England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

		Court 54 Royal Courts of Justice The Strand London WC2A 2LL
		20th July 2004

1. MR JUSTICE LEWISON: Formula One motor racing is controlled by a number of companies within the Formula One Group. The principal companies are Formula One Administration Limited and Formula One Management Limited. However, another company called Formula One Holdings Limited is the parent or great-grandparent of both.
2. Formula One Holdings Limited is in turn owned by SLEC Holdings Limited (SLEC). SLEC is owned 75 per cent by Speed Investments Limited (Speed), and 25 per cent by Bambino Holdings Limited (Bambino). Speed is in turn owned in varying proportions by three banks.
3. Speed, Bambino, Formula One Holdings and others are all parties to an agreement called the SLEC Shareholders Agreement. The SLEC Shareholders Agreement was made on 12th May 2000. Clause 3.2 provided that the maximum number of directors of Formula One Holdings should be eight and that Formula One Holdings should permit the holders of a majority in nominal value of the A shares as defined to appoint four persons to be directors of FOH. It went on to provide that FOH should permit the holders of a majority in nominal value of the B shares to appoint four persons to be directors of FOH.
4. Clause 3.3 contained covenants by SLEC and Formula One Holdings to procure:

"(A) The holders of a majority in nominal value of the A shares should be permitted to appoint a director to each of the subsidiaries, the ("A subsidiary directors");

"(B) The holders of a majority in nominal value of the B shares should be permitted to appoint two directors of each of the subsidiaries, the ("B subsidiary directors"); and.

"(C) The subsidiary directors are sent at the same time as the other directors of the relevant subsidiary notice of any meeting of the directors of such subsidiary and a copy of all papers sent to such directors."

5. Clause 3.6 amplified the provisions relating to the appointment of directors in the event that an option was exercised. Clause 5 provided that immediately following the execution of the agreements, the shareholders should procure the passing of resolutions, adopting new articles of association of, among other companies, Formula One Holdings. Those articles of association were duly adopted.
6. By clause 4 of the agreement, Bambino covenanted and undertook to Speed that the details set out in parts 1 and 2 of schedule 1 were in all respects true, complete and accurate. The details set out in part 2 of schedule 1 included a list of directors of Formula One Holdings in which Messrs Bernard Ecclestone and Stephen Mullens were described as B-directors.
7. At the heart of the overall dispute is the control and future of Formula One racing. The immediate cause of the proceedings was the appointment on 7th October 2002 by Bambino of the third and fourth directors, the Argands, as directors of Formula One Holdings. The claimants say that Bambino was not entitled to appoint the Argands, because it had exhausted its rights of appointment. This is because it says that Messrs Ecclestone and Mullens were B-directors of Formula One Holdings. Bambino says that the Argands were validly appointed because Messrs Ecclestone and Mullens were not B-directors, they were appointed as ordinary directors and remained ordinary directors, despite the provisions of the SLEC Shareholders Agreement, which described them as B directors.
8. The applications before me are applications by the second, third and fourth defendants disputing the jurisdiction of this court. The application in each case is made under Part 11 of the Civil Procedure Rules.
9. The two claimants are each Jersey companies. The first defendant is a company registered in England and Wales. The second defendant is another Jersey company and the Argands are individuals domiciled in Switzerland. The first defendant is playing no active part in the litigation.
10. The applications are based partly on Council Regulation (EC) No 44/2001, the ("Judgments Regulation"), and partly on the Lugano Convention incorporated into domestic law by Section 3A of the Civil Jurisdiction and Judgments Act 1982. Jersey is not a part of the United Kingdom, either for the purpose of the judgments regulation or for the purposes of the Lugano Convention. Switzerland is not a member state of the European Union, but it is a contracting state for the purposes of the Lugano Convention.
11. The proceedings were begun in this court by a claim form dated 1st March 2004. The claim was served on Bambino shortly afterwards in reliance on Part 6.19 of the Civil Procedure Rules. The Court's permission was therefore not obtained. The claim was served on the Argands in Switzerland on 19th March 2004.
12. The relief claimed in the action is described in the claim form as follows:

"1. A claim for declarations as to the identity of the directors of the first defendant.

"2. A claim for rectification of invalid entries in the register of directors of the first defendant.

"3. A claim for a declaration as to the validity of a written resolution of the board of directors of the first defendant."

13. The Particulars of Claim plead the essentials of the claim starting at paragraph 32. That part of the pleading reads as follows:

"32. On 7th October 2002, Bambino purported to appoint Monsieur Argand and Madame Argand-Rey as B-directors of FOH pursuant to Article 14 (A) of the new FOH articles.

14. "33. Bambino was not entitled to appoint Monsieur Argand and Madame Argand-Rey as B-directors of FOH because Bambino had already exhausted its rights to appoint B-directors under the new FOH articles. Alternatively, Bambino has estopped from denying that it had already exhausted its right to appoint B-directors under the new FOH articles. The claimants will say as follows:

"33.1. In connection with the purchase of Speed by EM.TV and the acquisition of shares in SLEC by Speed in accordance with the master agreement, the directors of FOH appointed prior to 12th May 2000 were agreed by SLEC, FOH, Bambino and Speed to be designated A-directors and B-directors respectively in accordance with the new FOH articles adopted on the same day, as evidenced by the description of such persons as A-directors and B-directors in schedule 1, part 2 of the SLEC Shareholders Agreement.

"33.2. Further or alternatively, by including schedule 1, part 2 of the SLEC Shareholders Agreement, each of the parties to the SLEC Shareholders Agreement represented to the others that they would treat the persons set out in the said schedule as A and B-directors respectively as having been appointed A and B-directors in accordance with the new FOH articles.

"33.3. Further or alternatively, by the SLEC Shareholders Agreement, Bambino contracted with Speed, SLEC and FOH that the persons described as B-directors off FOH in schedule 1, part 2 of the SLEC Shareholders Agreement should be deemed to be appointed as such B-directors of FOH in accordance with the new FOH articles. The claimants will refer to clause 4 (A) of the SLEC Shareholders Agreement.

"33.4. Further or alternatively, SLEC and Bambino have thereafter conducted themselves on the basis that and in reliance on the representation pleaded in paragraph 33.2 above, that the persons set out in schedule 1, part 2 of the SLEC Shareholders Agreement as A and B-directors respectively were appointed as A-directors by Speed and as B-directors by Bambino respectively. Paragraph 27 above is repeated.

"34. In the premises, Monsieur Argand and Madame Argand-Rey have not been appointed as directors of FOH."

15. Paragraph 37 of the Particulars of Claim pleads:

"On 11th November 2002, SLEC as sole shareholder in FOH appointed Mr Diederichs and Mr Mann as directors of FOH, not being A-directors or B-directors. Bambino and the secretary of FOH have refused to recognise the appointment of Mr Diederichs and Mr Mann on the basis that there were no vacancies of the board of directors because Bambino and the secretary of FOH contend that Monsieur Argand and Madame Argand-Rey were validly appointed."

16. Paragraphs 41 and 42 of the Particulars of Claim read as follows:

"41. A dispute as arisen between FOH, SLEC, Speed and Bambino as to who are the directors of FOH. The register of directors maintained by FOH pursuant to Section 288 of the Companies Act 1985 records Monsieur Argand and Madame Argand-Rey as directors of FOH and does not record Mr Diederichs and Mr Mann as directors of FOH. The entry of the names of Monsieur Argand and Madame Argand-Rey in the said register is invalid and FOH is obliged to include particulars of Mr Diederichs and Mr Mann in the said register.

"42. The accounts of FOH for the year ended 31st December 2002 were due to be filed at Companies House by 31st October 2003. By reason of the dispute between FOH, SLEC, Speed and Bambino as to the identity of the directors of FOH, substantial difficulties were encountered in approving and filing the said accounts. It was not possible to call a meeting of the board of directors because of the dispute as to who had been validly appointed directors of FOH."

17. The allegations relating to the appointment of directors rely on the articles of association of FOH.
18. On 15th March 2004, the first defendant, Bambino, begun proceedings in Switzerland. The Swiss court, according to the evidence, was definitively seised of those proceedings on 15th or 16th March, but in any event, before 19th March, which is the date upon which the Argands were served with the English proceedings. The Argands are also defendants in the Swiss proceedings. Bambino claims against them a declaration that they have been validly appointed as directors of Formula One Holdings. There is unlikely to be much, if any, dispute about that part of the claim as between the Argands and Bambino.
19. The claim also seeks to set aside certain pledges of shares by former shareholders of SLEC, which, it is said, will remove the banks' ability to control Speed.
20. Formula One Holdings is also a defendant to the Swiss proceedings, but it seems likely that, as with the English proceedings, it will play no active part.
21. As I have said, Bambino is a Jersey company. Jersey, as I have said, is neither a member of the European Union, nor a contracting state for the purposes of the Lugano Convention. This court's jurisdiction over Bambino is therefore governed by Article 4 of the Judgments Regulation. It provides as follows:

"If the defendant is not domiciled in a member state, the jurisdiction of the courts of each member state shall, subject to Articles 22 and 23, be determined by the law of that member state."

22. Article 4, as I have just recited is subject to Articles 22 and 23. If, therefore, Article 22 applies, then that is what decides jurisdiction. Article 22 provides, so far as relevant, as follows:

"The following court shall have exclusive jurisdiction regardless of domicile.

"2. In proceedings which have as their object the validity of the constitution, the nullity or the dissolution of companies or other legal persons or associations of natural or legal persons, or of the validity of the decisions of their organs, the courts of the member state in which the company, legal person or association has its seat. In order to determine that seat, the court shall apply its rules of private international law.

"3. In proceedings which have as their object the validity of entries in public registers, the courts of the member state in which the register is kept."

23. Article 23 applies where the parties have agreed that a court or the courts of a member state are to have jurisdiction to settle any disputes which have arisen. Although clause 30 of the SLEC Shareholders Agreement confers jurisdiction on the Geneva courts, that does not bring Article 23 into play because, of course, Switzerland is not another member state.
24. Bambino's position is that the claimant's claim is not within Article 22.
25. The position of the Argands is governed by the Lugano Convention. Article 16 of the Lugano Convention is for practical purposes in the same terms as Article 22 of the Judgments Regulation. Article 17 of the Convention permits parties to choose their own forum, but Article 17(3) makes it clear that a choice of jurisdiction clause cannot oust the exclusive jurisdiction conferred by Article 16. The Argands also say that the claimant's claim is not within Article 16.
26. They have also argued that the SLEC Shareholders Agreement contains a choice of jurisdiction clause conferring jurisdiction on the courts of Geneva. Although they themselves are not parties to it and although most of the parties to it are not domiciled in an contracting state, Formula One Holdings was so domiciled and is also a party to the Swiss proceedings. But Mr Rosen QC, who appears on their behalf, accepts that clause 30 is not something on which the Argands can rely, at least at this stage in the proceedings.
27. In addition, the Argands say that the Swiss court is the court first seised of the proceedings, consequently they say that Article 21 of the Lugano Convention comes into play. That Article provides as follows:

"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 notion stay its proceedings until such time as the jurisdiction of the court first 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."

28. The Court of Appeal has discussed the scope of Article 16 of the Brussels Convention, which is in the same terms as Article 22 of the Judgments Regulation and Article 16 of the Lugano Convention. The main discussion took place in the case of Grupo Torras v Al-Sabah [1996] 1 Lloyds Law Reports, page 7. Lord Justice Stuart-Smith said at page 15:

"The paragraphs of Article 16 constitute a series of exceptions to the basic jurisdictional rules established by the Convention. The objective of Article 16(2) is to confer exclusive jurisdiction to decide questions concerning the constitution and internal management of a company on the courts of a contracting state in which the company has its seat. It is generally accepted as a matter of private international law that the law of the place of incorporation determines the capacity of the company, the composition and powers of the various organs of the company, the formalities and procedures laid down for them, the extent of an individual member's liability for the debts and liabilities of the company, and other matters of that kind. The objective of Article 16(2) is to confer exclusive jurisdiction to determine all such questions on the courts of the state where the company has its seat. The other paragraphs of the Article follow a similar logic. The appellants submit that Article 16(2) governs all questions which are concerned with the internal management of the company and that this extends to all disputes which arise out of the relationship between a company and its officers or shareholders or between its shareholders and officers, possibly even between its shareholders inter se. This submission is far too wide. Whether an action falls within Article 16(2) depends upon its subject matter the nature of the dispute, not upon the relationship between the parties. A claim by an officer of a company for wrongful dismissal, for example, does not fall within the Article, although a claim that the decision to dismiss him had been taken by a meeting of the board which was inquorate would do so."

29. It certainly appears to have been assumed in that case that the board of directors of a company is one of its organs. Indeed, if not, it is difficult to see what the organs of a company are. In my judgment, it follows from what Lord Justice Stuart-Smith said that Article 16(2) is conferring exclusive jurisdiction on the courts of the place of incorporation of a company, if the subject matter of the proceedings raises questions about the constitution and internal management of the company and/or the composition of its board of directors. Although I accept that Article 22 of the Judgments Regulation and Article 16 of the Lugano Convention must be narrowly construed as exceptions to the usual domicile rule, these questions are at its core.
30. The scope of Article 16(3) was considered by Mr Justice Harman in Re Fagin's Bookshop Plc [1992] Butterworth's Company Law Cases, page 118. The proceedings concerned the register of members of the company kept under the Companies Act 1985. Mr Justice Harman said this:

"It is obvious that there are at least three different meanings which can be applied to the words public register: a register kept by a public official by not open to inspection by the public, as until recently the Land Registry, a register kept by a public official and open to inspection by the public, a register kept by a private body but open to inspection by the public, either by compulsion of law or perhaps voluntarily kept open to inspection by the public. There appears to be no way one can elucidate the matter and the argument upon it has been very short, but in the end it seems to me that in considering the words public register, the emphasis must be upon a register to which the public has access. To my mind it is, as Professor Kay says, natural that the courts of a country where a register is kept should be the courts in control of applications for access to that register."

31. The register of directors is also required to be kept by the provisions of the Companies Act 1985. It is open to inspection by the public. It is true that unlike the register of members it is not a document of title, but it is nevertheless in my judgment a public register.
32. One of the matters that can be taken into account in interpreting the Lugano Convention is the Jenard Report. That report emphasises the jurisdiction of the state where information in relation to companies is made public. In the case of the register of directors, that state is, of course, the United Kingdom.
33. Mr Rosen says that the dispute is essentially a contractual dispute. It is a dispute about the effect of the SLEC Shareholders Agreement. As I have mentioned under clause 30 of that Agreement, the parties had conferred jurisdiction on Geneva. The Geneva proceedings raise a number of issues, such as the possibility of setting aside the share transactions, which, he says, are logically prior to the issues raised by the English action. Mr Rosen accepts, however, that what is important for the present purposes is not the subject of the dispute but the subject of the proceedings.
34. He says that what is the subject matter of the proceedings is a question of characterisation. You look at the facts pleaded in support of the claim and the legal theory underpinning it. The facts pleaded, he says, are the terms of the SLEC Shareholders Agreement. The legal theory is the legal effect of the SLEC Shareholders Agreement. Therefore the claim is about the SLEC Shareholders Agreement and that is its subject matter. In support of that submission, Mr Rosen relies on the decision of the Court of Appeal in Ashurst v Pollard [2001] Chancery Reports, page 595. Lord Justice Jonathan Parker set out in paragraph 53 of his judgment a number of factors which the court should take into account in determining whether Article 16(1) applies, and by analogy, Mr Rosen argues that the same criteria apply to Article 16(2) and 16(3).
35. In the course of the discussion of the law, Lord Justice Jonathan Parker quoted with approval a paragraph in the opinion of Advocate General Darmon in Webb v Webb, in which the Advocate General said as follows:

"The jurisdiction ratione materiae of a court must necessarily be ascertained in the light of the subject matter of the claim as defined in the originating application without looking at its purpose."

36. In one sense, Mr Rosen's submission is true. But the reason why the SLEC Shareholders Agreement matters is because it affects the composition of the board of Formula One Holdings, so the claim is also about the composition of the board. I accept Miss Jones QC's submission that there is no necessary mutual exclusivity between a contractual dispute and a dispute falling within Article 22 of the Judgments Regulation. Both the Judgments Regulation and the Lugano Convention contemplate that an exclusive jurisdiction clause may purport to oust a exclusive jurisdiction given directly by Article 22 of the Judgments Regulation or Article 16 of the Lugano Convention, in which event they are of no legal effect. An exclusive jurisdiction clause will usually be found in a contract. Thus, where there is an overlap between the two, Article 22, or Article 16 as the case may be, prevails.
37. Miss Jones also says that the claimants do not claim damages for breach of the claimant or any contractual remedy. The right to appoint directors is not a right conferred by the contract, it is a right conferred by the articles of association which themselves are the constitution of the company. It is true that the articles of association altered because the SLEC Shareholders Agreement required that to be done, but once the articles of association were altered, rights to appoint directors were right arising out of those articles and not under the SLEC Shareholders Agreement. The SLEC Shareholders Agreement is merely the background giving rise to the claim and constitutes no more than the manner in which Bambino exhausted its right to appoint B-directors. I accept this submission.
38. In my judgment, the subject matter of the English proceedings is the composition of the board of directors of Formula One Holdings and therefore it does fall within Article 22(2). The claim to rectify the register of directors, in my judgment, falls within Article 22(3). Thus, so far as Bambino is concerned, the application fails.
39. I turn then to the position of the Argands. Does Article 21 of the Lugano Convention require me to defer jurisdiction to the Swiss court? Article 21 only applies if the parties to the Swiss proceedings are the same parties as the parties to the English proceedings. Miss Jones submits that since the Argands are on the same side as Bambino in England, (all of them are defendants) but on opposite sides in Geneva (where Bambino is a claimant and the Argands are defendants) they are not the same parties. She accepts that if the Argands had been claimants in the Swiss proceedings, this submission could not succeed. She says that there is no dispute between Bambino and the Argands over the validity of their appointment.
40. I see the force of this as a matter of common sense, but the European Court of Justice in The Tatry [1999] Queens Bench Reports, page 515 and the Court of Appeal in the Grupo Torras v Al-Sabah case said that the capacity in which the party is joined to the proceedings makes no difference. There may be reasons why under Swiss law the Argands were properly joined as defendants rather than as claimants. I do not feel able to accept Miss Jones' submission on this point.
41. Miss Jones then submits that Article 21 does not apply because the Swiss court is not the first seised. She says that this court is the first seised because the claim form was issued in this court before proceedings were lodged with the Swiss court. The problem here is Dresser UK Limited v Falcongate Freight Management Limited [1992] Queens Bench Reports, page 502. Under the Brussels Convention, the European Court of Justice said when a court was first seised of proceedings is a matter of national law. In so deciding, is recognised that different member states might give different answers to that question.
42. In Dresser, the Court of Appeal held that in English domestic law, it is the point of service of proceedings, not the point of issue of proceedings that is the moment at which the English court is definitively seised. It has since been held that the procedural change from the Rules of the Supreme Court to the Civil Procedure Rules make no difference to English law in this respect. The change is that the Brussels Convention has been superseded by the Judgments Regulation. Article 30 of the Judgments Regulation lays down an autonomous rule for deciding when a court is seised. It is clear that under that rule it is the moment when process is issued. It is clearly contemplated that the Lugano Convention would be revised to confirm with the Judgments Regulation, but that has not yet happened. Can I anticipate the change?
43. Miss Jones says the Judgments Regulation and the Lugano Convention are intended to create a common system and should be kept in tandem. The reports on the Convention and the Protocol for its interpretation emphasise the unity of the system. In Canada Trust Company v Stoltzenburg Number 2, 2002, 1 Appeal Cases page 1, Lord Hoffman made the same point, as follows:

"The Brussels and Lugano Conventions are for present purposes in identical language. The Brussels contracting states that members of the European Union and questions of the interpretation of the Convention may be referred to the European Court of Justice. The Lugano Convention includes non-members and the European Court as no jurisdiction over it. Nevertheless, as the two Conventions are intended to establish a single system for the allocation of jurisdiction of non-contracting states, and the mutual recognition of their judgments, decisions of the European Court on the Brussels Convention are obviously of great authority for the interpretation of the parallel provisions of the Lugano Convention. As the two Convention defendants in this case are domiciled in Switzerland, the Lugano Convention is the one engaged."

44. Although I entirely accept that description as a matter of generality, the fact is that at the moment the Judgments Regulation and the Lugano Convention are not in identical language and consequently no question of interpretation of parallel provisions as yet arises. As Lord Hoffman also explained in the Canada Trust case, prior to the decision of the Court of Appeal in Dresser, the common law had no lis pendens rule, and the Court of Appeal had to invent a domestic rule solely for the purposes of allowing Article 21 to refer to it.
45. Miss Jones submits that the policy underlying that rule has changed since the introduction of the Judgments Regulation and the decision of the Court of Appeal in Dresser should no longer be treated as binding. Before Article 30, the moment at which the court was definitively seised was a question of national law. Since Article 30, it is the subject of an autonomous rule. In my judgment, the introduction of an autonomous rule cannot change English domestic law. English domestic law still governs Article 21 of the Lugano Convention. English domestic law is in my judgment that laid down by the Court of Appeal in Dresser. In the Canada Trust case, the House of Lords conspicuously declined to overrule it. Although it has been subject to criticism, whether the criticism is justified is for a higher court than this one to determine.
46. I conclude, therefore, that as far as the Argands are concerned, the Swiss court is the court first seised. I must not, however, lose sight of the fact that this court is first seised as regards Bambino.
47. I should also at this stage refer to some further provisions of the Lugano Convention. Article 19 provides:

"Where a court of a contracting state is seised of a claim which is principally concerned with a matter over which the courts of another contracting state have exclusive jurisdiction by virtue of Article 16, it shall declare of its own notion that it has no jurisdiction."

48. And Article 28:

"Moreover, a judgment should not be recognised if it conflicts with the provisions of section 3, 4 or 5 of title 2, or in a case provided for in Article 59."

49. Article 16 is within title 5.
50. I have already referred to Article 17, which enables the parties to enter into a choice of jurisdiction clause, provided that it does not conflict with the exclusive jurisdiction provided for in Article 16. I should also mention that Article 17 is contained within section 6, which is not one of the sections mentioned by Article 28. Thus Article 16 is more entrenched than Article 17.
51. Although Article 21 does not in terms say that the court second seised may determine its own exclusive jurisdiction under Article 16, many commentators argue that this is implicit. Professor Kay in "Civil Jurisdiction and Enforcement of Foreign Judgments" says this at page 1222:

"However, what of the situation in which the second seised court itself has exclusive jurisdiction under the Convention, whereas the foreign first seised court did not, and yet decided to continue with its proceedings either incorrectly because in a case where the parties had conferred exclusive jurisdiction upon the second seised court under Article 17, the defendant had nonetheless entered an appearance to the action in the first seised court for the purposes of Article 18, thereby conferring jurisdiction upon the latter, or because where the second seised court's jurisdiction is exclusive under Article 16, the first seised court simply contravened its duty to decline jurisdiction under Article 19 or did not consider itself to be obliged to do so, because, for example, contrary to the view of the second seised court, the former regarded the seat of a company as being situated within its own territory for purposes of exclusive jurisdiction under Article 16(2) and not in that of the second seised court.

"In the present view (i), where the second seised court has exclusive jurisdiction under Article 16 and the first seised court non-exclusive jurisdiction, then according to the spirit and policy of the Convention, Article 21 in inapplicable in the second seised court and the latter need not therefore decline to adjudicate. This is firstly because the first seised court's judgment will not be entitled to recognition in other contracting states, or at least in the second seised state in any event by virtue of Article 28, paragraph 1 as contravening title to section 5, and consequently, community-wide recognition will not be required to be given to two possibly conflicting judgments, and secondly the fact that the first seised court did not decline jurisdiction under Article 19, as it should have done, even if the defendant entered an appearance, since Article 18 is expressly subject to Article 16, indicates a failure, indeed contravention, of the Convention system in view of which just as Article 28, paragraph 1 requires exceptional jurisdictional review and refusal of recognition in such circumstances, so the same situation demands that Article 21 be held to be inapplicable. Article 21, paragraph 1, does not expressly except this application in these cases precisely because they are not supposed to occur. Courts ought to comply with Article 19."

52. Professor Kaye goes on to distinguish that situation from the situation in which the second seised court has exclusive jurisdiction under Article 17 and he comes to a different view about that situation.
53. Dicey and Morris on Conflict of Laws, 13th edition, at paragraph 12-043, are of a similar view. They say:

"Accordingly, where Article 21 applies, the English court must decline jurisdiction if it is not the court first seised and the jurisdiction of the other court is not challenged, or is established after it is challenged. The court which is seised second must not itself normally investigate the jurisdiction of the court first seised. In Overseas Union Insurance Limited v New Hampshire Insurance Company, it was held that in such a case the court could only stay its proceedings until the court first seised had ruled on its own jurisdiction. But the European Court left open the question whether the answer was the same if the court seised second had conclusive jurisdiction, in particular under Article 16.

"As a result, the scope of this possible exception to the application of Article 21 remains uncertain. There are three points to be made. First, Article 21 should be inapplicable where the court seised second has exclusive jurisdiction under Article 16, for a judgment given by the court seised first in violation of Article 16 will be refused recognition in all contracting states and there is no sensible purpose in deferring to a court whose judgment will be a nullity in England. Secondly, although the European Court has reiterated that the court seised second has no general right to review the jurisdiction of the court seised first, this reasoning would justify extending the exception to those cases in which jurisdictional error by the court seised first means that its judgment will not be recognised."

54. They go on to make a third point relating to a decision of the Court of Appeal which appears to be a controversial one.
55. Lastly on this point, I should refer to the views of Briggs and Rees in Civil Jurisdictions and Judgments, paragraph 2.197. They say as follows:

"If two courts have exclusive jurisdiction, Article 29 applies a first come first serve rule to these, but the court seised second may look at the claims made and conclude that it alone has exclusive jurisdiction. In such cases, according to the decision in Overseas Union Insurance Limited, the court seised second may not be obliged to decline jurisdiction. The answer given by the court in that case was expressed to be without prejudice to the case, where the court seised second has exclusive jurisdiction under the Convention and, in particular, under Article 16 thereof.

"If the court seised second believes that it has jurisdiction under what is now Article 22, it may be that it must proceed to exercise it, unless the court seised first also has Article 22 exclusive jurisdiction. In such a case, Article 29 will apply."

56. The footnote to that sentence reads:

"It cannot be said for certain for the decision was without prejudice to this case, which therefore technically remains open, but as there would be an obligation to deny recognition, Article 35, to the judgment of a court which violated Article 22, it ought to follow that the court seised second may proceed to hear the case."

57. As the commentators point out, the European Court of Justice in the Overseas Union Insurance case left open the possibility that Article 21 of the Brussels Convention, equivalent to Article 21 of the Lugano Convention, might not apply where the second seised court had exclusive jurisdiction. The European Court returned to that question in the case of Eric Gasser v MISAT [2004] 1 Lloyds Reports, page 222. That was a case which concerned exclusive jurisdiction under a choice of jurisdiction clause ie Article 17. It did not concern Article 16 at all.
58. Amongst the parties who placed arguments before the Court were the European Commission itself. The Court recorded the European Commission's argument in the following terms:

"The Commission, like the Italian government, considers that the derogation under which the court second seised has jurisdiction on the ground that it enjoys exclusive jurisdiction under Article 16 of the Brussels Convention cannot be extended to a court designated under a choice of court clause."

59. It seems clear from that recitation of the Commission's argument that it was assumed, at least by the Commission, that such a derogation did in fact exist. The Court continued:

"The Commission justified a derogation from the rule laid down in Article 21 in the event of recourse to Article 16 by reference to the first paragraph of Article 28 of the Brussels Convention, according to which decisions given in the state of the court first seised in disregard of the exclusive jurisdiction of the court second seised based on Article 16 of the Convention, cannot be recognised in any contracting state. It would therefore be inconsistent to require under Article 21 of the Convention that the second court, which alone has jurisdiction, should stay proceedings and decline jurisdiction in favour of a court which has no jurisdiction. Such a course of action would result in parties obtaining a decision from a court lacking jurisdiction which could not take effect in the contracting state where it was given. In such circumstances, the aim of the Brussels Convention, which is to improve legal protection and for that purpose to ensure the cross-border recognition and enforcement of judgment in civil matters, would not be attained."

60. The European Court did not explicitly approve this argument, but it seems to me that paragraph 54 of the Court's findings, which distinguish between the effect of Article 17 and Article 16, does lend some support to the Commission's assumption. Both sides agree, however, that the European Court of Justice did not decide the question, and that is the question is still an open one. Mr Rosen submits that the language of Article 21 is clear and mandatory. The policy is to trust the court first seised to get the answer right, and if necessary, for the court second seised to decline jurisdiction.
61. Because this is a question now of interpreting the Lugano Convention, it is not possible to refer that question to the European Court, so I must decide it. The arguments seem to me to be finely balanced, but on balance, the arguments that commend themselves to the commentators and indeed to the European Commission commend themselves to me. It also seems to have been the view of the Court of Appeal in Prudential Assurance Co Limited v Prudential Assurance Company of America [2003] EWCA Civ 327, paragraph 22.
62. In addition, I must not lose sight of the fact that the same court may be first seised and second seised as regards different parties. Thus, as regards Bambino, this court is first seised, so the Swiss court must defer to this court, but as regards the Argands, the Swiss court is the first seised. If both courts are required to defer to each other, there is a potential impasse which is not a sensible conclusion.
63. I hold, therefore, that where exclusive jurisdiction under Article 16 is in point, the court in which exclusive jurisdiction is vested, even if second seised as regards some parties, may determine its own jurisdiction and need not stay the case pending determination by the court first seised. I therefore hold that I should determine whether the claim against the Argands is governed by Article 16.
64. For the reasons which led me to the conclusion that the claim against Bambino is governed by Article 22 of the Judgments Regulation, I hold that the claim against the Argands is governed by Article 16 of the Lugano Convention. Mr Rosen accepted that if I decided, as I have, that Article 22 of the Judgments Regulation and Article 16 of the Lugano Convention apply to the claims, then the question of a discretionary stay under Article 23 of the Lugano Convention does not arise. The upshot therefore is that both challenges to jurisdiction fail.