Introduction
1 …Parties to the Brussels, Lugano and San Sebastian Conventions
and ultimately to EU Regulation 44/2001 have at least established a
jurisdictional regime of reasonable certainty for international commercial
disputes connected with the courts of member states. Once outside that
regime, the opportunities for disruption of the resolution of substantive
claims by time-consuming and costly jurisdictional ancillary litigation
are far too often relentlessly and needlessly pursued to the prejudice of
all parties. The applications now before this court exemplify the futility
of this kind of ancillary litigation and point up the urgent need for an
international jurisdiction and judgments convention of the widest possible
application.
2 There are here two applications made in two separate actions. Both
actions arise out of the same events.
3 The events in bare outline are as follows.
4 The Claimants were insurers of two consignments of cargo said to have
been put into seven containers loaded on board the vessel L. in Cyprus
in August and September 2001 for carriage to Thessaloniki. I refer to the
Claimants as "the Insurers".
5 The Defendants claim to have been the owners of such contents and
that two certificates of insurance covered such goods. I refer to the
Defendants as "the Assured".
6 The vessel departed from Cyprus on 6 September 2001 and sank within
12 hours, water having entered the engine room and other parts. It and
the contents of the seven containers were a total loss. The Assured claim
under the certificates of insurance.
7 The Insurers intend to deny liability on the grounds that they are
entitled to avoid the contracts of insurance for misrepresentation and
non-disclosure of material facts and further, if they are bound by those
contracts, on the grounds that the Assured has made a fraudulent claim
by reason of the fact that the vessel was wilfully sunk with the complicity
of the Assured.
8 There is no doubt that both certificates of insurance contained an
exclusive English jurisdiction clause thus:
9 "This insurance shall be subject to the exclusive jurisdiction of the
English Courts."
10 The First Defendants were insured under one certificate of insurance
and the Second Defendants under the other.
11 On 13 May 2002 the two Assureds issued proceedings in two separate
actions in the District Court of N. against those of the Insurers identified
by their solicitors as leading underwriters -- P. I refer to those actions as
"the N. Proceedings". The Assured obtained leave from the N. court to
serve those underwriters outside the jurisdiction.
12 There can be no doubt that in issuing those proceedings and in seeking
leave to serve the Insurers outside Cyprus the Assured acted in breach
of the Jurisdiction clause. The Assured's Cypriot lawyer, Mr Andreas
Theophilou of Limassol has stated in his first witness statement that
the two certificates of insurance were issued to the Assured by their
brokers, V., and that they knew that they were insured by L. Underwriters
in accordance with the certificates, but that they knew nothing of the
identity of the placing brokers, the underwriters or how the risks were
placed. There is, however, no question but that the Assured were from
the outset well aware that their cover was subject to exclusive English
jurisdiction.
13 It seems, however, that P. were not the correct Insurers and in due
course with effect from 28 January 2003 the Assured joined A. as second
defendants in the N. Proceedings. The Insurers applied to strike out
the claim on the grounds that service was invalid, that there should not
have been an order for substituted service on V. Underwriting Agency
Ltd, failure of the Assured to disclose material facts on their ex parte
application for service out, the wrong identity ("P. " etc) of the defendants
as Insurers and failure to serve documents translated into English. By a
judgment dated 27 May 2003 the N. Court rejected all these grounds as
regards the claim against P. . A similar jurisdictional challenge in respect
of the proceedings against A.was raised on 7 July 2003 and was to be
heard on 16 October 2003, but, in the light of prior indications given by
the designated judge, this was withdrawn.
14 It is to be noted that neither in relation to the application on behalf
of P. nor in that on behalf of A.did the applicant rely on the exclusive
English jurisdiction clause. The view was taken that the applications
should be confined at that stage to formal matters relating to service.
However, when on 16 October 2003 the Insurers' representatives sought
leave to withdraw their application, they indicated they intended to issue
a new application in Cyprus disputing jurisdiction on the grounds of
the jurisdiction clause and forum non conveniens. Mr Theophilou then
indicated that the point had not previously been taken and that he would
submit that the Insurers had submitted to the jurisdiction of the N. Court.
15 In the meantime, Insurers had, on 12 September 2003, started the
first of the two English proceedings against the Assured. I refer to this as
"the Injunction Action". In it they claimed a permanent anti-suit injunction
to prevent the Assured from continuing the N. proceedings. Leave was
given to serve the Assured out of the jurisdiction. The Insurers relied
on the Jurisdiction Clause and forum non conveniens. The Assured filed
an acknowledgment of service indicating an intention to dispute the
jurisdiction of the English Court. On 4 November 2003 the Assured issued
an application notice for a declaration that the Commercial Court had
no jurisdiction, or should not exercise it, to try the Insurers' claim in the
Injunction Action. They relied on Mr Theophilou's first witness statement
both in support of that application and in defence to the claim for an anti-
suit injunction. In that evidence he repeated the submission that the
Insurers had, by their previous procedural steps in the N. Proceedings,
submitted to the jurisdiction of the N. court. In particular, they had at
no stage reserved their right to rely on the Jurisdiction clause or forum
non conveniens. He relied on provisions of the Cyprus Foreign Judgments
(Reciprocal Enforcement) Law and decisions of the Cyprus courts to the
effect that a defendant who wishes to dispute the jurisdiction of the
Cyprus Court must file an application to set aside the writ or service of it
or for a stay on the basis of contesting jurisdiction simultaneously with
the filing of its entry of appearance or within the time limits of any court
order allowing it to enter a conditional appearance. It was a requirement
of Cyprus law on the authorities that a party who wished to dispute
jurisdiction must put forward all his grounds at the outset within the
time limits specified by the Rules and by the same application. This the
Insurers had failed to do by holding back on their jurisdictional challenge.
Accordingly, a Cyprus court would consider it oppressive and an abuse of
process to make a fresh application to stay the N. Proceedings.
16 On 19 November 2003 the Insurers launched further applications in
both the N. Proceedings seeking a stay on the grounds of the Jurisdiction
clause and forum non conveniens.
17 Therefore, at that point there were in progress two separate parallel
applications by the Assured and the Insurers in both England and
Cyprus in both of which the Insurers claimed relief to enforce the
English Jurisdiction clause and in both of which the Assured, while
acknowledging that they were insured on terms of that clause, contended
that English jurisdiction should not be enforced either because there was
no jurisdiction in the English Courts to decide the threshold issue of an
injunction to restrain the Cyprus proceedings or because the Insurers had
submitted to Cyprus jurisdiction or on forum non conveniens grounds. 18
The first judicial determination was that of Morison J. in the Injunction
Action on 28 November 2003. He rejected the Assured's submission that
the English Court had no jurisdiction to determine the claim for an anti-
suit injunction. In the course of that hearing the court was informed by
counsel that the main reason that there had been a delay in commencing
the Injunction Action was that those advising the Insurers had been
investigating the possibility that the claim was fraudulent.
19 Morison J. decided that he did have jurisdiction to determine the claim
for an injunction. …
21 He then went on to hold that a trial in London would not be less
convenient than a trial in Cyprus. Accordingly, by reference to the decision
of the Court of Appeal in The Angelic Grace [1995] 1 L. Rep 87, he
concluded that an anti-suit injunction should be granted. In particular,
the Insurers' delay in claiming an injunction and raising the issue of
jurisdiction was not such as to disentitle them to the exercise of the
court's discretion in their favour. …
23 The order of Morison J. provided as follows:
"Each of the First and Second Defendants, whether by themselves
or through their servants or agents, be restrained from continuing or
assisting in the continuation of proceedings brought in Cyprus against
the Claimants relating to goods allegedly lost on the vessel "L. " on 7
September 2001 (and, in particular, action nos 5974/02 and 5975/02 in
the District Court of Nicosia) and from the instituting or pursuing such
proceedings in any jurisdiction other than England and Wales."
24 The Assured applied to the Court of Appeal for permission to appeal
and for a stay of the injunction in case the N. Court proceeded with the
pending application by the Insurers to stay the N. proceedings, for if the
injunction were in place the Assured could not oppose that application.
25 In the meantime, the Insurers' solicitors sent to the Assured's then
English solicitors a sealed order of Morison J. endorsed with a penal
notice.
26 On 20 January 2004 the Assured filed notices of intention to oppose
the Insurers stay applications in both N. Proceedings. The grounds
included the submission of Insurers to Cyprus jurisdiction. At a directions
hearing of the stay application in the action against G. which took place
on 29 January 2004, the terms of the order of Morison J. were brought to
the attention of the court.
27 On 3 February 2004 the Court of Appeal refused leave to appeal
against the order of Morison J. At that point, therefore, there was a final
judgment granting an anti-suit injunction against the Assured in respect
of the N. Proceedings in which the Assured had outstanding notices of
intention to oppose.
28 On 27 February 2004 the Insurers applied to the N. court for
registration, recognition and enforcement of the Order of Morison J.
They joined Mr Theophilou. A date for a hearing on 29 March 2004 was
obtained.
29 On 5 March 2004 there took place the hearing of the Insurers' stay
application in the N. Proceedings. It was opposed by the Assured. Mr
Theophilou, on behalf of the Assured, argued against the stay mainly on
two grounds:
i) the Insurers' submission to Cyprus jurisdiction;
ii) England was forum non conveniens.
30 Judgment was reserved.
31 The registration application was withdrawn by the Insurers and a
further registration application was subsequently made.
32 With effect from 1 May 2004 Cyprus, having become a member of the
European Union, became bound by the Judgments Regulation.
33 On 25 May 2004 Judge Michaelidis gave an Interim Decision in which
she dismissed the Insurers' stay application against G.. …
34 On 27 May 2004 the Assured issued applications in the N. Proceedings
for judgment in default of defence. These applications have not so far
been heard because it was agreed between counsel that they should be
left pending until after determination of the appeal against the ruling of
Judge Michaelidis.
35 On 8 June 2004 the Insurers lodged an appeal against the judgment
of Judge Michaelidis. In the N. Proceedings relating to S. Trading an order
was made that on 27 October 2004 there should be a hearing of the
issue as to the effect of the decision of Judge Michaelidis on the Insurers'
parallel stay application in those proceedings. …
37 On 19 July 2004 Clyde & Co wrote to both G.and S. Trading stating
that the Insurers would contend that the claim under the certificates of
insurance was fraudulent, the vessel having been deliberately sunk. The
Insurers further avoided both policies for non-disclosure and tendered
return of premium.
38 Then on 22 July 2004 the Insurers commenced the second English
claim with which these applications are concerned. They claimed
declarations that the contracts of insurance evidenced in the certificates
of insurance had been duly and lawfully avoided and/or that the Insurers
had no liabilities to either of the Assured. In the alternative the Insurers
claimed damages for breach of the Jurisdiction Clause. On the following
day Moore-Bick J. gave permission to serve the Assured outside the
jurisdiction.
39 At that point the Assured's then London solicitors A Nicolaou, ceased to
act for them. Clyde & Co obtained issue of a default costs certificate, the
Assured having decided not to be represented at the detailed assessment.
Copies of this were then sent to A Nicolaou and to Mr Theophilou with
a demand for payment within 14 days. Service of the claim in the
Declaration Action on both the Assured had been effected by 28 August
2004. The Assured instructed their present London solicitors, Fladgate
Fielder, who filed acknowledgment of service, indicating an intention to
challenge jurisdiction.
40 On 17 September 2004 at a directions hearing in S. Trading's N.
Proceeding it was agreed that the hearing of all further applications in
both of the N. Proceedings, including the Insurers' stay application, should
be postponed until after the Cyprus Court of Appeal had given judgment
in the Insurers' appeal against the judgment of Judge Michaelidis.
41 On 8 October 2004 Fladgate Fielder on behalf of the Assured invited
Clyde & Co to agree to a stay of the Declaration Action and immediate
discharge of the anti-suit injunction with effect from 1 May 2004 but
without prejudice to any issue arising out of the Assured's conduct before
that date. Because the Assured were concerned not to take any course
amounting to a submission to the jurisdiction of this court they invited
Clyde & Co to apply to discharge the anti-suit injunction and to make
an application to stay the Declaration Action pending the decision of the
Cyprus Court of Appeal.
42 In the meantime the order in the Injunction Action had still not been
registered in Cyprus. There had been a number of directions hearings and
substantial evidence had been filed.
43 On 15 October 2004 the Assured issued their application to set aside
service in the Declaration Action. They relied on Articles 27 and 28 of the
Judgments Regulation on the grounds when that Action was started there
was a lis alibi pending, namely the N. Proceedings, and that therefore this
court had no jurisdiction or should not exercise it.
44 The grounds for the application are as follows:
"When the Claim Form herein was issued, there were proceedings
involving the same cause of action and between the same parties and/or
related proceedings pending in the District Court of Nicosia, Cyprus, and
this Court accordingly, by reason of article 27 and/or 28 of Regulation No.
44/2001, has no jurisdiction or should not exercise any jurisdiction that
it may have to try any of the claims in this case; and/or 2. the Claimant
failed to make full disclosure in relation to these matters when it applied
to the Court, without notice, for permission to serve the Claim Form on
the Defendants out of the jurisdiction."
45 On 14 January 2005 the Assured issued and served an application
notice for an order setting aside with effect from 1 May 2004 the anti-suit
injunction ordered by Morison J.
46 The grounds for that application were stated as follows:
"1. The said paragraph refers to and restrains the Defendants from
continuing pending proceedings in the District Court of Nicosia, Cyprus.
2. Cyprus acceded to the European Union, and Council Regulation (EC)
No. 44/2001 thus acquired direct effect both in and in relation to Cyprus
on 1 May 2004.
3. The continuation of the said paragraph of the said Order on and/or
after 1 May 2004 thus is contrary to the jurisdictional regime codified
in the CJJ Regulation, when the CJJ Regulation is properly interpreted
in accordance of the jurisprudence of the European Court of Justice, in
particular its decision in Turner v. Grovit, Case C-159/02 dated 27 April
2004.
4. On 8 October 2004 and thereafter the Claimant was requested to make
an uncontested application to have the said paragraph of the said Order
set aside with effect of 1 May 2004, without prejudice to any allegation
that the Claimant might wish to pursue that the Defendants in the interim
had acted in contempt of the anti-suit injunction therein contained, but
has failed and/or refused to do so."
47 On the same day the Assured issued and served an application notice
for an order setting aside the default costs certificate in the Injunction
Action. That application is to be heard on 20 July 2005 before a costs
judge.
48 The appeal in Cyprus against the judgment of Judge Michaelidis
remains to be determined.
49 The structure of the proceedings before this court on these
applications may therefore be summarised as follows:
i) The Injunction Action: an application by the Assured to set aside the
order of Morison J., with effect from 1 May 2004, the day upon which
Cyprus became bound by the Judgments Regulation. I have already set
out the grounds of that application.
ii) The Declaration Action: an application for a declaration that this court
has no jurisdiction to try any of the Insurers' claims or a declaration that
the court should not exercise such jurisdiction as it has to try such claims
and that the claim form and service be set aside and/or proceedings be
stayed. …
51 Article 27 of the Judgments Regulation provides:
"1. Where proceedings involving the same cause of action and between
the same parties are brought in the courts of different Member States,
any court other than the court first seised shall of its own motion stay its
proceedings until such time as the jurisdiction of the court first seised is
established.
2. Where the jurisdiction of the court first seised is established, any court
other than the court first seised shall decline jurisdiction in favour of that
court."
52 Article 28 provides:
"1. Where related actions are pending in the courts of different
Member States, any court other than the court first seised may stay its
proceedings.
2. Where these actions are pending at first instance, any court other than
the court first seised may also, on the application of one of the parties,
decline jurisdiction if the court first seised has jurisdiction over the actions
in question and its law permits the consolidation thereof.
3. For the purposes of this Article, actions are deemed to be related where
they are so closely connected that it is expedient to hear and determine
them together to avoid the risk of irreconcilable judgments resulting from
separate proceedings."
Threshold Issues
Does this Court have jurisdiction to set aside the Injunction?
63 It is submitted by Miss Karen Troy-Davies on behalf of the Assured
that the fact that the order of Morison J. was final does not operate as a
bar to the further supervisory jurisdiction of this court and that further
supervisory jurisdiction has been engaged by the twin effects of firstly,
the accession of Cyprus to the EU and its thereby becoming party to the
Judgments Regulation with effect from 1 May 2004 and secondly the
decision of the ECJ in Turner v. Grovit [2004] 2 L. Rep 169 on 27 April
2004. These brought about a fundamental change of circumstances which
would justify the intervention of this court to release the effect of the
injunction from 1 May 2004.
64 In support of this approach to jurisdiction Miss Troy-Davies advances
the following propositions.
"1. This Court can vary or discharge a final injunction Order made in this
Court when the injuncted activity has been legalised by statute or, it is
submitted, the coming into force of an EU Regulation.
2. It is at least probable that this Court also can vary or discharge a final
injunction Order made in this Court if further compliance with is rendered
legally or physically impossible.
3. Liberty to apply is implicit, if not expressed, in any final injunction
Order that requires some "working out" or "carrying out", and equally, it
is submitted, any final injunction Order that is subject to a contingency,
and such liberty to apply permits this Court later to vary or revoke such a
final Order made in this Court, at least if that final Order was not made by
consent and there is a subsequent fundamental and/or unforeseen change
in circumstances and/or the eventuation of the contingency affecting the
Order so demands.
4. This Court can discharge a final injunction Order made in this Court if
there has been any abuse by the applicant of the grant of the injunction
and in any event can take account of any such abuse by refusing any
relief in respect of any contempt on the part of the injuncted party.
5. CPR Rule 3.1(7) permits this Court to vary or revoke a final Order
made in this Court, including a final injunction Order, if the circumstances
of the case render this appropriate." …
67 Accordingly, it is necessary to approach the authorities as to whether
such a power exists in the absence of liberty to apply.
68 In Cristel v. Cristel [1951] 2 KB 725, an express liberty to apply
case, it was contemplated, obiter, that had there been a "change of
circumstances" the court might have considered a substantial change
in the terms of an order for possession of a matrimonial home: see
Somervell LJ. at p730 and Denning LJ. at p731, the latter referring to "an
unforeseen change of circumstances".
69 In Jordan v. Norfolk County Council [1994] 1 WLR 1353, a "liberty to
apply" case, Sir Donald Nicholls VC did identify an unforeseen change of
circumstances -- that the cost of remedial works, which by the original
mandatory injunction were left to be identified by an expert engineer,
was out of all proportion to the value of the land and therefore the order
could not have been intended by the trial judge to operate in those
circumstances.
70 In Co-operative Insurance Society Ltd v. Argyll Stores (Holdings)
Ltd [1998] AC1 it was argued that if a mandatory injunction because
oppressive or difficult to enforce, an application could be made for it to be
varied or discharged. Lord Hoffmann rejected that submission with these
remarks:
"But the order would be a final order and there is no case in this
jurisdiction in which such an order has been varied or discharged, except
when the injuncted activity has been legalised by statute. Even assuming
that there was such a jurisdiction if circumstances were radically changed,
I find it difficult to see how this could be made to apply. Difficulties of
enforcement would not be a change of circumstances. They would have
been entirely predictable when the order was made. And so would the fact
that Argyll would suffer unquantifiable loss if it was obliged to continue
trading."
71 Lord Hoffmann's reference to an exception -- the injuncted activity
having been legalised by statute -- is consistent with the existence of a
jurisdiction to revoke an order where a change in the law has removed
the entitlement of the claimant to be protected by the court's order.
72 In David Rosling v. David Pinnegar (unrep) CCRTI98/0968/2 (9 Oct 98)
another "liberty to apply" case, Mummery LJ. observed that:
"For the purposes of this appeal, I would be prepared to assume: (1) that
an express "liberty to apply" gives the Court power to review the terms of
a final order in relation to the working out, or carrying out of it; (2) that
in very exceptional cases, such as where there has been a fundamental
and unforeseen change of circumstances, the Court has a residual power
to review the exercise of its discretion granting a final injunction; and
(3) that Order 45 Rule 11 is applicable in a case such as this. The critical
question on this appeal is not whether the Court has jurisdiction to make
the order, but whether the matters put before the Court by Mr Pinnegar
are such a change of circumstances that this Court should reconsider and
review the terms of the final injunction granted on 28 November 1986."
73 In relation to CPR 3.1(7) in Lloyds Investment (Scandinavia) Ltd v.
Christen Ager-Hanssen [2003] EWHC 1740 (Ch), Patten J. stated his
understanding of the effect of that provision in the following passage:
"It seems to me that the only power available to me on this application
is that contained in CPR Part 3.1(7), which enables the Court to vary
or revoke an order. This is not confined to purely procedural orders and
there is no real guidance in the White Book as to the possible limits
of the jurisdiction. Although this is not intended to be an exhaustive
definition of the circumstances in which the power under CPR Part 3.1(7)
is exercisable, it seems to me that, for the High Court to revisit one of its
earlier orders, the Applicant must either show some material change of
circumstances or that the judge who made the earlier order was misled
in some way, whether innocently or otherwise, as to the correct factual
position before him. The latter type of case would include, for example,
a case of material non-disclosure on an application for an injunction.
If all that is sought is a reconsideration of the order on the basis of
the same material, then that can only be done, in my judgment, in the
context of an appeal. Similarly it is not, I think, open to a party to the
earlier application to seek in effect to re-argue that application by relying
on submissions and evidence which were available to him at the time
of the earlier hearing, but which, for whatever reason, he or his legal
representatives chose not to employ. It is therefore clear that I am not
entitled to entertain this application on the basis of the Defendant's first
main submission, that Mr Berry's order was in any event disproportionate
and wrong in principle."
74 In so far as it goes I entirely agree with that analysis. It is, however,
necessary to add that if a permanent prohibitory injunction is granted on
the assumption that the private rights of the party to be protected will
continue to exist into the future and to require such protection but yet as
matters turn out, those rights do at some future time cease to exist or to
be enforceable either by statute or operation of law, that would normally
be a situation where the jurisdiction of a judge of first instance could be
engaged upon an application to revoke the original order and it would not
be necessary or appropriate to appeal the original order out of time. Thus
in this case, if by a change in the law which occurred after the making
of the order of Morison J. the rights which it was the purpose of that
order to protect ceased to exist, the underlying assumption of that order
would have gone and it would be open to this court to decide whether in
consequence the order should be revoked. To be more specific, if it were a
consequence of the accession of Cyprus to the EU and its having become
bound by the Judgments Regulation that the Insurers' right expressed
by the Jurisdiction Clause to be sued only in the English courts had been
rendered void or unenforceable from a given date against the Assured,
that would be a case where this court would, as a matter of discretion
exercise its jurisdiction under CPR 3.1(7) or its inherent jurisdiction to
revoke the injunction.
Should this court hear the Assured's Application in the Injunction Action?
75 There can be no doubt, in my judgment, that the Assured failed to
comply with the order of Morison J. by their conduct committed through
their counsel and agent, Mr Theophilou, in continuing and assisting in the
continuation of the N. Proceedings.
76 The order was dated 28 November 2003 and was served on the
Assured's then London solicitors in the course of December/January 2003.
Any step taken for the purpose of obstructing that application would be a
breach of the injunction in as much as it would facilitate the continuation
of the N. Proceedings. …
78 That being so, the question of submission in the course of foreign
proceedings has to be tested by English conflict rules. The relevant
test is whether the party has by his conduct in the proceedings acted
in such a way which is only necessary or only useful if objection to
the jurisdiction of the court in question has been waived or has never
been entertained at all: see Williams & Glyn's Bank v. Astro-Dinamico
[1984] 1 WLR 438 at p444 approving Rein v. Stein (1892) 66 LT 469
at p471. The essence of the test is that -- reflected in the word "only"
-- there has to be an unequivocal representation by word or conduct
that objection is not taken to the relevant jurisdiction. In the present
case the Insurers' conduct in not relying on the jurisdiction clause to
exclude Cypriot jurisdiction at the time of their original challenge to
jurisdiction in September 2002, following entry of appearance in the N.
Proceedings or thereafter until they issued proceedings in England in
the Injunction Action on 12 September 2003, was clearly not such as to
satisfy the test of conduct unequivocally referable to submission to the
jurisdiction. Reliance on more technical points, such as the identity of
the Assured, and the omission to raise the jurisdiction clause could not
seriously be regarded as such. Before Morison J. both parties appear to
have concentrated on the issue whether there had, in Cypriot law, been
a submission to the local jurisdiction. Indeed, at paragraph 21 of his
judgment he recorded that it was no part of the Assured's case that as a
result of the way the Insurers were conducting themselves in the Cyprus
courts, they believed that the Insurers were intending to submit to the
jurisdiction of the Cyprus court.
79 The order of Morison J. therefore imposed an unqualified prohibition on
facilitating the continuance of the N. Proceedings whether on the basis of
a submission to the N. court's jurisdiction or otherwise. That must have
been quite clear to a lawyer such as Mr Theophilou.
80 In so far as he suggests the contrary I reject his evidence. The
grounds relied upon for the application to the Court of Appeal for a
stay of the injunction pending determination of an appeal show a
clear appreciation of the effect of the injunction: it prevented those
representing the Assured from taking any steps in Cyprus to promote or
continue the N. Proceedings.
81 Following the making of that order, on 20 January 2004 both the
Assured filed notices of intention to oppose the Insurers' stay applications
currently pending in the N. Proceedings. The main ground was that
the Insurers had submitted to the jurisdiction by not relying on the
jurisdiction clause at the outset.
82 The Assured opposed registration in Cyprus of the order of Morison
J. Had the order been registered, it could have been enforced in
Cyprus and had it been enforced I infer that the N. court would have
had at least to take it into account in deciding whether to stay the N.
Proceedings. Although the registration proceedings were distinct from the
N. Proceedings, for the Assured to oppose them was indirectly to assist in
the continuation of those Proceedings and a breach of the injunction.
83 At a hearing on 5 March 2004 of the stay application in the N.
Proceedings Mr Theophilou orally opposed the Insurers' stay application
mainly on the grounds of submission to the jurisdiction in Cyprus. There
was no other conduct on the part of the Assured prior to the accession
of Cyprus to the EU and coming into force of the Judgments Regulation
which could amount to a breach of the injunction.
84 After the accession of Cyprus to the EU the Assured took further steps
to oppose the Insurers' registration applications. Further, on 27 May
2004 the Assured filed applications in the N. Proceedings for judgment in
default of defence. In the course of the remainder of 2004 there were a
number of steps by the Assured in opposition to the Insurers' registration
applications. However, in view of the judgment of Judge Michaelidis on 25
May 2004 and the Insurers' stated intention to appeal, it was later agreed
that all further pre-trial applications in relation to the N. Proceedings
should be stood over until after determination of the appeal.
85 …
87 In these circumstances, I have no doubt that it is strongly in the
interests of justice that counsel for the Assured should have been entitled
to address this court not only, as normally would be the case, on the
nature of the conduct, and therefore its gravity, said to amount to
contempt, but also generally on the effect of the coming into force of the
Judgments Regulation. The issue as to the Assured's entitlement to be
heard and the issue raised by the Assured's application in the Injunction
Action very substantially overlap.
The Effect of the Accession of Cyprus to the EU
88 It is submitted on behalf of the Assured that Article 66, set out in
paragraph 54 above, operates in this case in the following manner.
i) The N. Proceedings were commenced before accession and the
judgment of Judge Michaelidis on the stay application was given after
accession. Therefore Article 66.2(b) applies.
ii) The jurisdiction of the N. court was founded upon rules which accorded
with those provided for in Chapter II.
iii) The relevant rule in Chapter II of the Regulation was Article 24. This
provides as follows:
"Apart from jurisdiction derived from other provisions of this Regulation, a
court of a Member State before which a defendant enters an appearance
shall have jurisdiction. This rule shall not apply where appearance was
entered to contest the jurisdiction, or where another court has exclusive
jurisdiction by virtue of Article 22."
iv) As appears from the judgment of Judge Michaelidis, the conduct of the
Insurers in entering a conditional appearance subject to various technical
points but not subject to objection based on the Jurisdiction clause and
their failure to raise the latter objection within the 60 days and 30 days
time limits imposed by prior court orders, precluded them from raising
that objection on 19 November 2003, when they first did so. Thus, the
appearance entered by the Insurers had ceased to be conditional by the
time they first raised the Jurisdiction clause point.
v) The determination by the N. court that the Insurers have entered an
appearance is conclusive on the point and it is not for the English court
to second guess the determination by a court which is a party to the
Judgments Regulation as to compliance with its own rules. In support of
this proposition Miss Troy-Davies has referred me to the Jenard Report on
Article 18 of the Brussels Convention, the predecessor of Article 24 of the
Regulation.
"Article 18 [24] governs jurisdiction implied from submission. If a
defendant domiciled in a contracting state is sued in a court of another
Contracting state which does not have jurisdiction under the Convention
[Judgments Regulation], two situations may arise: the defendant may
either, as he is entitled to do, plead that the Court has no jurisdiction
under the Convention, in which case the Court must declare that it does
not have jurisdiction: or he may elect not to raise this plea, and enter an
appearance. In the latter case, the court will have jurisdiction.
Unlike the case of conventions based on indirect jurisdiction, the
defendant may, by virtue of the Convention, rely on its provisions in the
court seised of the proceedings and plead lack of jurisdiction. It will be
necessary to refer to the rules of procedure in force in the State of the
Court seised of the proceedings in order to determine the point in time up
to which the defendant will be allowed to raise this plea, and to determine
the legal meaning of the term 'appearance'."
vi) Although there is under the Judgments Regulation an exception to
the duty to recognise a judgment given in one member state if such
recognition is manifestly contrary to public policy in the member state
in which recognition is sought (Article 34.1), it would not be contrary
to public policy in England to recognise the judgment of the N. court.
That was, when given, a judgment of a court of a member state and
although, at the time of the oral hearing of the stay application in the N.
Proceedings, the Assured's participation in that hearing was inconsistent
with the terms of the injunction so that if that had given rise to a
judgment before accession it might have been contrary to public policy
to recognise it (see Phillip Alexander Securities v. Bamberger [1997] I L
Pr 73 at paragraph 120 per Waller J., approved by the Court of Appeal
at page 115 para 43, subject to the qualification "unless the apparent
breaches (of the anti-suit injunction) could be excused"), since the
judgment came after accession, it should be recognised notwithstanding
the breach of the injunction. The decision of the ECJ in Krombach v.
Bamberski [2000] ECR 1-1935 supported this approach, in particular
reliance is placed on the following passages:
"It follows that the public policy of the State in which enforcement is
sought cannot be raised as a bar to recognition or enforcement of a
judgment given in another Contracting State solely on the ground that
the court of origin failed to comply with the rules of the Convention which
relate to jurisdiction.
Recourse to the public-policy clause in Article 27, point 1, of the
Convention can be envisaged only where recognition or enforcement of
the judgment delivered in another Contracting State would be at variance
to an unacceptable degree with the legal order of the State in which
enforcement is sought inasmuch as it infringes a fundamental principle.
In order for the prohibition of any review of the foreign judgment as to
its substance to be observed, the infringement would have to constitute a
manifest breach of a rule of law regarded as essential in the legal order of
the State in which enforcement is sought or of a right recognised as being
fundamental within that legal order."
89 It is first necessary to consider the decision of the ECJ in Von Horn v.
Cinnamond [1997] ECR 1-5467.
90 The ECJ there decided that Article 29 of the San Sebastian Convention
(equivalent save in one striking aspect to Article 66 of the Regulation)
had the effect that where, prior to accession, the first proceedings were
commenced in a non-member state and after accession of that state
the second proceedings involving the same cause of action and between
the same parties were commenced in a member state and both sets
of proceedings were still pending, the second court must apply the
equivalent of Article 27 if the court first seised has already assumed
jurisdiction on the basis of a rule which accords with the provisions of
Chapter II of that (Regulation) or in a convention in force between the
two states when the proceedings were instituted and must provisionally
apply Article 27 if the court first seised has not yet ruled on its own
jurisdiction. Where the court first seised has assumed jurisdiction on the
basis of a rule which does not accord with Chapter II or another binding
convention, the court second seised could not apply Article 27. It is for
the court second seised to decide whether the first court has or has not
satisfied this condition. However, this last determination must be subject
to the following qualification, at paragraph 25:
"In the particular case where the jurisdiction of the court first seised
derives, in accordance with Article 4 of the Brussels Convention, from
the law of the State of that court, which would thus undeniably be
better placed to rule on the question of its own jurisdiction, the court
seised should restrict itself to ascertaining whether the conditions for
the application of that provision are satisfied, namely that the plaintiff
is domiciled in a Contracting State and the defendant is not domiciled in
such a State. In no case, therefore, may the court second seised assess
the jurisdiction of the court first seised in the light of the law of the State
of that court."
91 The main rationale for this construction is to be found in paragraphs
13, 14 and 15, the underlying purpose of their part of the Regulation
being to prevent parallel proceedings and inconsistent decisions in
different member states. The court deployed this objective in giving
a purposive construction to the provisions of the equivalent of Article
66 which on the face of it is concerned only with the recognition
and enforcement of judgments and does not expressly relate to how
jurisdiction in pending proceedings is to be allocated as between
competing courts.
92 The limits of the application of this approach were explored
by the Court of Appeal in Davy International Ltd v. Voest Alpine
Industrianlagenbau Gmbh [1999] 1 All ER 103. It was there held that
the purposive approach to construction adopted in Von Horn did not
lead to the conclusion that where competing proceedings had both been
commenced before the accession to the Lugano Convention of the state
of the court second seised and where both sets of proceedings were still
pending, the equivalent provision to Article 66(2) operated on the second
set of proceedings.
93 The Court of Appeal approved the following passages from the
judgment of May J.
"In my judgment, von Horn's case should not be extended to a case such
as the present where the proceedings in both contracting states were
instituted before the convention came into force. I reach this conclusion
for two principal reasons. Firstly, a robust, purposive application of art
54(1) to art 21 of the convention (with the assistance of the German
and Dutch language versions) was possible where the proceedings in
the court second seised were instituted after the entry into force of the
convention in the state first seised. But it would be, in my view, rewriting
art 54(1) entirely and unacceptably if art 21 were to apply even where
neither proceedings were instituted after the entry into force of the
convention as between the two contracting states. Secondly, I do not
read the European Court's decision in von Horn's case as saying that
the aim of avoiding two irreconcilable judgments in two contracting
states is to dictate the application of the convention notwithstanding and
even in defiance of all other considerations. The European Court in von
Horn's case implicitly acknowledged that the aim of reducing the risk of
irreconcilable judgments could not be achieved in every case. To say that
"it is essential to interpret art 29(1) of the San Sebastian Convention in
the light of the structure and aims of that convention and the Brussels
Convention" does not, I think, mean that in cases more extreme than
von Horn's case itself we have to shut our eyes completely to other
considerations than those considered in that case. One such consideration
in cases where the competing proceedings were both instituted before the
convention came into force is the possibility to which I have referred that,
if the court second seised were obliged of its own motion to apply art 21,
it could be required to do so at a stage in those proceedings which was in
practical terms nonsensically inconvenient.' "The mere coming into force
of the Lugano Convention would mean that a certain class of pending
proceedings in one state would have to be stayed, whatever stage they
had reached, in favour of other proceedings in another state whatever
stage those proceedings had reached. The stay would have to be imposed
by the court second seised of its own motion. In theory, such a stay would
have to be imposed part way through a final hearing (or even part way
through an appeal?) in favour of proceedings in another State which
might have got nowhere although they had been instituted earlier. Such
a problem could scarcely arise in a case, such as von Horn's case, where
the proceedings before the court second seised were instituted after the
convention came into force. Those second proceedings would have been
instituted in the face of the convention in force and the court's obligation
to stay these proceedings would arise at the outset."
94 In my judgment, the applicability of Article 66(2) to lis alibi pendens
situations has been conclusively determined by the ECJ in Von Horn to
be confined to cases where institution of the first proceedings in the
non-Member State before accession is followed by the institution of a
second set of proceedings in the jurisdiction of a Member State which
takes place after the date of accession of the state of origin. There is no
justification for extending the reasoning in Von Horn to a second set of
proceedings also commenced before accession, much less to a second
set of proceedings which goes to final judgment before accession. Those
proceedings would not have been started or judgment in them obtained
in the face of the jurisdiction regime prescribed by the Convention/
Regulation as applicable to both sets of proceedings. That, however,
leaves intact the applicability of Article 66(2)(b) where, even in the face
of an inconsistent decision in a final judgment given in a Member State
before accession, the court of origin of a non-Member State in which
proceedings have also been commenced before accession gives judgment
after accession. There are then, unavoidably, two inconsistent judgments
provided that the jurisdiction of the court of origin was founded in
accordance with Article 62(2)(b).
95 Accordingly, in the present case, the final judgment in the Injunction
Action having been given in proceedings upon which the Regulation
has not operated, does not yield to the N. Proceedings commenced
before the Injunction Action, either at the date of accession of Cyprus
or subsequently. Nor, in my judgment, is there anything in Von Horn or
the provisions of Article 66 to suggest that the injunction was rendered
ineffective as from the date of accession by Cyprus, as argued on behalf
of the Assured.
96 At the time when the order of Morison J. was made there were pending
substantive proceedings in the N. Court in which there had not yet been
a determination whether the Insurers had submitted to the jurisdiction.
There was also a final judgment in the English court in proceedings which
were not parallel proceedings in the sense that they raised the same
cause of action as that in the N. Proceedings since they were concerned
only with the enforcement of the Jurisdiction Clause. Once judgment
was given, the effect was conclusively to determine as between the
parties that the Assured was under a continuing duty to give effect to the
Jurisdiction Clause and, consistently with that duty, to refrain from acting
in the manner prohibited by the order. To the extent that the in personam
duty was expressed in those prohibitory terms it was enforceable as an
order of the court bearing upon the Assured over whom the court had
decided that it had jurisdiction. That therefore remained the position up to
the time of accession on 1 May 2004.
97 It has, however, also been submitted on behalf of the Assured that the
effect of the decision of ECJ in Turner v. Grovit [2004] 2 L. Rep 169 would
be to render the order of Morison J. ineffective or unenforceable as from
accession. The essence of that judgment is to be found in paragraphs 24
to 27 as follows:
"24 At the outset, it must be borne in mind that the Convention is
necessarily based on the trust which the contracting states accord to one
another's legal systems and judicial institutions. It is that mutual trust
which has enabled a compulsory system of jurisdiction to be established,
which all the courts within the purview of the Convention are required to
respect, and as a corollary the waiver by those states of the right to apply
their internal rules on recognition and enforcement of foreign judgments
in favour of a simplified mechanism for the recognition and enforcement
of judgments: Erich Gasser GmbH v MISAT Srl (Case C-116/02) [2004] 3
WLR 1070, para 72.
25 It is inherent in that principle of mutual trust that, within the scope
of the Convention, the rules on jurisdiction that it lays down, which are
common to all the courts of the contracting states, may be interpreted
and applied with the same authority by each of them: see, to that effect,
Overseas Union Insurance Ltd v New Hampshire Insurance Co (Case
C-351/89) [1992] QB 434, 458, para 23, and Gasser, at p 1082, para 48.
26 Similarly, otherwise than in a small number of exceptional cases listed
in the first paragraph of article 28 of the Convention, which are limited to
the stage of recognition or enforcement and relate only to certain rules of
special or exclusive jurisdiction that are not relevant here, the Convention
does not permit the jurisdiction of a court to be reviewed by a court in
another contracting state: see, to that effect, Overseas Union Insurance,
para 24.
27 A prohibition imposed by a court, backed by a penalty, restraining a
party from commencing or continuing proceedings before a foreign court
undermines the latter court's jurisdiction to determine the dispute. Any
injunction prohibiting a claimant from bringing such an action must be
seen as constituting interference with the jurisdiction of the foreign court
which, as such, is incompatible with the system of the Convention."
98 From these observations it is clear that the underlying concept upon
which this judgment is founded is that it is an essential feature of the
Convention and Regulation that the courts of Member States trust each
other to apply the Convention/Regulation in accordance with its terms.
Thus, if it is necessary to determine whether the courts of a particular
Member State have jurisdiction, it is in general not for the courts of
any other Member State to determine that issue, much less to make
an order purporting to prevent a party from referring that issue to the
courts seised of the claim. The decision to grant an anti-suit injunction
which interferes with the determination of jurisdiction by the courts of
the Member State where the claim is located is thus incompatible with
the Convention/Regulation regime. Had the injunction in the present case
been ordered the day after accession of Cyprus, there could therefore be
no doubt that it would have been incompatible with the Regulation and
therefore without effect.
99 That, however, is not this case.
100 The decision to grant the injunction was taken at a time when
Cyprus was not a Member State and when therefore there could be no
question of that decision representing an unacceptable derogation from
the principles of mutual respect as between Member States identified in
Turner v. Grovit or an undermining of the jurisdiction of the courts of a
member state. Indeed, it is open to the English courts to grant anti-suit
injunctions restraining proceedings in the courts of non-Member States for
the purpose of giving effect to English jurisdiction clauses: see the recent
decision of this court in Konkola Copper Mines v. Coromin [2005] EWHC
898 (Comm).
101 Given that, as I have held, it is against the initial making of the order
granting an anti-suit injunction that the reasoning in Turner v. Grovit is
directed, does that reasoning extend also to the continuing enforceability
of a judgment giving such an order already made prior to accession?
In my judgment, the answer to that question must be No. That is so
particularly because for the order to be rendered ineffective from the date
of accession would involve the destruction of the accrued and continuing
right of the party to enforcement in the EU of the order giving effect to
the Jurisdiction clause. It is not the function or effect of the Regulation to
take away such accrued rights. There is no transitional provision which
goes anywhere near that. Had that been the intention of the Regulation it
is inconceivable that it would not have been made expressly the subject
of a transitional provision. Yet the Regulation contains nothing which
could, even with the most purposive construction, disturb or revoke a
pre-accession judgment, however inconsistent with the principles of
jurisdiction and mutual trust underlying the Regulation.
102 So far, therefore, there is nothing in the impact of accession on the
injunction which could amount to a sufficiently fundamental change of
circumstances to justify my revoking that order.
103 That, however, is not the end of the matter because in order to
review the position of the injunction it is also necessary to resolve
the issue raised by the Assured's application to stay the Declaration
Action. That is because, if the Assured were entitled to a stay of those
proceedings and yet were also prohibited by the injunction from pursuing
the N. Proceedings the effect would be to close down both sets of
proceedings thereby removing from the parties any prospect of having
the Assured's substantive claim determined in subsisting proceedings.
Therefore, if a stay of the Declaration Action were granted it would
at least be a matter for consideration whether there had been so
fundamental a change in circumstances as would justify this court's
intervention to revoke the injunction in the interests of justice.
104 I therefore turn to consider the Assured's stay application.
The Application to stay the Declaration Action
105 I have already set out much of the argument of Miss Troy-Davies
on behalf of the Assured in support of the application for a stay:
see paragraph 88 above. In summary, she submits that because the
Declaration Action was begun by the Insurers after the date of accession,
namely 22 July 2004 with service effected in Cyprus on 20 and 28 August
2004, there were in this case be two parallel proceedings involving the
same cause of action, one (the N. Proceedings) commenced before
accession and one after it. Consequently, in accordance with the decision
in Von Horn, supra, Article 66 applies to the following effect. The N.
Court, being first seised, the English Court, being second seised, must
stay the proceedings or decline jurisdiction once the jurisdiction of the
court first seised is established, such jurisdiction being in accordance
with the jurisdiction regime of the Regulation. Under Article 24 (set out
at paragraph 88 above) a court of a Member State has jurisdiction if a
defendant has entered an appearance except an appearance to contest
jurisdiction. As held in Von Horn at paragraph 25, set out at paragraph
90 above, it is for the court first seised as distinct from the court second
seised to decide upon its own jurisdiction where that is derived from the
law of that state. In the present case, as appears from the judgment of
Judge Michaelidis, the law relating to whether an entry of appearance
is conditional or unconditional and, if the latter, a submission to the
jurisdiction, is derived from the procedural law of Cyprus and accordingly
that is a matter for the decision of the Cyprus courts. That decision
has been made, subject to the pending appeal, and accordingly Cyprus
jurisdiction has been established and the English proceedings must be
struck out or stayed in accordance with Article 27. …
108 Public policy in this connection has to be viewed in the light of the
provisions of the Regulation which are binding on this court and which
inform what amounts to public policy. Thus, the relationship between
the N. Proceedings and the Declaration Action is to be determined by
application of Article 66 as explained by the ECJ in Von Horn. That
involves that, regardless of the existence of the Jurisdiction Clause,
this court may be obliged at least to stay the Declaration Action if the
N. Court, being the court first seised, has jurisdiction on the basis of
the jurisdiction regime in the Regulation but that necessarily involves
investigation of whether the effect of the Jurisdiction clause has been
displaced by an unconditional entry of appearance. That is essentially
a matter to be determined by the court first seised because it depends
on domestic procedural law. If the English court were to ignore a
determination of that threshold issue by the Cyprus court, it would in
substance be rendering inoperable the Article 66 regime. Until the matter
has been determined by that court, there is no other competent tribunal
capable of resolving the issue.
109 Further, if the issue remained permanently unresolved, this court
would still be obliged to stay the Declaration Action under Article 28. The
position would then be that the Insurers' negative declaration claim and
the Assured's indemnity claim would both in effect by permanently frozen.
110 I therefore have no doubt that the public policy of this court must
be consistent with the achievement of justice to both parties and with
its obligations as a court of a Member State bound by the Judgments
Regulation. Only by taking account of the judgment of the Cyprus Court
on the entry of an appearance can those purposes be achieved.
111 I conclude therefore that since, subject to the Cyprus Court of Appeal
reaching a conclusion contrary to that of Judge Michaelidis, it has been
established that for the purposes of the application of Article 66, this court
must yield jurisdiction to the court first seised, namely the N. Court.,
this court must decline jurisdiction in respect of the Insurers' Declaration
Action.
112 The Assured's application for a declaration in the Declaration Action
and for those proceedings to be stayed or struck out therefore succeeds.
Conclusion as to the Injunction Action
113 The conclusion that the effect of Article 66 is that this court has no
jurisdiction in respect of the Declaration Action which must be stayed
or struck out leaves the N. Court as the only tribunal with jurisdiction in
relation to the Assured's substantive claim. If the Assured continue to be
prohibited from presenting their claim in that tribunal, the claim cannot
be determined anywhere unless the Assured abandon the N. proceedings
and start again in England in accordance with the Jurisdiction Clause. That
course would in effect be to ignore the jurisdiction regime established
by the Regulation in as much as the effect of the continuance of the
injunction would be to force the Assured to abandon the court first seised
notwithstanding its having been held by this court that the effect of the
Regulation is to confer jurisdiction on that court in priority to this court.
On the face of it that might seem to put this court in conflict with the
jurisdiction regime of the Regulation.
114 However, in order to ascertain whether there has been a change
of circumstances so fundamental as to justify revocation of the
order granting the injunction, it is necessary to compare the position
immediately following and created by the accession of Cyprus to the
Regulation with that which existed when the order was made.
115 At the date of the order of Morison J. the only pending proceedings
in which the issue of liability under the certificates of insurance was
raised were the N. proceedings. The consequence at that time for those
proceedings of the making of the order, assuming it to be performed,
would be that the Assured would have to pursue their claims by starting
fresh proceedings. Obviously they could not start such proceedings
in Cyprus, so those proceedings would have to be in England. At the
moment of accession, the injunction being still in force and, as I have
held, of continuing effect, the only extant proceedings in which the
Assured's claim was advanced remained, as before, those in Cyprus, but,
just as before accession, the Assured could not pursue those proceedings
without being in breach of its pre-existing duty to the Insurers and to
the English Court. It is true that the effect of Article 66 would be that,
provided the N. Court had jurisdiction on a basis consistent with the
jurisdiction regime in the Regulation, any judgment of that court following
accession would have to be recognised by the English courts, whereas
prior to accession, that would not have been so, the Assured would not
be in a position to obtain such a judgment if they were to comply with
the injunction. Accordingly, there would not be any effective change in
material circumstances by reason of accession. Both before and after
accession the only course open to the Assured consistent with compliance
with the injunction was to start fresh proceedings in the English courts.
116 Against this background the commencement by the Insurers after
accession of the Declaration Action is entirely irrelevant. The fact that the
English Courts are obliged not to exercise jurisdiction in those proceedings
by reason of the effect of Article 66 does not mean that the English courts
are precluded from hearing the Assured's claim if the Assured were now
to invoke English jurisdiction as they are perfectly entitled and, indeed,
obliged to do, if they wish to prosecute their claim.
117 Accordingly, I have no doubt that the incidence of accession has not
been a change of circumstances such as would justify revocation of the
injunction by this court.
118 It follows that the Assured's application for the revocation of the
injunction must be refused.