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Cite as: [2015] QB 699, [2015] ILPr 20, [2015] 1 QB 699, [2015] 3 WLR 282, [2015] EWCA Civ 143, [2015] WLR(D) 95

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		Neutral Citation Number: [2015] EWCA Civ 143
		Case No: A3/2014/1398

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE QUEEN'S BENCH DIVISION
MR JUSTICE POPPLEWELL
[2014] EWHC 1085 (COMM)

Royal Courts of Justice
Strand, London, WC2A 2LL

26/02/2015

B e f o r e :

Lord Justice Laws
Lord Justice Tomlinson
and
Lord Justice Christopher Clarke
____________________

Between:

	MARZILLIER, DR MEIER & DR GUNTNER RECHTSANWALTSGESELLSCHAFT mbH	Appellant
	- and -
	AMT FUTURES LIMITED	Respondent

____________________

Hugh Mercer QC and Pierre Janusz (instructed by Zimmers) for the Appellant
Thomas de la Mare QC and Andrew Scott (instructed by Farrer & Co LLP) for the Respondent
Hearing dates: 11th and 12th February 2015
____________________

HTML VERSION OF JUDGMENT
____________________

Lord Justice Christopher Clarke:

The background

AMT Futures Ltd ("AMTF") is a company incorporated in the UK, which acted as an execution only broker for the purchase and sale of derivative instruments. Marzillier, Dr Meier & Dr Guntner Rechtsanwaltsgesellschaft mbH ("MMGR") is a firm of German lawyers.

AMTF obtained instructions from introducing brokers. They introduced clients to AMTF who wanted to trade in derivatives and AMTF did so on their behalf. In some cases, the clients suffered losses on their trades. Some 70 of AMTF's former clients ("the former clients") issued proceedings in Germany against AMTF in which they claimed damages in respect of their losses. AMTF challenged the jurisdiction of the German court. In the event many of them have recovered damages by way of settlement.

The agreements made between the former clients and AMTF contained provisions whereby (a) the dealings between them and AMTF were to be governed by English law; and (b) the English courts were to have exclusive jurisdiction in respect of any disputes. AMTF has relied on these provisions, and other matters, in challenging the jurisdiction of the German court.

AMTF's case is that MMGR induced the former clients to issue proceedings in Germany and to advance causes of action under German law, and thereby to breach the terms of the applicable exclusive jurisdiction and choice of law clauses. AMTF claims damages against MMGR for their having done so, its claim being a claim in tort for inducement of breach of contract.

The issue

The question is whether or not the English Courts have jurisdiction to entertain this action under Council Regulation No 44/2001 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters ("the Regulation"). Popplewell J decided that they did. MMGR says that he was wrong to do so.

The German proceedings

Three of the 70 cases were brought in Hamburg. The remainder were brought in Duisburg or, on appeal therefrom, in Düsseldorf. The reason why the court in Duisburg was chosen is said by AMTF to have been because it had a particularly "investor friendly" approach. The claims, which were in delict or quasi delict, followed a standard model marketed by MMGR. The judge summarised them thus [7]:

"The primary complaint was addressed to the conduct of the relevant independent broker in advising the client to make the investments or failing to advise of the risks, but AMT was alleged to have encouraged this conduct by "kickbacks" to the independent brokers from the fees it was earning on the transactions so as to owe a duty directly to the client in tort to prevent any transactions being undertaken contrary to the client's interests, and a duty to brief the client about what was characterised as "fee churning". The claims against AMT were in essence based on an accessory liability ancillary to that of the introducing broker."

The 70 different cases have had different outcomes. The position at the time of the hearing before us was said to be as follows. 51 of the 70 cases had been settled, often for considerably less than the amount claimed. Of those 51, 30 were settled before any judgment had been given. 21 were settled after a judgment was given in relation to jurisdiction. Some of the settlements were approved by the court. 4 cases have been determined by a final judgment - 2 in favour of AMTF and 2 against. In the 15 cases which have not finally been settled, 4 are pending in the lower court. In 11 cases the lower court has made a decision and an appeal is pending. In 5 of those 11 cases AMTF was the winner in the lower court.

The damages sought by AMTF in the action include claims for (a) monies paid in settlement; (b) legal costs incurred in Germany and in England; (c) loss of management time; and (d) loss of profit in respect of future contracts. AMTF also seeks injunctive relief restraining MMGR from any further inducement.

The exclusive jurisdiction clauses

The contractual documentation between the former clients and AMTF consisted of a "Customer" or "Terms of Business" letter and a Client (or Customer) Agreement with terms of business. There were 5 different agreements used by AMTF over time.

The earliest relevant client agreements were on the SFA Terms (1991) which provide that:

"33.1 This Agreement and all rights and obligations arising in respect of your Account shall be governed by, performed and construed in accordance with the laws of England and … you irrevocably submit to the exclusive jurisdiction of the English courts in relation to such dispute, without prejudice to our right to seek enforcement of any arbitration award or judgment in any other jurisdiction."

The SFA Terms (1991) incorporated the terms of the Netting Agreement annexed to those terms, which provides at clause 12 as follows:

"12.1 These terms shall be governed by, and construed in accordance with, the laws of England and Wales.

12.2 With respect to any Proceedings each Party irrevocably (i) agrees that the courts of England shall have exclusive jurisdiction to determine any Proceedings and irrevocably submits to the jurisdiction of the English courts…"

The term "Proceedings" is defined under clause 13.1 of the Netting Agreement as

"Any suit, action, or other proceedings relating to this agreement."

As the judge recorded, over time the terms of the law and jurisdiction clauses came to be drawn more widely still. It is plainly seriously arguable that the German proceedings commenced by the 70 former clients were commenced in breach of the exclusive English jurisdiction clause and that, as a matter of contract the entirety of the legal relationship between the client and AMTF in relation to the client's account was agreed to be subject to English law. That raises questions as to the scope of Article 14 of the Rome II Regulation, with which we are not presently concerned. The terms of the letter contained an acknowledgment signed by the client that he understood that AMTF was only providing a dealing service and was not providing advice. The standard terms themselves contained provisions to the like effect. The letters included a confirmation that the introducing broker acted as his advisers and would be receiving a commission from AMTF per transaction.

The purpose of these arrangements, so far as AMTF was concerned, was as follows. AMTF was unwilling to assume the costs and risks, including regulatory risks, of advising on investments. The terms and conditions and letters were drafted so as (i) to make clear to clients the limited scope of the services to be provided; (ii) to comply with the UK regulatory regime to which AMTF is subject, and align the law of the contract with that of the regulatory regime; and (iii) to protect AMTF against the risk of becoming subject to proceedings outside England in courts which might not apply English law and would certainly be less familiar with it. It was only on those terms that AMTF was prepared to trade. The first set of contractual documentation was prepared on the basis of legal advice received by AMTF and the later sets of terms were prepared by English lawyers acting on behalf of a trade association of brokers, including AMTF, who were regulated by the SFA or the FSA.

The Judgments Regulation

Article 2 of the Regulation provides:

"1. Subject to this Regulation, persons domiciled in a Member State shall, whatever their nationality, be sued in the courts of the Member State."

Article 5 provides:

"A person domiciled in a Member State may, in another Member State, be sued:

1 (a) in matters relating to a contract, in the courts for the place of performance of the obligation in question:

…

3 In matters relating to tort, delict or quasi-delict, in the courts for the place where the harmful event occurred or may occur".

Accordingly whether or not MMGR can be sued in England depends on whether the place where "the harmful event occurred" was in this country. There are at least five major cases in which the ECJ has had to consider a situation in which the act giving rise to loss or damage has arisen in one country and the loss or damage in another (or more than one other) country.

Bier

In Handelskwekerj GJ Bier NV v SA Mines de Potasse d'Alsace (Case 4320/74) [1978] QB 708 the delictual claim was for damage caused to the plaintiff's nursery garden in Holland. The garden was watered from the Rhine and its seed beds were damaged by saline waste flowing down the river from the defendant's mine in France. The Court made clear [11] that the freedom of choice provided by the exceptions to Article 2 in Article 5 was:

"introduced having regard to the existence in certain clearly defined circumstances of a particularly close connecting factor between a dispute and the court which may be called upon to hear it, with a view to the efficacious conduct of the proceedings".

The Court held that the place of the event giving rise to the damage, no less than the place where the damage occurred, could, depending on the case, constitute a significant connecting factor from the point of view of jurisdiction and that it was not appropriate to opt for one rather than the other. It, therefore, held that the phrase "place where the harmful event occurred" must be interpreted as giving the plaintiff the option to commence proceedings at the place where the damage occurred or the place of the event giving rise to it.

In that case the tort was not complete until the effluent had found its way to the plaintiff's land; there was no place other than Holland where the damage could be said to have occurred; and the damage to crops was (as the ECJ pointed out in Dumez [12] – see below) the direct effect of the release of the saline waste.

Dumez

In Dumez France and Tracoba v Hessiche Landesbank (Helaba) (Case C-220/88) [1990] ECR I-49 two French companies sought compensation for the damage which they claimed to have suffered owing to the insolvency of their German subsidiaries, which was said to have been brought about by the suspension of a property development project for a German prime contractor allegedly on account of the cancellation by the German banks of loans granted to the prime contractor.

The ECJ held [13] that the cancellation by the German banks of the loans "originated and produced its direct consequences in the same Member state" namely Germany in which the banks, the prime contractor and the subsidiaries were all established. The plaintiffs were only indirect victims. The court held that the concept of the "place where the damage occurred" indicated the:

"place where the event giving rise to the damage, and entailing tortious, delictual or quasi-delictual liability, directly produced its harmful effect upon the person who is the immediate victim of the event"

Marinari

In Marinari v Lloyd's Bank Plc [1996] QB 217 Mr Marinari complained that the bank's staff had refused to return some dubious promissory notes which he had lodged in an envelope with the bank in Manchester and had reported him to the police as a result of which he was arrested. He brought proceedings in Italy. The ECJ held that:

"14 Whilst it is thus recognised that the term "place where the harmful events occurred" within the meaning of article 5 (3) of the Convention may cover both the place where the damage occurred and the place of the event giving rise to it, that term cannot, however, be construed so extensively as to encompass any place where the adverse consequences of an event that has already caused actual damage elsewhere can be felt.

15 Consequently, that term cannot be construed as including the place where, as in the present case, the victim claims to have suffered financial damage consequential on initial damage rising and suffered by him in another contracting state."

The case illustrates the focus by the court on the place of initial damage rather than damage consequential on that initial damage. As the Advocate General put it [39] in Kronhofer (see [25] below), Marinari:

"involved a causal event (the conduct imputed to the employees of the bank) and the direct harmful consequences (sequestration of the promissory notes and imprisonment of the claimant) which occurred in one territory (the United Kingdom) with the initial damage adversely affecting in turn the victim's assets (financial losses arising from the breach of several contracts) in another Contracting State (Italy)."

Réunion

In Réunion Européene SA v Spliethoff's Bevrachtingskantoor B.V. [2000] QB 690 a consignment of peaches was carried by sea from Australia to Rotterdam and then by road to a town in France. On arrival the peaches were found to be overripe because of a breakdown of the cooling system on the voyage. Proceedings were brought in France against (i) the Australian issuer of the bill of lading, (ii) the actual carrier, whose registered office was in Amsterdam and (iii) the Master, who resided in Amsterdam.

In his opinion the Advocate General stressed [48] the need to define the relevant damage which he regarded as:

"any harm to the property or person of the plaintiff, where it relates to the event giving rise to the damage, that is to say to the illegal behaviour attributed to the defendant by a direct and causal link … to the exclusion of indirect, more remote damage or damage which is suffered by an indirect victim".

The Court held that the place where the harmful event occurred, for the purpose of a tortious claim against the actual carrier was to be regarded as the place where the actual maritime carrier was to deliver the goods i.e. Rotterdam. It observed:

"36 That place meets the requirements of foreseeability and certainty imposed by the Convention and displays a particularly close connecting factor with the dispute in the main proceedings, so that the attribution of jurisdiction to the courts for that place is justified by reason relating to the sound administration of justice and the efficacious conduct of proceedings"

Kronhofer

In Rudolf Kronhofer v Marianne Maier and Ors Case C-168/02 an Austrian investor sought to recover damages in an Austrian court for financial loss said to have been suffered as result of the wrongful conduct of four investment consultants of a German company, who persuaded him on the telephone to enter into a call option in relation to shares. As a result he transferred $ 82,500 to an investment account of the company in Germany. This was used to subscribe for highly speculative call options on the London Stock Exchange, a transaction which resulted in a loss of part of the sum transferred.

The Advocate General agreed that "financial damage which has simultaneous and co-extensive consequences in a Contracting state other than that in which it arises and is suffered by the victim" did not fall with Article 5 (3).

In that case the claimant had claimed that Austria was the place where the harmful event occurred because it was there that his assets were concentrated. The Austrian court had regarded Germany as the place where the damage occurred as well as the event giving rise to it.

The Court held that the special jurisdiction rules, which provided exceptions to the fundamental principle in Article 2, were to be restrictively interpreted [14]. The fact that the damage allegedly suffered by the claimant in Germany was said to have affected the whole of his assets simultaneously did not justify conferring jurisdiction on the courts of a Contracting State "other than that on whose territory the event which resulted in the damage occurred and the damage was sustained, that is to say all of the elements which give rise to liability" [17-18]:

"[19] As the Court has held, the term 'place where the harmful event occurred' cannot be construed so extensively as to encompass any place where the adverse consequences can be felt of an event which has already caused damage actually arising elsewhere.

[20] In a situation such as that in the main proceedings, such an interpretation would mean that the determination of the court having jurisdiction would depend on matters that were uncertain, such as the place where the victim's 'assets are concentrated' and would thus run counter to the strengthening of the legal protection of persons established in the Community which, by enabling the claimant to identify easily the court in which he may sue and the defendant reasonably to foresee in which court he may be sued, is one of the objectives of the Convention (see Case C-256/00 Besix [2002] ECR I-1699, paragraphs 25 and 26, and DFDS Torline, paragraph 36). Furthermore, it would be liable in most cases to give jurisdiction to the courts of the place in which the claimant was domiciled. As the Court found at paragraph 14 of this judgment, the Convention does not favour that solution except in cases where it expressly so provides."

Discussion

Certain key features appear from these authorities. First, the Regulation is to be given a community, not a national, construction.

Second, the ECJ has, for obvious reasons, resolutely set itself against any interpretation of the Regulation which would mean that a claimant would, in practice, always be able to sue in tort in the courts of its own domicile and thus determine the competent court by his choice of domicile. In one sense a corporation may be said to suffer a loss wherever it keeps its accounts, for that is where its loss is ultimately felt. Where claimant and defendant are domiciled in two different States, the adoption of such an approach would lead to a result the exact opposite of that provided for by the basic rule in Article 2 which is that a defendant is to be sued in the courts of his domicile, not that of the claimant.

Third, where harm might be regarded as happening in two different States the search is not for one or more States in which damage has been suffered but, if possible, for the State in which "the harm" has occurred, sometimes referred to as the jurisdictionally significant harm. As Popplewell J put it at [34] (5) (b):

"The search will be for the element of damage which is closest in causal proximity to the harmful event. This is because it is this causal connection which justifies attribution of jurisdiction to the courts of the place where damage occurs (see Bier at [16]-[17] and Dumez at [20])."

Fourth, the Article 5 exception is designed to cover cases where there is a particularly close connecting factor between the dispute and courts other than those of the State of the defendant's domicile, which "justifies the attribution of jurisdiction to those courts for reasons relating to the sound administration of justice and the efficacious conduct of the proceedings": see Bier [11]; Dumez [17]; Shevill [19]; Marinari [10] and Kronhofer [15]. That is the reason for the exception. It does not mean that the application of Article 5 involves any form of forum conveniens test.

Fifth, one of the aims of the Convention is that there should be foreseeability and certainty as to the State where jurisdiction may lie: Reunion [36]; Kronhofer [20].

None of these cases concerned a situation in which what was complained of was that a tortfeasor had been induced not to do something. Such a situation arose in Dolphin Maritime & Aviation Services Ltd v Sveriges Angfartygs Assurans Forening (The Swedish Club) [2009] EWHC 716 [2009] 1 CLC 460. In that case the defendant P & I Club was alleged to have procured a breach of Dolphin's agreement with cargo underwriters, for whom Dolphin was acting, that any payment by the Club would be made in London. The court held that the place where the damage occurred or where the event giving rise to the damage caused injury was England where Dolphin did not receive the money which, if the contract had been performed, it should have received.

In the course of my judgment I said this:

"56. Accordingly there is, as it seems to me, a well arguable case that, under the terms and conditions, the underwriters were bound to procure that the sums recovered directly from the Club were paid in the first instance to Dolphin. ……

57. In those circumstances, the arguments on behalf of Dolphin are, in my judgment, to be preferred. Dolphin's essential complaint is that it suffered harm because it did not receive the $8.5 million into its bank account which it should have done because, despite knowledge that this would involve a breach of the underwriters' contract with Dolphin, the Club paid it to their accounts in Turkey. I recognise that the matter must be looked at through European spectacles. But there is nothing insular in recognising that the contract (which is governed and must be interpreted by English law) calls in terms for 'Recoveries and quasi-Recoveries (i.e. sums which would otherwise comprise 'Recoveries') to be received direct by Dolphin and that the complaint in tort is that the Club wrongfully brought about a breach of that obligation.

58. When, in those circumstances, I ask myself 'where the damage to the direct victim occurred' (Dumez: Advocate General para. 52) or 'where the event giving rise to the damage, and entailing tortious liability, directly produced its harmful effects upon the person who is the immediate victim of that event' (Dumez (ECJ) para. 20) or 'where the event giving rise to the damage caused injury' (Reunion), the answer appears to me that it is in this country, where Dolphin did not receive the money which, if the contract had been performed, it should have received.

59. Further, if I ask myself what would have been the position if the tort complained of had not taken place, the answer is that payment would have been made to Dolphin in England: and the essence of Dolphin's complaint is that that did not occur. Mr Thomas submitted that an inquiry as to what would have happened if the tort was not committed was no guide to the question - where did the damage occur? If there was no tort, there would have been no damage. In some cases, e.g. in cases of damage to goods or persons, the question may have no great utility. But in others where the claimant has failed to obtain some property or money which he would otherwise have received the answer to the question may be a guide to identifying where the harm in the particular case occurred.

60. I do not ignore the danger of conflating the place where the damage occurred with the place where the loss was suffered. There is, however, a difference between a case in which the claimant complains that he has lost his money or goods (as in Domicrest or The Seaward Quest) and a case in which the claimant complains that he has not received a sum which he should have received. In the former case the harm may be regarded as occurring in the place where the goods were lost (Domicrest) or the place from or to which the moneys were paid (The Seaward Quest), although the loss may be said to have been suffered in the claimant's domicile. In the latter case the harm lies in the non receipt of the money at the place where it ought to have been received, and the damage to him is likely to have occurred in the place where he should have received it. That place may well be the place of his domicile and, therefore, also the place where he has suffered loss. An analogy may be drawn with the non delivery of cargo at the destination port: see Reunion Europeene.

61. There is, in my view, nothing inconsistent with the scheme of the Regulation in that result. In those circumstances the place where the benefit should have been received provides a sufficiently 'close connecting factor with the courts of a Member State other than that in which the defendant is domiciled which satisfies the need for certainty and justifies the attribution of jurisdiction to those courts for reasons relating to the sound administration of justice', particularly where, as here, the contract between Dolphin and the Club was subject to English law and arbitration, and where Dolphin was a provider of services in England (as well as elsewhere).

62. Accordingly, Dolphin's tortious claims fall, in my judgment, within Article 5(3) of the Regulation. Whilst the argument centred round the claim for inducing breach of contract, I did not understand it to be suggested that, if the inducement claim fell within that Article the claim in conspiracy might not."

Both parties accept that Dolphin was correctly decided. The judge regarded it as supporting his conclusion. Mr Thomas de la Mare QC for AMTF submits that he was entirely right to do so. Mr Hugh Mercer QC for MMGR submits that the decision in Dolphin was correct on its facts but that in the present case the facts require the opposite conclusion.

The judge's decision

The reasoning of the judge was, in essence, as follows. In cases where the tort or delict involves the claimant being deprived of a contractual benefit the damage is likely to have occurred at the place at which the claimant would have received that benefit [35]. This principle is applicable to an exclusive jurisdiction clause where the harmful event is said to be a breach of the rights and obligations conferred thereby. Such a clause involves a positive obligation to submit disputes falling within its scope to the courts of the chosen jurisdiction; and, also, contains a negative obligation not to bring claims falling within its scope before any other court or tribunal elsewhere. These two aspects are not quite the opposite sides of the same coin since the negative obligation may be broken without reference to the positive obligation: AES Ust-Kamenogorsk Hydropower Plant LLP v Ust-Kamenogorsk Hydropower Plant JSC [2013] 1 WLR 1889 per Lord Mance at [21].

The judge rejected the argument that the breach induced was the breach of an obligation not to do something in Germany. He regarded the relevant obligation as the positive obligation to bring proceedings in England not merely the negative obligation not to bring proceedings in Germany. The jurisdiction clause required the former client to sue AMT, if at all, in England. Once the client had decided to bring proceedings somewhere the obligation was to seek determination in the English court. That was the relevant obligation whose breach was induced by MMGR. He held that Dolphin could not be distinguished on the basis that there was in the present case no breach of a positive obligation to do something in England. Nor did it matter that in all probability no claim would ever have been commenced in England because it would have been regarded as bound to fail. That, in his view, reinforced the conclusion that the damage was suffered in England; if the tort had not been committed any proceedings would have been brought in England where they would have been struck out.

The judge went on to hold that, where, as here, the forum chosen comprises the national courts of the system of law which the parties have chosen, one of the main functions of the choice of forum is the selection of a tribunal which is familiar with the law in question and so best placed to determine and apply it to any dispute which has arisen so as to uphold the parties' rights. A primary function of the jurisdiction clause is to secure that protection [43]. In this way the benefit of an exclusive English jurisdiction clause in an English law contract goes to the heart of the substantive rights and obligations which arise out of the contractual relationship. In this case the contractual benefit to AMTF of the exclusive English jurisdiction clause comprised the right to be sued, if it was to be sued anywhere, in England, where AMTF was entitled to have resolved any disputes falling within the scope of the clause. The right of recourse to the English courts was there in order to protect and enforce AMTF's substantive rights, and the harm which it had suffered was the loss of the protection and enforcement of those rights in the English Court. It was the deprivation of that benefit that was the harm suffered in England where the benefit ought to have been enjoyed.

AMTF advanced before the judge an alternative and secondary submission, which was that it had suffered damage in England because it was from England that it had had to pay the costs of defending the claims and the expense of settling them.

The judge rejected this alternative submission, saying:

"49 Applying the principles in the jurisprudence set out above, if the damage is to be treated as the expense caused by the litigation, it occurred in Germany. The direct harm which AMT suffered was the activity it was required to undertake in Germany to handle the claims. It involved the engagement of German lawyers and the payment of court fees and other disbursements. This activity took place and incurred a cost in Germany. Payment of the settlement sums arose from the compromising of the claims which gave rise to the liability to make those payments. The compromises were concluded in Germany, and the liability discharged in Germany. All the expense caused by the litigation was incurred in Germany, and was made necessary because of the commencement of the proceedings there and the activity which AMT was forced to undertake there as a result. Germany was where the harm originally manifested itself.

50 The way in which AMT ultimately bore such expenditure by funding it is not the initial damage itself, but merely the remoter financial consequence of the activity in Germany. It is not therefore appropriate to look to the place where such payments occurred to determine where damage occurred for the purposes of Article 5(3). It is clear from the jurisprudence considered above, that it is not sufficient for a claimant to bring himself within Article 5(3) merely to establish that he ultimately feels the loss at his place of domicile, nor merely that that is the place from which he has funded the expenditure involved. This would be to accord in almost every case jurisdiction to the place of domicile of a claimant, which is contrary to the scheme of the Judgments Regulation and in particular the primacy of Article 2 conferring jurisdiction on the place of the [defendant's]^[1] domicile.

…..

51 The unquantified heads of loss for wasted management time and loss of business are not the primary heads of claim and do not constitute the main part of the damage said to have occurred as a result of the harmful event. They are not the damage. They are not initial, direct or immediate damage, but to the extent quantifiable and recoverable, merely the remoter financial consequences of the harm suffered in Germany."

The case for AMTF