ON APPEAL FROM THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND & WALES
COMMERCIAL COURT (QBD)
MR JUSTICE JACOBS
Strand, London, WC2A 2LL |
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B e f o r e :
LORD JUSTICE HICKINBOTTOM
and
LORD JUSTICE NEWEY
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Etihad Airways PJSC |
Claimant/Respondent |
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- and - |
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Prof. Dr. Lucas Flöther |
Defendant/Appellant |
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Mr Robin Dicker QC and Ms Roseanna Darcy (instructed by Shearman & Sterling LLP) for the Respondent
Hearing dates : 25 & 26 November 2020
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Crown Copyright ©
Lord Justice Henderson:
Introduction
"32. GOVERNING LAW
This Agreement and all non-contractual obligations arising from or connected with it are governed by English law.
33. ENFORCEMENT
33.1 Jurisdiction
33.1.1 The courts of England have exclusive jurisdiction to settle any dispute arising out of or in connection with this Agreement (including a dispute relating to non-contractual obligations arising from or in connection with this Agreement, or a dispute regarding the existence, validity or termination of this Agreement) (a "Dispute").
33.1.2 The Parties agree that the courts of England are the most appropriate and convenient courts to settle Disputes and accordingly no Party will argue to the contrary.
33.1.3 This Clause 33 is for the benefit of the Lender only. As a result, the Lender shall not be prevented from taking proceedings relating to a Dispute in any other courts with jurisdiction. To the extent allowed by law, the Lender may take concurrent proceedings in any number of jurisdictions."
"1. Without prejudice to Article 31(2), 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.
…
3. 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."
"1. Where actions come within the exclusive jurisdiction of several courts, any court other than the court first seised shall decline jurisdiction in favour of that court.
2. Without prejudice to Article 26 [which deals with submission to the jurisdiction by entry of an appearance], where a court of a Member State on which an agreement as referred to in Article 25 confers exclusive jurisdiction is seised, any court of another Member State shall stay the proceedings until such time as the court seised on the basis of the agreement declares that it has no jurisdiction under the agreement.
3. Where the court designated in the agreement has established jurisdiction in accordance with the agreement, any court of another Member State shall decline jurisdiction in favour of that court."
"(22) However, in order to enhance the effectiveness of exclusive choice-of-court agreements and to avoid abusive litigation tactics, it is necessary to provide for an exception to the general lis pendens rule in order to deal satisfactorily with a particular situation in which concurrent proceedings may arise. This is the situation where a court not designated in an exclusive choice-of-court agreement has been seised of proceedings and the designated court is seised subsequently of proceedings involving the same cause of action and between the same parties. In such a case, the court first seised should be required to stay its proceedings as soon as the designated court has been seised and until such time as the latter court declares that it has no jurisdiction under the exclusive choice-of-court agreement. This is to ensure that, in such a situation, the designated court has priority to decide on the validity of the agreement and on the extent to which the agreement applies to the dispute pending before it. The designated court should be able to proceed irrespective of whether the non-designated court has already decided on the stay of proceedings.
This exception should not cover situations where the parties have entered into conflicting exclusive choice-of-court agreements or where a court designated in an exclusive choice-of-court agreement has been seised first. In such cases, the general lis pendens rule of this Regulation should apply."
The background to the present dispute
"For the purpose of the finalisation of the financial statements of Air Berlin plc for the year ended 31 December 2016, having had sight of your forecasts for the two years ending 31 December 2018, we confirm our intention to continue to provide the necessary support to Air Berlin to enable it to meet its financial obligations as they fall due for payment for the foreseeable future and in any event for 18 months from the date of this letter. Our commitment is evidenced by our historic support through loans and support on obtaining financing for Air Berlin."
The Comfort Letter did not contain a jurisdiction clause, nor did it cross-refer to the Facility Agreement signed on the same date. On the assumption that the Comfort Letter was intended to be governed by English law, it is clearly well arguable that Etihad did not thereby bind itself contractually to continue to provide the necessary support to Air Berlin.
"(i) A claim for breach of the Comfort Letter on the basis that the Comfort Letter is legally binding.
(ii) Alternatively, if the Comfort Letter is not legally binding, a pre-contractual claim in culpa in contrahendo, on the basis that Etihad used its negotiating power during the negotiations between the parties to avoid providing a clearly binding statement whilst, at the same time, inspiring the trust of Air Berlin that it would adhere to the commitment in the Comfort Letter."
The claims were set out in a lengthy document of 232 paragraphs, ending with a preliminary estimate that the amount in dispute was no less than €2 billion.
(a) the claims made and declarations sought in the German proceedings are subject to the exclusive jurisdiction of the English court within Article 25 of Brussels Recast, because, on its true construction, they are within the scope of the exclusive jurisdiction clause contained in the Facility Agreement;
(b) the claims made and declarations sought in the German proceedings are governed by English law on the true construction of the governing law clause in the Facility Agreement;
(c) Etihad is not liable for breach of the Comfort Letter, as alleged in the German proceedings, because that letter, on its true construction, did not create a legally binding promise to provide financial support to Air Berlin;
(d) Etihad is not liable on the basis of culpa in contrahendo, as alleged in the German proceedings, because the facts and matters relied on in the German proceedings do not give rise to a cause of action known to English law; and
(e) further, and in any event, Etihad is not liable to Air Berlin as alleged by Air Berlin in the German proceedings.
"These two areas of the case were, for all relevant purposes, separate; certainly once it had been accepted, as Air Berlin accepted in its written submissions (whilst reserving its position on a possible appeal), that an asymmetric clause is a jurisdiction agreement falling within Article 25. There was therefore no material overlap between the arguments advanced on these two areas of the case."
"I therefore conclude that, interpreting the jurisdiction agreement in the Facility Agreement as a matter of English law, there is a good arguable case that (i) the jurisdiction clause in the Facility Agreement is applicable to the Comfort Letter and any non-contractual claim in connection therewith, and (ii) the claim commenced by Air Berlin in Germany falls within the scope of that clause."
"3. The Comfort Letter was clearly part of the Support Package with the Facility Agreement and the judge was clearly right to conclude as he did that the dispute here has arisen from the legal relationship in connection with which the jurisdiction agreement in the Facility Agreement was concluded. The contentions in grounds 6 and 7 that he was wrong to do so are unarguable.
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7. On any view the judge was right to conclude that there was a good arguable case that the Comfort Letter was governed by English law and that as a matter of English law it was not binding so that it could be viewed as ancillary to the Facility Agreement, from which it followed that the dispute under it was within the scope of the jurisdiction clause. The applicant has no real prospect of persuading this Court to the contrary.
8. Despite the ingenuity of the arguments in the applicant's Skeleton Argument, the applicant has no real prospect of success on grounds 2 to 9."
"The Judge was wrong in law to conclude that the English court is not obliged to stay its proceedings under Article 29 of the Brussels Recast and erred in concluding that the provisions of Article 31(2) of Brussels Recast apply to the asymmetric clause in the Facility Agreement."
On that issue, we have had the benefit of clear and helpful written submissions on both sides, and excellent oral arguments from leading counsel (Mr David Joseph QC for Air Berlin, and Mr Robin Dicker QC for Etihad).
The factual background
"Such factual disputes as existed were within a very narrow compass, and the factual evidence did not significantly advance matters beyond what was apparent from the contemporary documents."
Legislation
(1) Brussels Recast
"(14) A defendant not domiciled in a Member State should in general be subject to the national rules of jurisdiction applicable in the territory of the Member State of the court seised.
However, in order to ensure the protection of consumers and employees, to safeguard the jurisdiction of the courts of the Member States in situations where they have exclusive jurisdiction and to respect the autonomy of the parties, certain rules of jurisdiction in this Regulation should apply regardless of the defendant's domicile.
(15) The rules of jurisdiction should be highly predictable and founded on the principle that jurisdiction is generally based on the defendant's domicile. Jurisdiction should always be available on this ground save in a few well-defined situations in which the subject-matter of the dispute or the autonomy of the parties warrants a different connecting factor. The domicile of a legal person must be defined autonomously so as to make the common rules more transparent and avoid conflicts of jurisdiction."
"(19) The autonomy of the parties to a contract, other than an insurance, consumer or employment contract, where only limited autonomy to determine the courts having jurisdiction is allowed, should be respected subject to the exclusive grounds of jurisdiction laid down in this Regulation."
The "exclusive grounds of jurisdiction" to which reference is made in this recital are those laid down in Article 24, and include, for example, proceedings which have as their object rights in rem relating to immovable property and proceedings concerned with the registration or validity of patents and other forms of intellectual property. None of the exclusive grounds has any bearing on the present case.
"The same need for continuity applies as regards the interpretation by the [CJEU] of the 1968 Brussels Convention and of the Regulations replacing it."
"Subject to this Regulation, persons domiciled in a Member State shall, whatever their nationality, be sued in the courts of that Member State."
Article 5(1) then provides that:
"Persons domiciled in a Member State may be sued in the courts of another Member State only by virtue of the rules set out in Sections 2 to 7 of this Chapter."
" "Prorogation" is a term of Scots law used to translate, accurately, the same French term. It means "the extension of the jurisdiction of a judge or court to cases which do not properly come within it." "
"(1) If the parties, regardless of their domicile, have agreed that a court or the courts of a Member State are to have jurisdiction to settle any disputes which have arisen or which may arise in connection with a particular legal relationship, that court or those courts shall have jurisdiction, unless the agreement is null and void as to its substantive validity under the law of that Member State. Such jurisdiction shall be exclusive unless the parties have agreed otherwise. The agreement conferring jurisdiction shall be either:
(a) in writing or evidenced in writing;
(b) in a form which accords with practices which the parties have established between themselves; or
(c) in international trade or commerce, in a form which accords with a usage of which the parties are or ought to have been aware and which in such trade or commerce is widely known to, and regularly observed by, parties to contracts of the type involved in the particular trade or commerce concerned."
It is also worth noting Article 25(5), which emphasises the independent nature and validity of agreements conferring jurisdiction:
"(5) An agreement conferring jurisdiction which forms part of a contract shall be treated as an agreement independent of the other terms of the contract.
The validity of the agreement conferring jurisdiction cannot be contested solely on the ground that the contract is not valid."
(2) The Hague Convention on Choice of Court Agreements
"This Convention shall apply in international cases to exclusive choice of court agreements concluded in civil or commercial matters."
The expression "exclusive choice of court agreement" is then defined in Article 3(a), which says that it means:
"an agreement concluded by two or more parties that meets the requirements of paragraph (c) and designates, for the purpose of deciding disputes which have arisen or may arise in connection with a particular legal relationship, the courts of one Contracting State or one or more specific courts of one Contracting State to the exclusion of the jurisdiction of any other courts."
Paragraph (c) of Article 3 requires the agreement to be concluded or documented in writing, or by certain other means of communication.
"A court of a Contracting State other than that of the chosen court shall suspend or dismiss proceedings to which an exclusive choice of court agreement applies unless –
(a) the agreement is null and void under the law of the State of the chosen court;
(b) a party lacked the capacity to conclude the agreement under the law of the State of the court seised;
(c) giving effect to the agreement would lead to a manifest injustice or would be manifestly contrary to the public policy of the State of the court seised;
(d) for exceptional reasons beyond the control of the parties, the agreement cannot reasonably be performed; or
(e) the chosen court has decided not to hear the case."
"This Convention shall not affect the application of the rules of a Regional Economic Integration Organisation [such as the EU] that is a Party to this Convention, whether adopted before or after this Convention –
(a) where none of the parties is resident in a Contracting State that is not a Member State of the Regional Economic Integration Organisation;
(b) as concerns the recognition or enforcement of judgments as between Member States of the Regional Economic Integration Organisation."
The effect of the latter provision, as I understand it and as Mr Joseph submitted, is that priority is afforded to the rules of Brussels Recast in any case where both parties are resident in Member States of the EU, but not where only one of the parties is so resident.
Air Berlin's submissions
(1) Allocation of jurisdiction for the German proceedings as between the German and English courts is a matter to be determined in accordance with the automatic and mandatory rules of Brussels Recast.
(2) Pursuant to Article 29 of Brussels Recast, 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 first seised must of its own motion stay its proceedings until such time as the court first seised is established. It is common ground that in the present case the German court was first seised.
(3) The only potentially relevant exception to this mandatory rule is that found in Article 31(2), which provides a derogation from the first seised rule, in circumstances where a court of a Member State on which an agreement as referred to in Article 25 confers exclusive jurisdiction is seised second. The fact that this is an exception to the general rule is clear from the terms of Article 31(2) and recital (22). As with all exceptions under Brussels Recast, they are to be construed narrowly. In those narrowly defined circumstances, any proceedings in a Member State court shall be stayed until the court seised on the basis of the exclusive jurisdiction agreement shall declare that it has no jurisdiction.
(4) This carve out only applies where the parties under an Article 25 agreement have conferred exclusive jurisdiction in accordance with Article 25.
(5) The nature and effect of an agreement conferring exclusive jurisdiction under Article 25 is to be interpreted autonomously under EU law, not national law. The validity or effect of such a clause under national law is not relevant. The purpose is to ensure the application of harmonised rules applied across the EU in a uniform manner to provide legal certainty.
(6) Under principles established by the CJEU, an exclusive jurisdiction agreement for the purposes of Brussels Recast is an agreement which satisfies the formal requirements of Article 25, pursuant to which the parties both confer exclusive jurisdiction on the designated court or courts of a Member State to settle any disputes which have arisen in connection with a particular relationship, and thereby exclude the heads of jurisdiction lower in the Brussels Recast hierarchy that would otherwise apply.
(7) The essential nature and effect of consensual prorogation is not a matter of contractual enforcement as between the parties, but rather is a tightly regulated procedural rule allocating jurisdiction as between courts in accordance with the framework laid down by Brussels Recast. This is reinforced by Article 25's position as a derogation from the general rules of allocation of jurisdiction in Sections 1 and 2 of Chapter II of the Regulation.
(8) The wording of Article 17 of the (original) Brussels Convention of 1968 is not reproduced in its entirety in Article 25 of Brussels Recast. The third paragraph of Article 17, which made reference to the independent possibility of a clause for the benefit of one party only, is not included in Brussels Recast, nor was it included in the Brussels I Regulation (Article 23). Instead, Article 25 and its immediate predecessor contain express provision allowing for the possibility of either exclusive or non-exclusive jurisdiction for the settlement of disputes that arise in connection with a particular relationship, according to the choice made by the parties.
(9) This settled meaning of conferral of exclusive jurisdiction is equally reflected in the definition of an exclusive choice of court agreement in the Hague 2005 Convention, to which the EU is party.
(10) Article 31(2) makes provision for a limited exception to the lis pendens rule in Article 29 and expressly applies only to clauses which confer exclusive jurisdiction, requiring all parties to bring proceedings before the designated court (or courts). The jurisdiction clause in the Facility Agreement does not do this. It is an asymmetric clause expressly designed to confer a wide range of possible jurisdictions for the benefit of Etihad. An asymmetric jurisdiction clause of this type is not an agreement conferring exclusive jurisdiction on the English Court (the court second seised) for the settlement of all disputes that may arise between Etihad and Air Berlin in connection with their particular legal relationship. Nor can it be said that the English court is "seised on the basis of" such an exclusive jurisdiction agreement as is required under Article 31(2). No court or courts are designated by the parties for the exclusive resolution of claims brought by Etihad against Air Berlin relating to the Facility Agreement. In relation to such claims, Etihad is entitled to invoke any head of jurisdiction available to it under Brussels Recast, including: (a) the place of Air Berlin's domicile, i.e. Germany (Article 4(1)); (b) the place of performance of the obligation in question (Article 7(1)(a)); and (c) non-exclusive jurisdiction in England pursuant to clause 33 of the Facility Agreement and Article 25. The English Court is seised by Etihad under Brussels Recast on the basis of its right to choose the court in which to bring proceedings.
(11) Strong support for this conclusion is found in the treatment of the same question which has arisen under the Hague 2005 Convention, given the materially similar wording of the relevant provisions and the principle that Brussels Recast and the Hague 2005 Convention are designed to operate with "maximum alignment".
(12) Finally, both Etihad and the judge placed heavy reliance on the underlying objective of Article 31(2) as leading to a conclusion that asymmetric clauses are covered by Article 31(2) and that a different solution had been reached for Brussels Recast to that concluded under the Hague 2005 Convention. Neither proposition is correct. The wording of Article 31(2) is clear and has to be applied as it stands. Further, the wording and historical development of Article 31(2) make it clear that the derogation from the first seised rule in Article 29 was designed to cover only exclusive conferral of jurisdiction, and not non-exclusive jurisdiction or asymmetric jurisdiction.
Should Article 31(2) be given a narrow construction as an exception to the first seised rule?
"Derogations from and exceptions to the treaty or other legislation must be strictly construed. It has also been said that they cannot be given a meaning that goes beyond what they expressly provide; that they cannot be interpreted in such a way as to extend their effects beyond what is necessary to safeguard the interest which they seek to secure; and that their scope must be determined in the light of the aims pursued by the measure containing them."
"Exceptions must as a general rule be strictly construed and cannot take precedence over general and unconditional rules. Exceptions to fundamental treaty provisions or other rules cannot be given a scope which would exceed their objectives."
"In the present case, I accept that Article 31(2) can be viewed as an exception to Article 29. It is clear that the lis pendens rule in Article 29 is subject to and qualified by the provisions of Article 31(2). However, both of these provisions must be viewed in the context of Recital (22) of Brussels Recast, and the "aims pursued by the measure containing them". The interpretation advanced by Etihad gives effect to those aims. Air Berlin's interpretation does not. It is in my view inappropriate to give a restrictive approach to Article 31(2) which produces a result contrary to the aims of Brussels Recast."
"62. There is no warrant, in my judgment, for giving article 29 of Brussels I Recast primacy and treating article 31(2) as somehow an exception to it. Nor is there any warrant for giving article 31(2) a narrow meaning. Whatever may have been the legislative history of the first seised rule in the Brussels Convention and Brussels I, there is nothing in Brussels I Recast indicating this approach. In my view, ordinary principles apply and both articles should be read together and given effect according to their language and purpose.
63. On its face article 29(1) is without prejudice to article 31(2), which can only mean that article 29(1) gives way to article 31(2) when the latter applies."
The history of Article 25 and Air Berlin's "taxonomy" argument
"Article 17
If the Parties, one or more of whom is domiciled in a Contracting State, have, by agreement in writing or by an oral agreement evidenced in writing, agreed that a court or the courts of a Contracting State are to have jurisdiction to settle any disputes which have arisen or which may arise in connection with a particular legal relationship, that court or those courts shall have exclusive jurisdiction.
…
If the agreement conferring jurisdiction was concluded for the benefit of only one of the parties, that party shall retain the right to bring proceedings in any other court which has jurisdiction by virtue of this Convention."
Mr Joseph's submission was that this wording started with an unqualified concept of conferral of fully exclusive jurisdiction, and the only exception to that concept came in the third paragraph of the Article, quoted above, which permitted a carve-out of non-exclusive jurisdiction if the agreement was concluded for the benefit of one party only.
"The way in which that provision is to be applied must be interpreted in the light of the effect of the conferment of jurisdiction by consent, which is to exclude both the jurisdiction determined by the general principle laid down in Article 2 and the special jurisdictions provided for in Articles 5 and 6 of the Convention. In view of the consequences that such an option may have on the position of the parties to the action, the requirements set out in Article 17 governing the validity of clauses conferring jurisdiction must be strictly construed. By making such validity subject to the existence of an "agreement" between the parties, Article 17 imposes on the court before which the matter is brought the duty of examining, first, whether the clause conferring jurisdiction upon it was in fact the subject of a consensus between the parties, which must be clearly and precisely demonstrated. The purpose of the formal requirements imposed by Article 17 is to ensure that the consensus between the parties is in fact established."
I do not find this guidance particularly helpful in the present case, because its focus seems to me to be on the need to establish the consensus between the parties, and the part played by the formal requirements of Article 17 in achieving that objective. In the present case, there is no dispute about the agreement which the parties reached, because it is clearly set out in clause 33 of the Facility Agreement.
"13. It should be pointed out in the first place that Article 17 of the Convention… allows the parties, within the limits laid down by the second paragraph of that provision, to choose by mutual agreement a court or the courts of a Contracting State. The parties may thus confer jurisdiction on courts which would not have jurisdiction under the general or special provisions of the Convention or exclude the jurisdiction of courts which would normally have jurisdiction under those rules. According to the first paragraph of Article 17, the jurisdiction of a court or courts designated by a jurisdiction clause is exclusive, whilst the third paragraph of that article maintains the right of the party for whose benefit the clause was agreed to institute proceedings in any other court having jurisdiction under the Convention.
14. Since Article 17 of the Convention embodies the principle of the parties' autonomy to determine the court or courts with jurisdiction, the third paragraph of that provision must be interpreted in such a way as to respect the parties' common intention when the contract was concluded. The common intention to confer an advantage on one of the parties must therefore be clear from the terms of the jurisdiction clause or from all the evidence to be found therein or from the circumstances in which the contract was concluded.
15. Clauses which expressly state the name of the party for whose benefit they were agreed and those which, whilst specifying the courts in which either party may sue the other, give one of them a wider choice of courts must be regarded as clauses whose wording shows that they were agreed for the exclusive benefit of one of the parties."
"106. The 1988 Convention lays down that a prorogation clause that meets the requirements of the Convention always confers exclusive jurisdiction on the designated court or courts. But under the laws of some of the States bound by the Convention - under English law in particular - the parties will often agree a choice of forum clause on a non-exclusive basis, leaving other courts with concurrent jurisdiction, and permitting the plaintiff to choose between several forums; and English case-law has accepted that a non-exclusive clause constitutes a valid choice of forum under the Convention. On a proposal from the United Kingdom delegation, the ad hoc working party re-examined the question of the exclusive effect of a choice of forum clause, and reached the conclusion that, since a clause conferring jurisdiction was the outcome of an agreement between the parties, there was no reason to restrict the parties' freedom by prohibiting them from agreeing in the contract between them that a non-exclusive forum should be available in addition to the forum or forums objectively available under the Convention.
A similar possibility was in fact already provided for, though within certain limits, by the 1988 Convention, Article 17(4) of which allowed a choice of forum clause to be concluded for the benefit of only one of the parties, who then retained the right to bring proceedings in any other court which had jurisdiction by virtue of the Convention, so that in that case the clause was exclusive only as far as the other party was concerned. That provision was obviously to the advantage of the stronger party in the negotiation of a contract, without producing any significant gain for international commerce. The 1988 Convention has now been amended to give general recognition to the validity of a non-exclusive choice of forum clause, and at the same time the provision in the 1988 Convention that allowed a clause to be concluded for the benefit of one party only has been deleted.
107. Article 23 does still give preference to exclusivity, saying that the agreed jurisdiction "shall be exclusive unless the parties have agreed otherwise". A choice of forum clause is therefore presumed to have exclusive effect unless a contrary intention is expressed by the parties to the contract, and not, as was initially proposed, treated as a non-exclusive clause unless the parties agree to make it exclusive."
"That wording, which is based on the most widespread business practice, cannot, however, be interpreted as intending to exclude the right of the parties to agree on two or more courts for the purpose of settling any disputes which may arise. This interpretation is justified on the ground that Article 17 is based on a recognition of the independent will of the parties to a contract in deciding which courts are to have jurisdiction to settle disputes falling within the scope of the Convention, other than those which are expressly excluded pursuant to the second paragraph of Article 17. This applies particularly where the parties have by such an agreement reciprocally conferred jurisdiction on the courts specified in the general rule laid down by Article 2 of the Convention."
There is nothing surprising about this conclusion, but it does provide an early endorsement of the principle that the parties are free to decide which courts are to have jurisdiction to settle disputes between them.
"In my view the validity of a clause of this nature can be recognised without misgivings. Indeed, it is probable that no doubt would have arisen if the clause had been worded differently; that is, if it had prescribed that each party could be sued only before the courts of his domicile (or perhaps the State of which he is a national: in the present case the two links coincide). In those circumstances an identical intention would have been expressed in such a way as to emphasise the concern of the parties to establish a single criterion as being decisive: the domicile (or the nationality) of the defendant. Nevertheless, quite apart from the foregoing, it can be recognised that the parties to a contract may stipulate that the courts of two States shall have jurisdiction to settle disputes arising from that contract, provided that each jurisdiction is restricted to a specified class of dispute. In short, there is nothing to preclude the parties, instead of treating all disputes which could arise from their contract as a whole, from dividing them into two or more groups in accordance with criteria which they are free to establish and prescribing the courts of a different State for each group. This is not a common step but there are no grounds for considering it unlawful."
"The rationale for the new rule in Article 32(1) [of Brussels Recast] is party autonomy. Recital (22) explains that the new rule was introduced "in order to enhance the effectiveness of choice-of-courts agreements and to avoid abusive litigation tactics". In an asymmetric agreement, the borrower has promised not to sue anywhere other than the chosen jurisdiction. The question of whether the other party did or not agree to do the same does not arise when the bank is seeking to enforce the agreement and should be irrelevant. Thus, the point is not so much that "considered as a whole" they are agreements conferring exclusive jurisdiction, as the judge put it in Commerzbank. Rather, each obligation can be considered on its own; the clause includes a promise by the borrower not to sue in any other jurisdiction and that promise is capable of being protected by Article 31(2). Each different obligation necessarily falls to be considered separately and the fact that the bank is not under a similar obligation is neither here nor there."
This passage was quoted by the judge at [184] of his judgment. He said that the essential point was "concisely, and in [his] view convincingly expressed" in it. I agree. The judge then went on to consider Meeth at some length, from [185] to [191], finding support in it for Etihad's case, as I have done, and as Cranston J had before him in Commerzbank at [65] to [68].
The reversal of the decision of the CJEU in Gasser
"The Austrian court was the designated court in an exclusive jurisdiction agreement. Nevertheless, proceedings were first taken in Italy by the Italian party. The subsequent proceedings commenced in the designated court by the Austrian party meant that the Austrian court was second seised. The European Court of Justice held that the designated (Austrian) court had to await the decision of the non-designated (Italian) court as to whether the latter had jurisdiction. If the Italian court decided that it had jurisdiction, the court second seised would have to decline jurisdiction in its favour. The outcome is sometimes referred to as the "Italian torpedo"."
The impact of the "Italian torpedo" was exacerbated by the Court's further holding that it made no difference if the duration of the proceedings before the courts of the state first seised was excessively long: see paragraph 73 of the Court's judgment.
"The efficiency of choice of court agreements needs to be improved. Currently, the Regulation obliges the court designated by the parties in a choice of court agreement to stay proceedings if another court has been seised first. This rule enables litigants acting in bad faith to delay the resolution of the dispute in the agreed forum by first seising a non-competent court. This possibility creates additional costs and delay and undermines the legal certainty and predictability of dispute resolution which choice of court agreements should bring about."
"With respect to choice of court agreements, there was a large support from stakeholders and Member States to improve the effectiveness of such agreements. Among the various ways to achieve that objective, preference was expressed for granting priority to the chosen court to decide on its jurisdiction. Such a mechanism would largely accord with the system established in the 2005 Hague Choice of Court Agreements Convention, thus ensuring a coherent approach within the Union and at international level were the Union to decide to conclude the 2005 Convention in the future."
"196. The effect of Air Berlin's arguments, however, is that this reversal of Erich Gasser, and the aims set out in Recital (22) are only partially achieved; so that the Italian torpedo remains fully effective in the context of very widely-used asymmetric clauses. I consider that there can be no logical justification for this difference in approach. In the present case, Air Berlin entered into an agreement that proceedings that it commenced would be brought exclusively in England; it had no option to bring proceedings elsewhere, and Air Berlin agreed not to bring such proceedings elsewhere. It is accepted that such clauses are effective under Article 25 of Brussels Recast. The clauses are therefore entitled to be enforced like any other jurisdiction clause.
197. Given that the parties had agreed on the exclusivity of the English courts for proceedings brought by Air Berlin, Air Berlin's argument leads to the conclusion that, in relation to a jurisdiction clause of this type, party autonomy should not be respected; that the effectiveness of choice of court agreements should not be enhanced; and that the chosen court does not have priority to decide on the validity of the agreement and the extent to which the agreement applies to the pending dispute. It is in my view not possible to see why these conclusions should follow simply because the clause leaves open the possibility that, in relation to another "group" of disputes, namely those where Etihad may wish to begin proceedings, the parties agreed that Etihad was not confined to the jurisdiction of the English courts."
"There is nothing in the Brussels Recast itself which indicates, let alone makes clear, that asymmetric clauses are being treated differently to other exclusive jurisdiction clauses, with the consequence that the parties' agreement on exclusivity for particular disputes should fall outside the aims identified in Recital (22). Moreover, once it is accepted that asymmetric clauses are within Article 25 as a matter of EU law – so that any national laws which may cast doubt on the validity of such clauses are not relevant – it makes little sense to say that the effectiveness of such clauses should be decided in the first instance by a non-designated court, if first seised."
"Arguably, the solution is to draw a distinction between a jurisdiction clause and the distinct agreements it may comprise. It is coherent to say that asymmetric clauses are to be classified as non-exclusive, in so far as they do not confine proceedings to a single court. However, such clauses contain separate exclusive and non-exclusive jurisdiction agreements, whereby the counterparty's agreement to sue in the designated court is exclusive, and the "beneficiary's" agreement to sue in that court is non-exclusive."
"If X and Y agree to the jurisdiction of the English courts, for example, X alone has the right to sue in any other court of competent jurisdiction. Suppose therefore that Y launches a pre-emptive strike in Germany, and X replies by suing in England. Is Article 31(2) engaged, or does Gasser still prevent X from relying on the agreement? If such agreements are not protected by Article 31(2), there remains the potential for a party to an asymmetric agreement to disable the agreement by launching a pre-emptive strike in its preferred court. Principle suggests that a finance party may rely on Article 31(2) in such a case. Such asymmetric agreements, although non-exclusive for the benefit of the "beneficiary" under the clause, are exclusive against a counterparty. Article 31(2) should therefore engage if a counterparty brings proceedings other than in the designated court in breach of its promise to sue only in that court."
"In that case, the Spanish court was first seised of proceedings commenced by Codere in September 2015. The English court was second seised of proceedings commenced by Perella in December 2015. The Spanish court granted a stay of proceedings which had been commenced by Codere in breach of an asymmetric clause, pending determination by the English court of an application by Codere to challenge the jurisdiction of the English court. In granting the stay, the judge relied upon and applied the approach advocated by Professor Richard Fentiman… ."
The relevant passage in the judgment of the Spanish court is reproduced by the judge at [166].
"He was plainly right not to do so. So far as article 31.2 is concerned, there is, as it seems to me, good commercial reason to focus upon the question whether [a] party seeking to bring proceedings in a court of "another member state" has agreed that the dispute in question is to be subject to the exclusive jurisdiction of a court or the courts of another member state. Nothing in article 31.2 requires that the party relying upon the exclusive jurisdiction clause must itself be under a symmetrical obligation."
"Even if this case were not covered by pre-existing authority, I would have no difficulty in saying that Article 31(2) applies in the present case."
The Hague 2005 Convention
"71. The Hague Convention, in my view, offers no assistance in the characterisation of asymmetric jurisdiction clauses under Article 31(2) of Brussels I Recast. There is no reference to the Hague Convention in Brussels I Recast, although the drafting of both occurred in tandem and Council Decision 2014/887/EU referred to ensuring coherence between the rules of the EU on the choice of court in civil and commercial matters and those of the Hague Convention.
72. While there is an overlap between the two instruments, however, there are important divergences. Thus there are differences between the two in the formal requirements for exclusive jurisdiction clauses, the Hague Convention in Article 3(c) requiring writing or an accessible form, Brussels I Recast in Article 25 allowing agreements to be established on a wider basis, through the practices of the parties or by commercial usage.
73. Further, there is a definition of exclusive jurisdiction clauses in Article 3(a) of the Hague Convention, whereas there is no definition in Brussels I Recast. The reporters record that the Diplomatic Session adopting the Hague Convention accepted that the definition in Article 3(a) did not extend to asymmetric jurisdiction clauses, something the reporters themselves do not seem to have regarded as clear.
74. There are good arguments in my view that the words of the definition of exclusive jurisdiction clauses in Article 3(a) of the Hague Convention cover asymmetric jurisdiction clauses. For present purposes, however, there is no need to reach a concluded view on the ambit of the definition. Even if it were to be read as excluding asymmetric jurisdiction clauses, however, that in my view is of no assistance as to the quite separate issue of their characterisation under article 31(2) of Brussels I Recast."
"215. Air Berlin repeated substantially the same arguments concerning the Hague Convention which had failed to persuade Cranston J.: see paragraphs [71]-[74] of his judgment in Commerzbank. It is true, of course, that some of the materials which preceded the Hague Convention indicate that asymmetric clauses were not to be equated with symmetric clauses for the purposes of that Convention. However, the language of the Hague Convention itself does not make that clear. Unlike the Brussels Recast, it contains a definition of the expression "exclusive choice of court agreement":
[the definition is then set out]
…
217. Like Cranston J and Merrett [at page 58 of her article], I consider that there are good arguments that the rules in the Hague Convention are engaged by an asymmetric clause. But in any event, I am concerned here with the rules in Brussels Recast which are differently worded and also have the important Recital (22). I have come to a clear view, based on the wording of Brussels Recast, its aims and background, as well as the decision in Meeth and the three prior cases on Article 31(2), that Article 31(2) of Brussels Recast does apply to asymmetric clauses. I am far from convinced that even if a different result might arguably be reached under the Hague Convention, that this should dictate the answer under Brussels Recast. Indeed, there is a powerful case for saying that the conclusions reached in relation to Brussels Recast should assist in dictating the answer under the Hague Convention."
"It was agreed by the Diplomatic Session that, in order to be covered by the Convention, the agreement must be exclusive irrespective of the party bringing the proceedings. So agreements of the kind referred to in the previous paragraph [i.e. asymmetric agreements] are not exclusive choice of court agreements for the purposes of the Convention."
Remaining arguments
"I did not consider that there was any force in this argument. It was rejected by Cranston J in paragraph [75] of his judgment, and in my view, he was right to do so. Etihad has seised the English court for the simple reason that the agreement provides for the exclusivity of the English court in relation to proceedings commenced by Air Berlin, and Etihad has brought the present proceedings on the basis of that agreement. There is no difficulty in saying that, in those circumstances, the English court is "seised on the basis of the [exclusive jurisdiction] agreement". Etihad is able to rely, and does rely, on Clause 33.1.1 and the agreement of the parties that the courts of England have exclusive jurisdiction."
Should there be a reference to the CJEU?
Conclusion
Hickinbottom LJ:
Newey LJ: