DIAMOND Q.C.:
[1] In view of the fact that these applications raise matters of some
general importance I am giving this judgment in open court.
Introduction
[2] There are before the court two applications brought by the Charterers
Mutual Assurance Association Limited. The Association, as I will call it,
is a Charterers Protection and Indemnity Association incorporated in the
United Kingdom which insures the charterers of ships against, inter alia,
third party liability. The risks are set out in the Association's rules. There
are two classes of risk, Class 1--(Defence); and Class 2--(Liability).
[3] One of the members of the Association is or was Caribbean Liners
(Caribtainer) Limited, a company incorporated in the United Kingdom
which went into voluntary liquidation in April of 1996. I will call it
"Caribtainer". The managers of Caribtainer were Anglian Shipping Limited
("Anglian") which has also gone into liquidation and which was likewise
entered in the Association. These proceedings have in a sense resulted
from the liquidation of those two companies.
[4] In these proceedings the Association seeks, inter alia, injunctions
restraining the respondents, whom I will describe shortly, from bringing
proceedings against the Association in France. The Association also seeks
declarations that all claims by the respondents against the Association,
whether as statutory transferees, assignees or otherwise of the rights
of Caribtainer or Anglian, are properly only justiciable by arbitration in
London in accordance with the Association's Rules.
[5] Caribtainer and Anglian were members of the Association and
insured against Class 2 risks in respect of the 1993 policy year. The
rules for that year so far as relevant provided as follows. Rule 3, entitled
"Risks covered", sets out the risks covered by the Association. They
included, under section 4 of that rule, cargo liabilities. Rule 5(A) is entitled
"Payment first by the Member" and provided as follows:
(i) Unless the Managers in their absolute discretion otherwise decide, it
is a condition precedent of a Member's right to recover from the funds of
the Association in respect of any liabilities, costs or expenses that he shall
first have discharged or paid the same.
Rule 36, entitled "Proper Law", provided as follows:
These Rules and any contract of insurance between the Association and
a Member shall be governed by and construed in accordance with English
law.
Finally, rule 38, the arbitration provision, provided in five subparagraphs
as follows:
(A) If any dispute or difference shall arise between a Member (including
a past Member) and the Association out of or in connection with these
Rules or any contract between them or as to the rights or obligations of
the Association or the Member thereunder or in connection therewith,
such difference or dispute shall in the first instance be referred to and
adjudicated upon by the Directors. Such reference and adjudication shall
be on written submissions only.
(B) If a Member in such dispute or difference does not accept the decision
of the Directors, or if the Directors fail to adjudicate within three months
of the dispute or difference being referred to them, the dispute or
difference shall be referred to the arbitration in London of a sole Legal
Arbitrator, unless the Directors in their absolute discretion decide that
such dispute or difference shall be decided by the English High Court.
(C) The Arbitrator to whom any such dispute or difference is referred
under paragraph (B) shall be a practising Queen's Counsel. The
submission to arbitration and all the proceedings therein shall be subject
to the provisions of the Arbitration Acts 1950-1979 or any statutory re-
enactment or modification thereof. The Arbitrator shall have power to
admit any evidence, whether legally admissible or not.
(D) Subject to the foregoing provisions of this Rule, the obtaining of an
Arbitration Award as provided by paragraphs (B) and (C) hereof shall be
a condition precedent to the right of any Member to bring or maintain any
action, suit or other legal proceedings against the Association.
(E) The sole obligation of the Association to the Member under these
Rules or otherwise howsoever in respect of any such dispute or
differences shall be to pay such sum as may be directed by such an Award
or judgment as the case may be."
[6] These two originating applications relate first to the vessel the Karin B
and, secondly, to another vessel, the "Carib Explorer". I will mention each
in turn.
The Karin B
[7] This vessel was chartered to Caribtainer on the terms of a time
charter on the Baltime form dated 25 November 1993 for a time
chartered trip from Europe to the Caribbean/U.S. Gulf. Part of the vessel's
cargo consisted of five yachts loaded at Dunkirk on about 17 December
1993. Liner bills of lading were issued. The bills were on a printed form
which bore prominently the name of Caribtainer on their face and which
named Anglian as managers.
[8] In the course of the voyage one of the yachts broke free from her
lashings and was swept overboard. In addition it is alleged that the other
four yachts sustained damage and had to be repaired. The yachts had
been insured with four insurance companies, one of which, the British
& Foreign Marine Insurance Company Limited, carries on business in
the United Kingdom, the others of which are French. I will refer to them
collectively as "the cargo insurers".
[9] On 9 August 1994 the leasing companies who claimed title to the
yachts commenced proceedings before the Commercial Court of Roubaix-
Tourcoing in France, claiming compensation for the loss of or damage
to the yachts. The respondents to the French proceedings were the
following: first, the sellers of the yachts, Henri Waquiez S.A.; secondly,
British & Foreign; thirdly, Caribtainer; and fourthly, Anglian. Although only
British & Foreign were named as respondents it is said that all the cargo
insurers were in fact joined.
[10] On 13 September 1994 British & Foreign made a claim in the French
proceedings for an order that Caribtainer and/or Anglian should indemnify
them against any liability that they may have incurred to the leasing
companies. In December 1994 a similar claim was made by the sellers,
Waquiez. On 20 February 1996 the cargo insurers indemnified the sellers
in respect of one yacht, the one lost overboard. According to them this
was a payment on account.
[11] In July 1996, after Caribtainer and Anglian had gone into liquidation,
the cargo insurers made a further claim in the French proceedings,
namely, that Caribtainer or Anglian should indemnify them in respect
of the sum paid to the sellers and in respect of any further liability they
might have incurred to the leasing companies.
[12] On 26 December 1996 the cargo insurers served a summons upon
the Association in the French proceedings summoning it in its capacity as
the liability insurers of Caribtainer and Anglian.
[13] In March 1997 the Commercial Court of Roubaix-Tourcoing gave
judgment in favour of the leasing companies against the cargo insurers.
The court, however, declined to consider the liability of Caribtainer,
Anglian or any other party.
[14] The cargo insurers have appealed against this decision to the Court
of Appeal at Douai. There is apparently no prospect that a decision on the
appeal will be given until the end of 1998 or the beginning of 1999. If the
Court of Appeal then orders that a determination be made of the liability
of Caribtainer or Anglian, the matter will have to be remitted to the court
of first instance to enable liability to be determined. The Association,
however, fears that if the Court of Appeal requires that a determination
be made of the liability of Caribtainer or Anglian and if as a consequence
it is held that either Caribtainer or Anglian are liable for the loss of the
yachts it may also be ordered that the Association as the liability insurers
of Caribtainer and Anglian is liable to indemnify the cargo insurers to the
extent of such liability.
[15] On 20 May 1997, therefore, the Association issued the first of the
originating applications before me. This names as respondents the four
cargo insurers and claims the declaration I have mentioned together with
an injunction restraining the cargo insurers from prosecuting the claim
brought by them against the Association in the proceedings before the
Commercial Court of Roubaix-Tourcoing.
The Carib Explorer
[16] In November 1992 a company by the name of SOMAF engaged a
firm of freight forwarders, T.M.M. Transcap (which I will call "Transcap") to
carry 1,550 cartons of champagne by road from Reims to Le Havre. The
wine was then to be loaded on board a ship for carriage to Point à Pitre in
Guadeloupe.
[17] The wine was in fact placed in a container carried by road from
Reims to Le Havre and loaded on board the Carib Explorer, a vessel
chartered by Caribtainer. A bill of lading was issued again on Caribtainer's
form which acknowledged the shipment of a container said to contain
1,550 cartons of champagne for carriage from Le Havre to Point à Pitre.
The consignees were named as SOMAF.
[18] On arrival the container was found to be unsealed and empty. In due
course the insurers of the cargo indemnified the receivers in respect of
the loss.
[19] On 23 September 1993 the cargo insurers commenced proceedings
before the Commercial Court of Nanterre claiming compensation for the
loss of the champagne. The defendants to the proceedings were Transcap
and Caribtainer. Transcap in turn claimed an indemnity from Caribtainer in
respect of any liability incurred to the cargo insurers.
[20] On 5 May 1995 the Commercial Court at Nanterre gave judgment
and found that the loss had occurred prior to shipment but condemned
Caribtainer to pay cargo insurers the sum of 250,386 FF. The court also
held that Caribtainer were entitled to recover 100 per cent of their liability
from the stevedores. The action against Transcap was dismissed.
[21] On 31 August 1995 the cargo insurers appealed to the Court of
Appeal at Versailles. Their appeal was partly against quantum but was
also against the dismissal of their claim against Transcap.
[22] On 10 February 1997, after Caribtainer had gone into liquidation,
Transcap served a summons on the Association summoning it to appear
before the Court of Appeal at Versailles in respect of a claim that if
Transcap are liable to the cargo insurers Transcap is entitled to be
indemnified in respect of that liability by the Association.
[23] On 19 May 1997 the Association issued the second of the originating
applications before me. By this application the Association seeks as
against Transcap both a declaration that any proceedings against the
Association are only justiciable by arbitration in London in accordance with
the Association's rules and also an injunction restraining Transcap from
prosecuting the claim brought by Transcap in the proceedings presently
before the Court of Appeal of Versailles.
[24] I am told that the hearing before the Court of Appeal is due to take
place at the end of this month. There is therefore some urgency in dealing
with the application.
French law
[25] Letters of opinion written by French lawyers instructed by the parties
were placed before me for the purpose of throwing light on the nature
of the proceedings brought by the respondents in the French courts.
The Association relied on three letters of opinion written by M. Henri de
Richemont, an avocat à la Cour, dated 9 May, 12 August and 2 September
1997. The respondents to the Karin B application placed before the court
two letters written by M. Axel Engelsen, avocat au barreau de Paris, dated
16 July and 2 September 1997. The respondents to the Carib Explorer
application submitted an opinion dated 22 July 1997 written by another
avocat, Mme Géraldine Pageard.
[26] None of these experts was called to give oral evidence and their
opinions give perhaps the impression of having been prepared under
some pressure of time and piecemeal as and when different legal points
were put to them. It was, however, agreed between the parties that on
the basis of this material the court should make what findings of fact
are necessary for the purposes of these applications. Accordingly I will
attempt to do so.
[27] First, it is clear from the evidence of French law that French law
recognises the right of a third party, A, who has suffered loss or injury
to bring legal proceedings against the liability insurers, C, of a party who
has caused that loss or injury, B. The direct right of third party A to bring
an action against C, an action directe, has as its purpose the necessity
to ensure that sums payable under a liability policy are received by the
third party and that they are not distributed to the creditors of B on the
bankruptcy or liquidation of the latter. An action directe may be brought
either by the third party, A, himself or by any insurer who has indemnified
A and has thereby obtained rights of subrogation. Under French law rights
of subrogation are treated as a species of assignment and accordingly an
insurer who has indemnified the third party must bring an action directe
in his own name and may not sue in the name of A.
[28] Secondly, it is also clear that in general the right of A or his insurers
to bring an action directe against C is governed by the limits and defences
available to C under the terms of the relevant liability policy. The action
directe is in some ways analogous to an assignment and thus the liability
insurer, C, can usually take advantage of all defences which would be
available to it under the terms of the policy had it been sued by its own
assured. In order to succeed in an action directe A or its subrogated
insurer must establish first the extent of B's liability to A; secondly, that
A has not been indemnified by B; thirdly, the extent of the liability of C to
B under the terms of the liability policy. An action directe can be brought
before the liability of B to A has been established but that liability must be
established in the proceedings if the action directe is to succeed against
B's insurers.
[29] Thirdly, there are some exceptions to the general principle that C
can take advantage as against A of all defences which would be available
to C in an action brought by its own assured. One of these arises by
reason of the principle that the right of A to bring an action directe arises
on the date of the event which caused the relevant loss or injury. As a
consequence of this, the liability insurer, C, is not permitted to rely on any
breach of the policy committed by B after the loss or injury occurred. C
may not rely on any post-injury conduct by B as a ground for avoiding
cover.
[30] Fourthly, in considering the extent of C's liability to B under the
terms of the liability policy a French court will apply the proper law of
that policy. Consequently in the present case it would apply English law.
This was expressly decided by the Court of Appeal of Aix en Provence on
12 February 1993 in a case concerning a vessel, the Irini M, where the
court held that the direct action was governed by the law of the contract,
English law, since this was not incompatible with French public policy.
According to M de Richemont, that decision was subsequently upheld
by the Cour de Cassation on the ground that the Court of Appeal had
properly applied English law.
[31] There was a difference of opinion between the French lawyers on
two matters which I do not find it possible to resolve. First, there was a
dispute as to whether a French court would uphold a defence based on
rule 5(a), "Payment First by the Member". M de Richemont was of the
opinion that since a French court would apply English law it should give
effect to this defence in line with the decision of the House of Lords in The
Fanti/the Padre Island. [FN1] He considered, however, that there was a
risk that a French court would fail to give effect to it. To do so would be
inconsistent with previous decisions including The Irini M, [FN2] but he
said that the Commercial Court of Paris had upheld such a defence in a
decision dated 12 December 1996. M. Engelsen referred to what he called
the "duality" of a direct action, namely, that a third party has a right to
indemnification but that the terms of the policy have to be applied to
determine the sum due from the insurers. He considered that a French
court would not uphold a defence based on rule 5(a).
FN1 [1990] 2 Lloyd's Rep. 191.
FN2 Cited above.
[32] Secondly, there was a controversy as to whether a French court
would give effect to the arbitration clause contained in the Association's
rules. M de Richemont considered that logically a French court should
give effect to the clause. He pointed out, however, that in The Irini M the
Court of Appeal had refused to do so, relying on Article 10 of the E.C.
Judgments Convention (Brussels) 1968. M. Engelsen considered that the
arbitration clause would be disregarded by a French court before which
an action directe was brought. He gave a number of reasons, which I do
not find it necessary to discuss. It is sufficient to say that in view of the
decision in The Irini M and the differing opinions of the experts there is
clearly a real possibility that a French court before which an action directe
was brought might give no effect to the arbitration clause contained in the
Association's rules.
The contentions of the parties
[33] Mr Luke Parsons, who appeared for the Association, made inter alia
the following submissions.
1. An English court has jurisdiction to grant an injunction restraining
a person "from bringing suit against the plaintiff in a foreign court on
the ground that the plaintiff is entitled under English law to a legal or
equitable right not to be sued in that foreign court by that person upon
the cause of action that is the subject of such proceedings". Furthermore,
"if under English law a defence would be available to the injunction
seeker, that defence may be given anticipatory effect as a right not to
be sued that is enforceable by injunction in an action for a declaration of
non-liability". [FN3] The power of the English court to grant injunctions
depends upon a right of the plaintiff to be protected from a foreign
suit the bringing of which by the defendant is in the circumstances
unconscionable. [FN4]
FN3 British Airways v. Laker Airways [1985] 1 A.C. 58, at p. 81 C-E, per
Lord Diplock.
FN4 British Airways, cited above, at p. 81F, per Lord Diplock and p. 95F-G,
per Lord Scarman.
2. In determining what is unconscionable an English court applies English
law and English law alone. Reliance was placed on British Airways v. Laker
Airways [FN5] and on Continental Bank NA v. Aeakos Compania Naviera
S.A. [FN6]
FN5 Cited above.
FN6 [1994] I.L.Pr. 413.
3. Any action which either deprives a party to an English law contract of
his contractual right to arbitrate or which deprives a party to an English
law contract of a defence available to him under English law by virtue or a
Scott v. Avery clause in that contract invades the legal or equitable rights
of that party and is to be regarded as unconscionable. [FN7]
FN7 Aggeliki Choris Compania Maritima S.A. v. Pagnan SpA; Angelic
Grace, The [1995] 1 Lloyd's Rep. 85 and Schiffahrtsgesellschaft Detlef
Von Appen GmbH v. Weiner Allianz Versichrungs AG; Jay Bola, The [1997]
2 Lloyd's Rep. 279.
4. Once it is concluded that the respondent's conduct in bringing the
foreign suit is unconscionable or that the suit would invade the legal
or equitable right of the plaintiff to have the dispute determined by
arbitration the court should grant the injunction unless there is good
reason why an injunction should not be granted in the particular case.
There are, as Mr Parsons recognised, statements of high authority to
the effect that the jurisdiction to grant an injunction restraining the
respondent from bringing or continuing proceedings in a foreign court
is to be exercised with caution because it involves indirect interference
with the process of the foreign court concerned. [FN8] Such sensitivity,
however, is not relevant where the foreign suit invades the legal or
equitable rights of the plaintiff. In such circumstances there is no place for
caution based on notions of comity. [FN9]
FN8 South Carolina Insurance Co. v. Assurantie Maatschappij [1987] A.C.
24, at p. 40 D-E per Lord Brandon of Oakwood.
FN9 The Angelic Grace, cited above, at p. 96, per Millett L.J.
[34] For the respondents, Mr Charles Haddon-Cave and Mr Gavin Geary
advanced in essence the following contentions.
(1) The respondents are not parties to any arbitration agreement made
with the Association nor are they the assignees of any such agreement.
Accordingly the proceedings commenced by them in France infringe no
legal or equitable right of the Association.
(2) The respondents are exercising a right given to them by French law to
bring an action directe against the Association. Since that right is given to
them by French law the English court must have regard to French law in
considering whether the conduct complained of is unconscionable.
(3) The right given to the respondents under French law does not operate
by way of assignment or transfer of any arbitration clause. Under French
law the respondents have a right to bring a type of action which is not
trammelled by the arbitration clause that the Association has made
with its member. If this is right then it is more appropriate that the
respondents' rights be determined by the French courts than by the
English court.
(4) In any event the doctrine of comity is not dead. It continues to apply
to applications for injunctive relief to prevent one party from bringing or
continuing proceedings in a foreign court. [FN10]
FN10 See Société Nationale Industrielle Aerospatiale v. Lee Kui Jack
[1987] 1 A.C. 871, at pp. 892 and 896, per Lord Goff of Chieveley; Re
Maxwell Communications Corporation Plc (No. 2) [1992] B.C.C. 757, at
p. 765; and Deaville v. Aeroflot Russian International Airlines [1997] 2
Lloyd's Rep. 67.
(5) The court should exercise its discretion against the grant of an
injunction on, inter alia, the following grounds:
(i) that the respondents are not assignees of the policy;
(ii) that the respondents are merely exercising their rights under French
law;
(iii) that it is not clear what is wrong with the respondents' conduct; and
(iv) that the grant of an injunction would interfere with the right of the
French courts to decide whether or not the actions before those courts
should proceed.
(6) In addition, Mr Geary submitted that an injunction should be refused
on the grounds of the delay which he said had intervened between the
Association being joined in the French proceedings and the bringing of the
present applications for injunctive relief.
(7) It was submitted that the present proceedings should be stayed under
Article 21 or Article 22 of the E.C. Judgments Convention.
Discussion
[35] I begin by considering the relationship between the Association and
its members in relation to the contract of insurance. That relationship
has two relevant characteristics. First, the member's contractual rights
against the Association are subject to the arbitration clause, including its
Scott v. Avery provision and its one sided option that the Association may
refer the dispute to the English High Court. The arbitration clause may
be regarded as limiting or qualifying the right of a member to recover
an indemnity from the Association in respect of the insured risks; see
paragraph (e) of the clause which so provides.
[36] Secondly, the member's contractual right to an indemnity is further
limited or qualified by rule 5(a) which renders it a condition precedent to
the member's right to recover from the Association that the member shall
first have paid the third-party claim.
[37] I next turn to consider the rights of third parties under English law
who may have suffered loss or injury due to some wrong or breach of
contract committed by a member of the Association and who may wish to
recover that loss from the Association on the ground that the Association
insured the member against liability for it. Under the Third Parties (Rights
against Insurers) Act 1930, the third party has no rights against the
Association save on the bankruptcy or liquidation of the member and in
addition the liability of the member must first have been established by
judgment, arbitration award or agreement before the third party may
enforce any rights against the Association.
[38] Once that stage has been reached, however, the third party becomes
a statutory assignee of the member's rights against the Association. The
rights assigned to the third party have the two relevant characteristics
which I have previously mentioned. First, the right to an indemnity
transferred to the third party is limited or qualified by the arbitration
clause. [FN11] In The Padre Island No. 1 [FN12] the effect of the 1930
Act was described by Leggatt J. as follows [FN13]:
The 1930 Act transfers to the plaintiffs not the claim but the contractual
rights of the insured. Those contractual rights are subject to the
arbitration clause, including its Scott v. Avery provision.
FN11 See The Padre Island No. 1[1984] 2 Lloyd's Rep. 408; The Padre
Island No. 2 [1990] 2 Lloyd's Rep. 191, at p. 200; and The Jay Bola, cited
above, per Hobhouse L.J.
FN12 Cited above.
FN13 At p. 414.
[39] The second characteristic of the third party's rights against the
Association is that, where before transfer it was a condition precedent
to the right of the member to be indemnified by the Association that
the liability of the third party should first have been discharged by the
member with the result that the Association had a good defence to any
claim made by the member, the Association would have precisely the
same defence to a claim made by the third party after such transfer.
[FN14]
FN14 The Padre Island No. 2, cited above, at p. 198.
[40] I next come to the proceedings brought against the Association in
France. Those proceedings are brought under the provisions of French
law relating to the rights of third parties to bring a direct action against
the wrongdoer's liability insurers. I will consider such an action from two
different standpoints: first, the jurisdiction of the French courts; secondly,
the rights which are sought to be enforced in those actions.
[41] As to jurisdiction, it is to be borne in mind that both the United
Kingdom and France are parties to the E.C. Judgments Convention. By
virtue of Article 10 of that Convention an insurer may, if the law of the
court permits it, be joined in proceedings which the injured party has
brought against the insured. But by virtue of Article 12, paragraph 5, the
provisions of Article 10 do not apply where an agreement on jurisdiction
has been made relating to a contract of insurance in so far as the contract
covers one or more of the risks set out in Article 12A. That article includes
the risk of liability for goods in transit, other than passengers' luggage
where the transit consists of or includes carriage by seagoing ships. By
English law there is a valid arbitration agreement binding upon both the
third party and the Association:
... unless the directors in their absolute discretion decide that such
dispute or difference shall be decided by the English High Court.
[42] Accordingly, as the insurance is against the risk set out in Article
12A and as according to English law the parties are bound by a valid
arbitration and jurisdiction agreement, it seems to me that English law
does not recognise the jurisdiction of the French court to entertain a
direct action brought by the third party against the Association under
Article 10.
[43] Looking at the matter from the point of view of the rights sought
to be enforced in France by the respondents in their direct actions,
such rights can only be to enforce the contracts of insurance which
are governed by English law. As held by the Court of Appeal of Aix en
Provence in The Irini M:
The direct action taken is governed by contract law since it is not
incompatible with French public policy.
[44] According to English law, the rights sought to be enforced in the
direct actions against the Association are limited and qualified first
by the arbitration clause and, secondly, by the condition precedent
that before the Association can be liable the member must first have
discharged or paid the claim. The respondents urged that the proceedings
in France infringe no legal or equitable right of the arbitration. I reject
this submission since in my judgment it is clear that any rights which the
respondents may have acquired or may in the future acquire are rights
which are subject to the arbitration clause and which can only be explored
by arbitration in London. The position is not distinguishable from that
considered by the Court of Appeal in The Jay Bola. [FN15]
FN15 Cited above, at p. 286, per Hobhouse L.J.
[45] In these circumstances, it is in my view clear on the authorities
that the court has jurisdiction to grant an injunction restraining the
respondents from bringing direct actions against the Association in
France. The jurisdiction of the court to grant injunctions by virtue of
section 37(1) of the Supreme Court Act 1981 includes the power to grant
an injunction to one party to an action to restrain the other party from
beginning or continuing proceedings in a foreign court. The grounds on
which an injunction may be granted include that the first party has a
legal or equitable right not to be sued upon the cause of action that is the
subject of such proceedings in the foreign court. [FN16]
FN16 British Airways v. Laker Airways, cited above, at pp. 81 and 95.
[46] Here the respondents are not entitled under English law to assert
rights against the Association inconsistently with the terms of the contract
concluded between the member and the Association. One of those terms
is that in the event of dispute the claim must be referred to arbitration
in London unless the directors decide that it should be decided by the
English High Court. The Association has the right to require that a claim
made by the third party be decided in one or other of these ways. If
the direct actions in France are permitted to continue they would, it
seems to me, infringe the legal rights of the Association in this respect.
Accordingly, the conduct of the respondents in bringing or continuing
these proceedings must be regarded in English law as unconscionable and
so unjust.
[47] I turn now to consider whether in this case there are grounds which
should weigh against the grant of an injunction. The most powerful
argument against the grant of an injunction is that it should be left to
the French courts to decide whether actions brought before them should
proceed. Mr Haddon- Cave relied on a passage from the judgment of
Hoffmann J. (as he then was) in Re Maxwell Communications Corporation
Plc No. 2, [FN17] cited in Deaville v. Aeroflot:
... The normal assumption is that the foreign judge is the best person
to decide whether an action in his own court should proceed. Comity
requires a policy of non-intervention not only for the same reason that
appellate courts are reluctant to interfere with the exercise of a discretion,
namely, that in the weighing of the various factors different judges may
legitimately arrive at different answers. It is also required because the
foreign court is entitled, without thereby necessarily occasioning a breach
of international law or manifest injustice, to give effect to the policies of
its own legislation.
FN17 Cited above, at p. 765.
[48] For my own part, I see great force in the view expressed by
Hoffmann J. in this passage from his judgment. That view has particular
force, it seems to me, where jurisdiction is governed by the E.C.
Judgments Convention. Anti-suit injunctions do not fit very comfortably
into the framework of the E.C. Judgments and EFTA Judgments (Lugano)
Conventions. Under those Conventions, each court before whom
proceedings are started in any Contracting State has to decide whether
it has jurisdiction over the particular cause of action. The decision as to
whether the court of the State of origin has taken jurisdiction correctly
cannot in most cases be reviewed by the enforcement court of another
Contracting State.
[49] It is consistent with this that generally the courts of one Contracting
State should not interfere either directly or indirectly with court
proceedings in another Contracting State. The question whether anti-suit
injunctions are compatible with the E.C. Judgments Convention has been
much discussed by the commentators, some of whom have suggested
that they are fundamentally incompatible with the two Conventions.
[50] The difficulty, however, which faced Mr Haddon-Cave on the present
applications is that the policy considerations which I have briefly touched
on have been settled so far as a judge at first instance is concerned by
the two decisions of the Court of Appeal in Continental Bank v. Aeakos
Compania Naviera S.A. [FN18] and The Angelic Grace, [FN19] both of
which were cases where jurisdiction was governed by the E.C. Judgments
Convention. In the first of those cases a loan agreement expressly
provided that the borrowers submitted to the jurisdiction of the English
courts. Notwithstanding that clause, the borrowers commenced an action
against the lenders in the court of first instance at Athens. A number
of issues were discussed by the Court of Appeal which decided that
the loan agreement evinced a clear intention that the borrowers but
not the lenders were obliged to submit disputes in connection with the
loan facility to the English courts. For present purposes, however, the
important matter is that the Court of Appeal was clearly concerned as
to the impact of the E.C. Judgments Convention and considered that
impact both as regards an application for a stay under Articles 21 and
22 and also as regards the exercise of the court's discretion to grant an
injunction.
FN18 Cited above.
FN19 Cited above.
[51] In the latter context it had been argued that no injunction should
be granted as an injunction would operate "as an indirect interference
with the workings of a community court". The Court of Appeal, however,
reasoned as follows [FN20]:
It is necessary to bear in mind that the proper construction of the
jurisdiction agreements is governed by English law. And as a matter of
English law the jurisdiction agreements apply to the subject-matter of the
Greek proceedings, and are exclusive jurisdiction agreements. It follows
that the English courts have exclusive jurisdiction. And by virtue of Article
17 the Greek Courts have been deprived of jurisdiction.
FN20 At pp. 511-512, per Steyn L.J.
...
In our view the decisive matter is that the bank applied for the injunction
to restrain the appellants' clear breach of contract. In the circumstances a
claim for damages for breach of contract would be a relatively ineffective
remedy. An injunction is the only effective remedy for the appellants'
breach of contract. If the injunction is set aside, the appellants will persist
in their breach of contract, and the bank's legal rights as enshrined in the
jurisdiction agreement will prove to be valueless. Given the total absence
of special countervailing factors, this is the paradigm case for the grant of
an injunction...
[52] It seems to me that I am bound by this decision and by The
Angelic Grace to hold that the grant of an injunction is not necessarily
incompatible with the E.C. Judgments Convention and Mr Haddon-
Cave did not seek to argue to the contrary. It follows from this that in
considering whether to grant an injunction a judge will have in mind the
consideration mentioned by Hoffmann J. that, "The normal assumption
is that the foreign judge is the best person to decide whether an action
in his own court should proceed," but will also in some cases have to
consider the countervailing point that by English law, where that is the
proper law of a jurisdiction agreement or an agreement to arbitrate, the
applicant for an injunction has a right to have any dispute determined by
the English courts or by arbitration in England and that if no injunction be
granted that right may prove to be valueless.
[53] In the present case Mr Haddon-Cave sought to distinguish the
Continental Bank case by submitting, as is the case, that by commencing
proceedings in France the respondents have not committed any breach of
contract. He further sought to distinguish The Jay Bola on the ground that
under French law an arbitration agreement is not assigned or transferred
as part of the action directe procedure. These arguments, however, carry
no weight. While it is true that no breach of contract has been committed
by the respondents, nevertheless under English law, which is the proper
law of the relevant contracts, the right of any member or of any third
party to claim an indemnity from the Association is limited or qualified
by the arbitration and jurisdiction clause set out in the Association's
rules. If it be assumed, as may be the case, that a French court would
not recognise that clause, then unless the court intervenes by way of
injunctive relief the clause will be wholly ineffective and there will be
no means of enforcing the Association's rights under English law. There
will be no possibility of the Association claiming damages for breach of
contract. The situation will be allowed to continue which under English law
is to be regarded as unconscionable and so unjust.
[54] This is not, therefore, a case where the court is confronted simply
with the position that the foreign court may or may not have jurisdiction,
nor is it a case where the forum conveniens may be one jurisdiction rather
than another. It is a case where the applicant for injunctive relief has a
right to require disputes to be determined either by an English court or
by arbitration in London and where that right would be ineffective unless
an injunction be granted. In this context either considerations of comity
play little or no part or, alternatively, they are greatly outweighed by the
factors I have mentioned.
[55] This is not, moreover, a case where the English court is being
asked to determine precisely the same matter as is before the foreign
court. It may be that the French courts would apply English law to
determine whether the Association has the right to require the dispute
to be arbitrated in London, in which case the matter before the French
court would be the same as the matter before this court and no doubt the
same answer would be given. But the French court may view the matter
differently in the light of French law. It is because of this possibility and
because such a course would invade the rights of the Association under
English law that in the light of Continental Bank case, The Angelic Grace
and The Jay Bola the Association has a powerful case for the grant of an
injunction.
[56] Before leaving this aspect of the case I should mention that my
decision might well have been different had any substantial argument
been available to the respondents that under the E.C. Judgments
Convention the French courts have jurisdiction over a direct action against
the Association notwithstanding the jurisdiction and arbitration clause
contained in the Association's rules. Under English law and particularly in
the light of Article 12A no such argument has been or can be advanced.
[57] It remains to mention two further matters. First, I have not
overlooked the submission made by Mr Geary that the Association has
been guilty of some delay in bringing the present applications before
the court. It is sufficient in my judgment to say that the delay was not
significant.
[58] Secondly, I should deal with the respondents' application for a stay
of these proceedings under Article 21 or Article 22 of the E.C. Judgments
Convention. I do so, however, very briefly as I have heard little or no
argument on these applications at the hearing. Indeed, it is not unfair
to the respondents to say that these applications were not pursued with
any conspicuous enthusiasm. The applications did not feature in the
respondents' skeleton argument and in one case the relevant summons
had not even been issued by the time of the hearing.
[59] In considering these applications I proceed on the basis that the
Association's applications for declarations and for injunctive relief are
within the E.C. Judgments Convention and are not excluded by Article
1(4), the arbitration exclusion. At the time of preparing this judgment it
is expected that the European Court will very shortly give an authoritative
ruling as to the width of that exclusion. I have previously stated my own
unaided view as to the ambit of this exception in The Heidberg. [FN21] It
is implicit in that decision that an application for an injunction to restrain
foreign proceedings, not being integral to the arbitration process, does
not fall within Article 1(4). [FN22] In the more recent decision of Toepfer
International GmbH v. Société Cargill France, [FN23] a different view was
expressed by Colman J. and it is not perhaps surprising, in view of the
lack of clarity in the drafting of the Convention and the lack of effective
guidance in the travaux preparatoires, that different views have been
expressed by different tribunals and commentators. I prefer, however,
to base this judgment on the perhaps fragile and no doubt temporary
foundation of The Heidberg.
FN21 [1994] 2 Lloyd's Rep. 287.
FN22 Toepfer International GmbH v. Molino Boschi Srl [1996] 1 Lloyd's
Rep. 510.
FN23 [1997] 2 Lloyd's Rep. 98.
[60] Dealing first with Article 21, I cannot see that the proceedings
brought before the French courts and those brought before this court
involved the same cause of action. The proceedings brought by the
respondents in France are for a determination in one case as to whether
in the event that Caribtainer or Anglian are held liable for the loss of
the yachts the cargo insurers are entitled to recover their loss from the
Association; in the other as to whether if Transcap are held liable to the
cargo insurers Transcap is entitled to an indemnity from the Association.
Proceedings in this court are for declarations that those claims are only
justiciable by arbitration in London and for injunctions to prevent those
claims being determined by the French courts. It seems to me that the
ends in view in the French and English proceedings are not the same in
the two countries. [FN24]
FN24 Case C-406/92, Owners of the Cargo Lately Laden on Board the
Ship Tatry (the) v. the Owners of the Ship Maciej Rataj: [1995] I.L.Pr. 81,
[1994] I E.C.R. 5439.
[61] Turning to Article 22, the definition of related actions is that:
They are so closely connected that it is expedient to hear and determine
them together to avoid the risk of irreconcilable judgments resulting from
separate proceedings.
[62] The purpose of the claims in this court (for declaratory and injunctive
relief) is to prevent the respondents from pursuing their claims against
the Association in the French proceedings. If the court grants the
declarations and injunctions sought there should be no question of
enforcing irreconcilable judgments. The court must assume that if
an injunction is granted the respondents will not pursue the French
proceedings with the result that there will be no judgments given against
the Association in France which are inconsistent with the orders made
in these proceedings. It seems to me, therefore that the claim for an
injunction cannot amount to a related action within the definition to be
found in Article 22 and that the claim for a declaration is likewise not
within that definition, for very similar reasons.
Conclusion
[63] I conclude that the Association should be granted the declaratory
and injunctive relief sought in paragraphs 1 and 5 of its applications and
that the respondents' application for a stay under Articles 21 and 22 of
the E.C. Judgments Convention should be refused.
Applications granted.
(c) Sweet & Maxwell Limited
[1998] I.L.Pr. 838
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