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Two recent decisions of the European Court of Justice (Turner v Grovit [2004] 1 Lloyd’s Rep 216 and Erich Gasser GmbH v Misat SRL [2004] 1 Lloyd’s Rep 222) would appear to undermine the purpose of exclusive jurisdiction clauses in contracts and signal the end of anti-suit injunctions being obtained within the European Union, at least in relation to Court proceedings.

As a matter of general principle, the English Courts are reluctant to interfere with commercial contracts. If therefore, parties contractually agree to resolve their disputes in a particular way (e.g. provision is made in a Charterparty for any disputes to be referred to the English High Court and to be determined in accordance with English law), the English Courts will hold them to their bargain unless there are very strong reasons against this. Consequently, there are a number of cases where the English Courts have considered it appropriate to grant an anti-suit injunction preventing a party from commencing/continuing proceedings in breach of an exclusive jurisdiction clause. The English Courts have also previously been willing to grant an anti-suit injunction in order to prevent vexatious litigation being conducted by a party with the sole intention of frustrating proceedings.
The European Court of Justice in the above cases clearly considered however, that anti-suit injunctions were contrary to the whole spirit of the European Community Conventions/Regulations and, in particular, Council Regulation (EC) No.44/2001 (“the Brussels Regulation”), which deals with the question of jurisdiction in civil and commercial disputes between EU Member States (with the exception of Denmark) in place of the Brussels Convention 1968.
The main object of the Brussels Regulation (and indeed, the Brussels/Lugano Conventions) is to promote legal certainty and harmony between the Courts of Member States. The general principle is that a person domiciled in a Contracting State (listed below) shall, regardless of their nationality, be sued in the Courts of that State. Individuals can therefore, be sued where their principal place of residence is. The domicile of a company can be determined by the whereabouts of its registered office or its principal place of business (i.e. where the company is administered from). However, as is often the case, there are a number of exceptions to the general principle.
One exception (under Article 17 of the Brussels Convention, now Article 23 of the Brussels Regulation), is that in circumstances where the parties have agreed for their disputes to be determined by a particular forum in a particular jurisdiction, the Court/forum so elected will have exclusive jurisdiction to determine the matter. If, however, a party commences proceedings in the Court of a Contracting State in breach of an exclusive jurisdiction clause and the other party subsequently commences proceedings in the Court of another Contracting State, in order to bind the other to the provisions of the exclusive jurisdiction clause, there would appear to be a conflict between Article 17 of the Brussels Convention (Article 23 of the Brussels Regulation) and Article 21 of the Brussels Convention (now Article 27 of the Brussels Regulation). Article 21 of the Brussels Convention/Article 27 of the Brussels Regulation provides that proceedings commenced in the Court of a Contracting State after proceedings have already been commenced in the Court of another Contracting State must be stayed until the Court first seized of the proceedings determines whether or not it has jurisdiction to deal with the matter.

This principle was upheld by the European Court of Justice in Erich Gasser GmbH v Misat SRL. In this case, Misat sought a declaration from the Italian Court that the contract between themselves and Erich Gasser had been terminated, notwithstanding the presence of an exclusive jurisdiction clause (in all of the invoices sent by Erich Gasser to Misat), referring disputes to the Austrian Courts. Whilst Erich Gasser subsequently commenced proceedings before the Austrian Court, in an attempt to hold Misat to the exclusive jurisdiction clause, Misat disputed the jurisdiction of the Austrian Court to determine the dispute and maintained that, in accordance with the general principle under Article 2 of the Brussels Convention, the Court in Rome, where Misat were domiciled, was the Court with competent jurisdiction. The European Court of Justice held that the proceedings subsequently commenced by Erich Gasser in the Austrian Court (in accordance with the exclusive jurisdiction clause) would have to be stayed until such time as the Italian Court, which was the Court first seized of the proceedings determined, for itself, whether or not it had jurisdiction to deal with the dispute. This is consistent with the provisions of Article 21 of the Brussels Convention (Article 27 of the Brussels Regulation).

In Turner v Grovit the European Court of Justice had to consider whether it was appropriate for the House of Lords to grant an anti-suit injunction in circumstances where proceedings had been commenced by Grovit in Spain, with the sole intent and purpose of frustrating and/or obstructing proceedings which should properly be determined by the English Courts. As the English Court would have to consider whether or not the Spanish Court had jurisdiction to deal with the matter for the purposes of granting an anti-suit injunction, the European Court of Justice held that this amounted to a direct interference with the authority of the Spanish Court to determine its own jurisdiction. This, in the view of the European Court of Justice, was contrary to the whole purpose of the Brussels Convention/Brussels Regulation. Thus, the European Court of Justice concluded that the Brussels Convention/Brussels Regulation precludes the Courts in one Contracting State from granting anti-suit injunctions restraining proceedings being commenced/continued in the Courts of another Contracting State. It is for the Court where the proceedings are commenced/continued to determine whether or not it has jurisdiction to deal with the matter and not for the Court of another Contracting State to do so.
Whilst the rationale behind the decisions of the European Court of Justice appears to emphasise the main purpose of the Brussels Convention/Regulation namely, to ensure mutual trust and harmony between the Courts of Member States, this is clearly of no comfort to parties entering into international commercial contracts which contain exclusive jurisdiction clauses in favour of the Courts of a specific Contracting State. Indeed, it would appear that there is no longer any bar to a party rushing to commence proceedings in the Court of a Contracting State in breach of an exclusive jurisdiction clause with the sole aim of delaying and frustrating proceedings until such time as the Court first seized determines whether or not it has jurisdiction to deal with the matter. In an attempt to protect the innocent party in this respect it would be a good idea to ensure that the contract includes a provision for damages to be payable in the event of any breach of the exclusive jurisdiction clause. Alternatively, parties may simply prefer to ensure that their exclusive jurisdiction clauses refer disputes to Arbitration as opposed to a Court of a Contracting State, as the provisions of the Brussels Regulation and Lugano Conventions do not apply to arbitration proceedings.
Clearly the recent decisions of the European Court of Justice signal the end of anti-suit injunctions being used to restrain Court proceedings from being commenced/continued in another Contracting State. However, these decisions should not prevent the English Court from issuing an anti-suit injunction in respect of existing or contemplated proceedings outside the EU and EFTA Countries or to prevent a party from breaching an exclusive jurisdiction clause which refers disputes to Arbitration.

"THE BRUSSELS REGULATION"

The Brussels Regulation came into force in the following EU Member States on 1st March 2002; Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal, Spain, Sweden and the UK. Whilst Denmark is a Member State of the EU, it opted out of the Brussels Regulation thus, the Brussels Convention 1968 will continue to apply here. The EFTA (European Free Trade Association) countries i.e. Liechtenstein, Iceland, Norway and Switzerland, will continue to apply the Lugano Convention (which is similar to the Brussels Convention).

 

Regulated by the Solicitors Regulation Authority