“(…) GOLDRING J:
Introduction
The Claimant in this action is A, an Irish computer company ("A.
Ireland"). The Defendant is D., an Italian computer distribution company.
This is an appeal by D. against an order of Master Leslie dated 26 June
2001. The Master himself gave permission to appeal.
The application before the Master
The original application was for an order that:
1. Article 17 of the Brussels Convention (Civil Jurisdictions and Judgments
Act 1982) does not apply in this case as there is no valid jurisdiction
agreement between the Claimant and Defendant.
2. The High Court should decline jurisdiction under art 22 of the
Convention in favour of the Italian court, namely the civil court of Naples.
3. Alternatively, the High Court should stay the action under art 22 of the
Convention on the grounds that the Italian action is a related action and
the two actions 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. 1/14
In fact, the hearing proceeded on the basis of applications under both arts
21 and 22 of the Convention.
The relevant Articles
By art 17,
"If the parties (...) have agreed a court or the courts of a Contracting
State are to have jurisdiction to settle any disputes (...) which may arise
in connection with a particular legal relationship, that court or those
courts shall have exclusive jurisdiction (...)"
By art 21,
"Where proceedings involving the same cause of action and between the
same parties are brought in the courts of different Contracting States,
any court other than the court first seised shall of its own motion stay
proceedings until such time as the jurisdiction of the first court seised is
established. Where the jurisdiction of the court first seised is established,
any court other than the court first seised shall decline jurisdiction in
favour of that court."
By art 22,
"Where related actions are brought in the courts of different Contracting
States, any court other than the court first seised may, while the actions
are pending at first instance, stay its proceedings.
A court other than the court first seised may also, on the application of
one of the parties, decline jurisdiction if the law of that court permits the
consolidation of related actions, and the court first seised has jurisdiction
over both actions.
For the purposes of [art 22], 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."
The application under art 21 is not pursued in this appeal. Neither is it
suggested the court should decline jurisdiction. Only a stay is sought.
The background
Between 1993 and June 2000, D. was a distributor in Italy of A. computer
products. Agreements between A. Italia SpA, later A. Italia Srl ("A.
Italy") and D. were signed in 1993 and 1996. They contained exclusive
jurisdiction clauses in favour of Italian law. In 1998 a replacement
agreement was signed. It was between A. Computer BV of Netherlands
("A. Netherlands") and D.. It contained a jurisdiction clause in favour of
the English courts and an English law clause.
On 11 February 1999 there was a second agreement between A.
Netherlands and D.. It is the basis of these proceedings. It too contained
a jurisdiction clause in favour of the English courts and law.
By Clause 12.4 of that agreement, it
" (...) will be governed by and construed in accordance with the laws of
England and the parties admit to the exclusive jurisdiction of the Courts
of England and Wales. A. shall (...) be entitled to enforce it rights by
recourse to the judicial authority having jurisdiction in accordance with
the domicile and/or main place of business of the Distributor [D.] and
by recourse to all legal remedies contemplated by Italian procedural and
substantive law." 1/7/16
On about 26 August 1999, A. Netherlands wrote to D.. It stated that
it intended to assign the agreement to A. Ireland, the Claimant in
these proceedings. It purported to do so on 26 September 1999. There
was argument before the Master as to the validity and nature of that
purported assignment. That is agreed not to be relevant to this appeal.
It is agreed that after 26 September 1999 A. Ireland was the supplier
of items to D.: that the claim is in respect of items so supplied. There is
however an issue about clause 12.4.
On 29 June A. Ireland terminated the agreement with D.. D. issued
proceedings against A. Italy and A. Ireland in Italy. On 1 August 2000
those proceedings were served on A. Italy. They have not so far been
successfully served on A. Ireland. The correct procedures under the
Hague Convention were not apparently followed. The Irish Court returned
the papers. Although various submissions have been made about that
by Miss Evans-Gordon on behalf of D., the only evidence as to the effect
of the failure to serve A. Ireland comes from Mr Fiofi, who is a partner
of Baker and McKenzie, A. Ireland's solicitors, both in Italy and here. He
states that because the writ in the Italian proceedings was not served, art
22 cannot be applied by that court: see 1/20.
The nature of the Italian proceedings
There is a rather literal translation of the relevant pleading: see 1/19/13.
The allegations seem to amount to this. A. Italy and Ireland intended
to exclude D. from the A. distribution chain. That intention was hidden.
There was a,
"design put into effect by A. (...) [Ireland] with the collaboration of (...)
[A. Italy], which can certainly be considered illegal both in terms of the
fact of A. taking advantage of its own dominant position and in terms
of the substantial breach of agreements reached (...) While. [Italy]
was supplying assurances that the adequate commercial and economic
solutions would be found (...). [Ireland] (...) declared its own desire to
withdraw from the relationship pending, awaiting the missing payment
of the balance of the goods supplied. The above definitively clarifies the
design put into effect by A. [Ireland] with the collaboration of (...) [A.
Italy] which can certainly be considered illegal both in terms of the fact
of A. taking advantage of its own dominant position and in terms of the
substantial breach of agreements reached, and on which D. had been
called upon to respect with considerable economic commitments (...)
D. (...) not only contests the debt of A. as regards a presumed failure
to pay for certain supplies as there were agreements for economic re-
negotiation, and (...) impugns the withdrawal of the relationship of A.
[Ireland] (...) it is forced to request the confirmation of the breaches,
violations and serious non-fulfilment (...) committed by A. [Ireland] (...)
with the collaboration of A. [Italy] (...) Also, in enforcing the contract, A.
[Ireland] behaved in clear breach of art. 1375 of the Civil Code (...)" See
1/19/15
By the claim, the following is apparently sought.
1. A confirmation and declaration that A. Ireland unlawfully withdrew from
the relationship.
2. A confirmation and declaration that the contract between A. Ireland
and D. was not fulfilled.
3. Confirmation of the "concurrent unlawful behaviour of A. [Italy]."
4. Damages against A. Ireland and Italy. See 1/19/17
Mr Iesini, who is D.'s English lawyer summarises D.'s case as follows:
"It is D.'s case that it was entitled to withhold payment of invoices
by reason of serious commercial damage being done to its business
by A. Italy and A. Ireland, and that the activities of those companies
in damaging its commercial reputation in the Italian market, and
in terminating D.'s distributorship summarily have caused D. very
substantial loss, estimated (...) at (...) £ 2,336,574 (...)" see 2/4/10/para
10.
Although not an expert in Italian law, Mr Iesini also speaks as to the view
the Italian court might take of clause 12.4. He states that D. would claim
that there are grounds to argue that it should not be recognised in any
proceedings between A. Ireland and D. in Italy: see 2/4/8/para 20. Of
course, if Mr Fiofi is right (1/20), the failure to serve the writ on A. Ireland
would mean that there would at present be no question of the Italian
court considering clause 12.4. His is the only expert evidence on this
topic.
The nature of the English proceedings
They are straightforward. They were issued by A. Ireland against D. on
9 March 2001. The claim is for some £ 1.116 million "as monies due
and owing in consideration of the supply by A. Ireland to D. of computer
hardware and software." See 1/6
The Master's decision and the issues: see 1/4
There was considerable argument regarding the nature of the assignment
of the agreement. As I have said, I can put that to one side. Miss Evans-
Gordon accepts that the English court would recognise this clause as
an exclusive jurisdiction clause for the purposes of Article 17: that as
a result, Article 17 would bite. As will become plain, she disputes its
relevance and suggests that the Italian court might take the view it does
not bite for the purposes of Article 17.
There was argument regarding Article 21. As Miss Evans-Gordon has
abandoned that, I need not go into it.
As to Article 22 he decided,
1. The actions are related within the terms of Article 22. The Italian was
not the first court seised of it. As I understand his reasoning it was this.
A court can only be seised of an action when proceedings in it have been
served. In D.'s Italian case proceedings had been served on A. Italy. The
Italian court was seised of that action. Proceedings had not been served
on A. Ireland. The Italian court was not seised of that action. He relied on
the authority of Gruppo Torras v Al Sabbah [1996] Lloyd's Rep 21 for the
proposition that a court is not seised of an action until the proceedings are
served.
"It therefore follows that as between the present Claimant and Defendant,
the Italian court is not first seised because this Claimant has never been
served in the Italian proceedings and therefore the stay contemplated by
Article 22 (...) does not arise." See his judgment at 7/28.
As a result of that finding, he found that no question arose of him
exercising his discretion under Article 22.
Both sides agree that until proceedings have been served upon a
Defendant, the court cannot be seised of the action between that
Claimant and that Defendant. However, submits Ms Evans Gordon
on behalf of D., that is not an end to the matter. For in this case the
proceedings have been served on A. Italy. Those proceedings constitute
the related action. An action can be related without it necessarily
being between the same parties. The Master should have exercised his
discretion. This court should do so and in favour of D..
2. There was also considerable argument about Article 17. As he makes
plain, what the Master said regarding Article 17 was not necessary, given
his decision on Article 22. Although I shall need to consider Article 17, I
do not propose to refer to what the Master said about it at present.
The grounds of appeal
D.'s case can be summarised shortly. The Italian court, it is said,
was seised of the related action by virtue of the service of the Italian
proceedings on one of the Defendants in that action. The Master, having
concluded that he actions were related, he should have considered the
exercise of his discretion under Article 22. He failed to do so. This court
therefore should. It should exercise it in favour of D.. Jurisdiction should
be declined or the action stayed pending the outcome of the Italian
proceedings.
It is not necessary to refer to A.'s grounds for upholding the order.
The issues which now arise
Article 17
I shall consider this first. For Mr Fyfe, on behalf of A. Ireland, submits it is
effectively fatal to this application, whether or not the actions are related
for the purposes of Article 22 and whether or not I would otherwise
exercise my discretion in favour of a stay.
By clause 12.4, he submits, the parties to the English action have agreed
in writing that the English court is to have jurisdiction to settle any
dispute in respect of the agreement which forms the basis of A. Ireland's
claim. The authorities, he submits are clear and I am bound by them.
I think Mr Fyfe's submissions came to this.
1. There is no dispute but that under English law, clause 12.4 is valid.
2. There is no expert evidence that the Italian court might take a different
view. Such expert evidence as there is suggests that at present it would
not consider the A. Ireland case.
3. Be that as it may, the authorities are decisively in his favour. The well
known case of Continental Bank v Aeakos Compania Naviera SA and
others [1994] 2 All ER 540, [1994] 1 WLR 588 is clear authority for the
proposition that the fact that the Defendant in the English proceedings
has already commenced proceedings in another Convention jurisdiction
is irrelevant where they have been commenced in breach of an exclusive
jurisdiction clause. That must equally be so when the court is dealing with
a related action not directly involving the parties in the English action. The
Article 17 clause takes precedence. I cannot impose a stay.
Miss Evans-Gordon, in submissions with which I have some sympathy,
disagrees. She submits
1. D. had no choice but to bring the proceedings against A. Italy in Italy.
2. No question of an English exclusive jurisdiction clause arises in those
proceedings. Clause 12.4 and Article 17 are irrelevant.
3. The failure to serve A. Ireland was procedural. The Italian court may
well decide that service on them was sufficient. Whether or not it does,
once A. Ireland is a party, the Italian court might decide that clause 12.4
does not bite in Italian law. It should be permitted to do so.
4. The Italian court was first seised of the Italian action. Mr Fyfe accepts
it was. If the actions are related, the Italian court was therefore first
seised of the related action. When two courts are seised, the second
must apply Articles 21 or 22 as appropriate, even if it believes it has
jurisdiction and first court (here, the Italian) does not: see Overseas
Union Insurance v New Hampshire Insurance [1991] ECR 1-3317.
Challenges to its jurisdiction must be brought in the court first seised or
not at all. Continental Bank v Aeakos Compania Naviera SA and others
[1994] 2 All ER 540, [1994] 1 WLR 588 and the authorities which followed
it cannot stand in the face of Overseas Union Insurance v New Hampshire
Insurance (see above). This case can be distinguished from Continental
Bank v Aeakos Compania Naviera SA and others and the cases which
followed it. In those cases, the parties and the contract were the same.
There was no issue about the applicability of the Article 17 clause in the
foreign proceedings.
5. In any event, Continental Bank v Aeakos Compania Naviera SA and
others was wrongly decided. It has been subjected to considerable
criticism. Miss Evans-Gordon does accept that if applicable, I am obliged
to follow it.
Article 17: my view
However sympathetic to Miss Evans-Gordon's submissions I might be, it
seems to me the authorities pose an insuperable bar to them. I refer to
Continental Bank v Aeakos Compania Naviera SA and others [1994] 2 All
ER 540, [1994] 1 WLR 588. I need only quote from the relevant passages.
See 3/9. The facts are summarised in the headnote. See 594, 596-7.
I have considered Overseas Union Insurance v New Hampshire Insurance
(see above). It was cited to the Court of Appeal in Continental Bank v
Aeakos Compania Naviera SA and others. I need not recite the facts. In
that case the European Court considered the relationship between Article
16, an exclusive jurisdiction clause and Article 21 (as then drafted). As
the Summary of the Judgment puts it,
"Without prejudice to the case where the court second seised has
exclusive jurisdiction under the Convention and in particular Article
16 (...), Article 21 must be interpreted as meaning that, where the
jurisdiction of the court first seised is contested, the court second seised
may, if it does not decline jurisdiction, only stay the proceedings and may
not itself examine the jurisdiction of the court first seised."
Arguments not dissimilar to Miss Evans-Gordon appear to have been
advanced by Mr Michael Beloff QC to More-Bick J in Glencore International
v Metro Trading [1999] 2 Lloyd's Rep 632. He rejected them. He was
satisfied that Continental Bank v Aeakos Compania Naviera SA and others
represents the current law. I agree.
The fact here that at present no art 17 clause features in the Italian
litigation or that in Continental Bank v Aeakos Compania Naviera SA and
others and the authorities which followed it, the parties and the contracts
were the same does not seem to me to be a basis for a valid distinction
between those cases and this. So to decide would seem to me to ignore
the basis of the decision in Continental Bank v Aeakos Compania Naviera
SA and others and lead to confusion and illogicality.
If in the Italian action A. Ireland had been successfully served, those
authorities would mean that the court would not grant a stay under art 21
or 22: the art 17 clause would bite. Indeed, on the basis of it, the court
could grant an injunction in respect of the Italian A. Ireland proceedings.
It is by mischance, that A. Ireland is not a party and that the contracts
are not the same. The effect is that the relationship between the actions
is accordingly less than it otherwise would have been. Yet, if Ms Evans-
Gordon is right, in the face of the same art 17 clause, in proceedings
properly brought in England, no proceedings having been brought in Italy,
I should apply a stay on the basis of art 22. That would seem to me a
strange and inconsistent consequence in the light of the authorities.
On that ground alone, I would refuse a stay.
Are the actions related?
Although that would be enough to dispose of this appeal, I shall briefly
consider art 22.
Ms Evans-Gordon submits the actions are plainly related. Her
submissions, which I accept, come to this.
Both actions raise A. Ireland's conduct. The alleged conspiracy involved
A. Ireland. The debt claimed in the English proceedings is disputed in the
Italian. The Defence to it will raise the matters relied upon in the Italian.
No finding as to A. Italy can be made without findings as to A. Ireland.
Any sum due to A. Ireland would be part of the claim against A. Italy.
Mr Fyfe suggests there is little or no risk of irreconcilable judgments.
There are two sets of proceedings. D.'s denial of the debt in the Italian
proceedings is vague and without real substance. A declaration that the
English action debt is not due is not sought. There is no pleading in the
English action raising the Italian issues.
As I have indicated, in my view, Ms Evans-Gordon is right (as was the
Master). It is plain that in the English action, as part of the defence, the,
or similar allegations, to those raised in the Italian action will arise. In
each case, among other things, the judge will be required to rule upon
A. Ireland's conduct. If he ruled differently in each, the judgments would
be inconsistent. I would therefore have concluded that the Italian action
is so closely related to the English that it would have been expedient
to hear and determine them together to avoid the risk of irreconcilable
judgments.
Once the court concludes the actions are related there are in principle
strong grounds to stay the second proceedings: see for example the
Jenard Report para A1.165, Virgin Aviation Services Limited v CAS
Aviation Services [1991] 1 Lloyd's Rep 7. However, this is not the ordinary
case.
The position at present is that the actions are related for the purposes
of art 22. They do not at present involve the same cause of action and
the same parties. A hearing in Italy is soon about to take place. Once
A. Ireland is a party in the related Italian proceedings (assuming that
happens), it will. There would, it seems to me, then be a strong argument
that art 21 would require the Italian court to decline those proceedings.
It would be the second court seised of that action: see Grupo Torras v Al-
Sabah [1996] 1 Lloyd's Rep 7 at p 21. There would of course also be an
argument as to the Italian court's jurisdiction having regard to clause 12.4
and art 17.
In such circumstances it would not have seemed to me appropriate,
certainly at present, to impose a stay in the present English proceedings.
Conclusion
Accordingly, albeit not throughout for the same reasons, I have concluded
that the Master's decision was right. This appeal is dismissed. (…)“