England and Wales High Court (Commercial Court) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT

		Royal Courts of Justice Strand, London, WC2A 2LL
		05/04/2005

Mr. Justice Cooke:

Introduction

1. The Defendants (together Primacom) apply, under CPR Part 11, for a stay of three Actions begun in England. The same parties are involved in each of the proceedings and similar issues arise in relation to the applications in each. The First Defendant (PAG) is the parent company of the Primacom Group and the Second Defendant (PMG) is a wholly owned subsidiary of PAG and itself indirectly owns NV Multikabel, a Netherlands company. Both PAG and PMG are German companies. The issues which arise on these applications, concern German proceedings begun by Primacom and English proceedings begun by the Claimant (JP Morgan).
2. JP Morgan acts as Agent for a number of banks (the SSLs) under a Second Secured Facility Agreement dated 26^th March 2002, which provided for a term loan facility in the amount of Euros 375 Million (the SSFA). PAG is the borrower under the SSFA and on-lent the sums advanced to it to PMG, which is the guarantor of the loan made by the SSLs.
3. The SSFA is specifically governed by English Law and contains an exclusive jurisdiction clause in favour of the Courts of England and Wales. In addition the parties expressly agreed that England was the forum conveniens: -

"LAW

Governing Law

This Agreement shall be governed by, and shall be construed in accordance with, English Law.

JURISDICTION

English Courts

The courts of England have exclusive jurisdiction to hear and determine any suit, action or proceeding, and to settle any dispute (a "Dispute"), which may arise out of or in connection with this Agreement (including a dispute regarding the existence, validity or termination of this Agreement or the consequences of its nullity).

Convenient Forum

The parties agree that the courts of England are the most convenient and appropriate courts to settle Disputes between them and accordingly they will not agree to the contrary.

Service of Process

Each of the Obligors agrees that the documents which start any proceedings and any other documents required to be served in relation to those Proceedings may be served on it on Baker & McKenzie, 100 New Bridge Street, London EC4V 6JA marked for the attention of "Partner in charge of litigation", or if different, its registered office."

Background Facts

4. PAG and the Primacom Group have for some time been in an extremely uncertain financial position. In the past, Primacom's Management has acknowledged that a considerable insolvency risk exists for PAG and PMG due to their high debt ratio. Primacom for sometime anticipated that the group would not have sufficient resources to comply with its repayment obligations under a Senior Credit Facility (a secured 1,000,000,000 Euro revolving facility dated 18^th September 2000) and would within the first six months of 2005, default on those obligations.
5. Despite efforts to negotiate a restructuring and refinancing of the Group by the SSLs, no agreement was reached on this in the summer of 2004.
6. On the 30^th June 2004 PAG failed to make an interest payment as required under the SSFA but because of an agreement between the SSLs and Primacom's senior lenders under the Senior Credit Facility, the SSLs were subject to a sixty day standstill period during which they were not to take action to enforce payment of interest due. On the 25 August 2004, just prior to the end of the standstill period, PAG paid the overdue interest but "under reserve". Despite enquiry, no details were given of the nature of the "reserve".
7. At about this time PAG issued a press release stating that an earlier accountants' report commissioned by the Management Board of PAG, which had concluded that Primacom was significantly over indebted had not been produced in accordance with applicable standards in Germany.
8. The SSLs, as a consequence of the non-payment of interest due on 30^th June, engaged BDO to review Primacom's financial position, as they were entitled to do under the provisions of the SSFA. PAG effectively prevented BDO from obtaining access to PAG's books and at about the same time engaged PwC to perform an over indebtedness analysis. The SSLs ultimately agreed not to proceed with the BDO examination of the position but instead to allow PwC to carry out the analysis on the basis that the SSLs would be included in the process. In particular they were to have the opportunity to comment on the factual basis upon which the PwC report was being prepared before it was finalised and the preliminary and final PwC reports were to be shared with them. It was envisaged that PwC would complete its analysis by the end of October 2004.
9. On the 30^th September 2004, PAG failed to make another interest payment on the due date but subsequently paid it "under reserve" just prior to the expiry of the standstill period. Despite further enquiry, no details were given of the nature of the "reserve" under which payment was made. The SSLs, as on the previous occasion rejected any "reserve" put forward.
10. On 9^th December 2004, without any prior notice, Primacom issued a press release stating that it had issued proceedings in Mainz and on 22^nd December 2004, it issued a further press release stating that it had issued proceedings in Frankfurt. As a matter of English Law it is clear that both these proceedings were commenced in breach of the exclusive jurisdiction clause and the evidence suggests that this was done with the primary intention of frustrating any possible attempt by JP Morgan and the SSLs to seek appropriate relief in the English Courts in accordance with that jurisdiction clause. The Mainz proceedings were, after some considerable delay, served on all the SSLs but the Frankfurt proceedings have not yet been served on a number of the SSLs. It is clear that delay is advantageous to Primacom and this appears to be one of its objectives.
11. Moreover it is clear that Primacom have been obstructive in relation to the provision to JP Morgan of the PwC report, whether in preliminary or final form. Despite the production of such a report by PwC, Primacom has prevented PwC from providing it to JP Morgan. Draft reports were provided to PAG on 9^th December 2004 and 10^th February 2005 and a preliminary report on 15^th February 2005. The contents of these reports remain unknown outside PwC and Primacom. On the face of it, there is a clear failure by PAG to provide information as required by Clauses 18.5, 18.1.4 and 20.1.7 of the SSFA
12. By Clause 20.2.5 of the SSFA, Primacom is prevented from selling certain assets without first obtaining the consent of an instructing group of the SSLs. Primacom Netherlands Holdings BV and NV Multikabel (collectively Multikabel) are together Primacom's most valuable asset and significant source of cash flow. From early September 2004, press reports and market rumours indicated that Primacom was intending to dispose of Multikabel without first obtaining the consent of an instructing group of SSLs. From early November 2004 JP Morgan repeatedly sought assurances from Primacom that Multikabel would not be sold without the required consent. No adequate response was obtained and the rumours about a sale without consent continued.
13. As a result of concerns over any possible sale of Multikabel, before being served with any German proceedings, JP Morgan commenced proceedings in England on 23^rd December 2004, seeking an order preventing disposal without the contractual consent required ("the Injunction Proceedings"). In the next two weeks, Primacom's Solicitors in London gave assurances that Primacom had no intention of disposing of Multikabel without the required consent and stated that there was nothing going on behind the scenes that should cause JP Morgan any concern. On 7^th January, however JP Morgan received a letter from PAG questioning the need for the SSLs' consent to any sale of Multikabel. In consequence, on 10^th January JP Morgan sought and obtained an interim injunction substantially in the terms of Clause 20.2.5 of the SSFA. JP Morgan's concerns were unabated because of further information and press releases from Primacom stating that the consent of the lenders under the Senior Facility to a sale of Multikabel had been obtained and that no one could prevent any sale from taking place. Receiving no clarification from PAG, on 14^th January 2005 JP Morgan on behalf of the SSLs, commenced proceedings seeking declarations to the effect that the SSLs were entitled to withhold consent to the proposed sale of Multikabel. The Injunction Proceedings were subsequently amended to include the request for declaratory relief and a further more specific interim injunction was obtained. It is to these proceedings that one of the stay applications relates.
14. On 23^rd February, JP Morgan commenced "the PwC Proceedings", in which they sought an order for specific performance of Clauses 18.5, 18.1.4 and 20.1.7 in order to obtain a copy of the preliminary report delivered to PAG by PwC on 15^th February 2005. An application to stay these proceedings is also made.
15. On 31^st December 2004, PAG had again failed to make the interest payment due under the SSFA but unlike previous occasions, no payment was paid prior to the expiry of the 60-day standstill period. On 8^th March 2005, JP Morgan issued a Notice of Default and Demand in which it accelerated Primacom's obligations and demanded immediate repayment of the loan which, together with the accrued interest and other sums owed, amounts to Euros 527,291,909.08. The demand has not been met.
16. On 18^th January 2005, JP Morgan commenced "the Declaratory Proceedings" in which it sought declarations that clause 7 of the SSFA was valid, binding and enforceable in accordance with its terms and that the Notice of Default which it had served was also valid. Other related declarations were sought also. This is the third action of which a stay is sought.
17. It is in these circumstances that Primacom challenges the jurisdiction of the English Court on the basis that Primacom has commenced proceedings in Germany in both Mainz and Frankfurt ("the German Courts") and that these are the Courts first seised of proceeding involving the same cause of action as the three sets of English Proceedings. Primacom seek a stay in reliance on Article 27 or alternatively Article 28 of Council Regulation 44/2001 (the Brussels Regulation). JP Morgan and the SSLs resist the application for a stay on either basis but also maintain that they are entitled to maintain the injunctions preventing the disposal of Multikabel on an interlocutory basis under Article 31 of the Brussels Regulation, even if a stay is granted.

The Brussels Regulation.

18. Article 27 of the Brussels Regulation reads as follows: -

"1. 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.

2. 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."

19. Article 28 provides: -

"1. Where related actions are pending in the Courts of different Member States, any Court other than the Court first seised may stay its proceedings": -

….

3. For the purpose of this Article, actions are deemed to be related where they are so closely connected that it is expedient to hear and determine them together to avoid the risk of irreconcilable judgments resulting from separate proceedings".

20. Article 31 provides: -

"Application may be made to the Court of a Member State for such provisional including protective, measures that as may be available under the law of that state, even if, under this Regulation, the Courts of another Member State have jurisdiction as to the substance of the matter".

21. It is common ground between the parties that the German Proceedings were begun first and that the parties in interest are the same for the purpose of Article 27. Issues arise however as to whether the German and English proceedings involve the same cause of action and are therefore subject to a compulsory stay until the German Courts decide upon their own jurisdiction, which is the subject of challenge by JP Morgan and the SSLs in those Courts. Issues also arise as to the degree of interconnection between the German and English proceedings for the purposes of Article 28 and as to the exercise of this Court's discretion whether or not to stay the latter. Further issues arise in relation to the exercise of the Court's powers to grant protective measures in the shape of the injunctions preventing the disposal of Multikabel, should a stay be granted, whether under Article 27 or 28.

The Mainz Proceedings

22. In these proceedings Primacom seeks a declaration or order that the SSLs are not entitled to interest under the SSFA at all. Alternatively, Primacom asks the Mainz Court to find that there is no claim for interest for the period from October 1^st 2004 to 31^st December 2009 because, since 1^st October 2004 the defendants have been "in financial crisis" within the meaning of particular German statutory provisions. In the further alternative, Primacom seeks a finding from the Courts that there is no claim for repayment for the amount loaned under the SSFA until 31^st March 2010, which is the expiry of the term of the loan. Under the fourth head of claim, Primacom asks the Court to find that the SSLs have no claims against Primacom arising out of the Share Option Agreement of 26^th March 2002.
23. The basis of the second and third claims which, if successful, would result in the suspension of interest payments for the periods referred to, both depend upon provisions of German domestic law which are of no application if the German Court applies English Law, as the law chosen by the parties to apply to the SSFA. The first head of claim, as explained in the expert evidence, arises as a matter of Ordre Public -the public policy of the German Courts. Under Article 6 of the EGBGB, the German Courts can disapply the law of another state, if its application leads to a result that is manifestly irreconcilable with fundamental principles of German Law. Article 6 reads as follows: -

"Public policy (Ordre Public)

A legal provision of another state is not to be applied if its application leads to a result that is obviously irreconcilable with the fundamental principles of German Law. In particular, it is not to be applied if the application is irreconcilable with the basic rights".

24. Primacom's argument is that because Article 138 of the Civil Code (BGB) provides that "a legal transaction which offends good morals is void" and because a number of factors can be prayed in aid in support of an argument under Article 138, the effect of Article 6 is that some or all of the provisions of the SSFA are unenforceable as a matter of public policy in Germany. The particular points upon which Primacom relies are the rate of interest in the SSFA which is said to be more than double the market rate at the time of the conclusion of the SSFA, the provisions in the SSFA which restrict PAG in its business operations and are said to jeopardise its "business autonomy" and the circumstances in which the SSFA was concluded, which meant Primacom had little choice but to agree to oppressive terms. All these points are hotly contested, but it is said that the provisions of the SSFA are unconscionable and therefore immoral and contrary to public policy.
25. The Share Option Agreement is directly linked to the SSFA and is said to be unethical inasmuch as the SSFA is immoral. It is claimed that no rights can be derived from the former insofar as the arguments succeed with regard to the latter.
26. It is common ground between the parties that the German Court will apply English Law to the SSFA, as its governing law by reason of the express choice of law clause. No challenge is made to the validity of any of the provisions of the SSFA as a matter of English Law but it is said that Article 6 of the EGBGB applies so that English Law will fall to be disapplied to the extent that it is contrary to the public policy of Germany. The German Court will therefore concern itself not with questions of validity of the SSFA but questions of its enforceability or unenforceability to the extent that it infringes public policy.

The Frankfurt Proceedings

27. These proceedings relate to a Share Pledge Agreement and an Interest Pledge Agreement concluded on the same date as the SSFA. Primacom seek declarations or orders that there are no such pledges constituted by those agreements. Alternatively Primacom say that the pledges are not enforceable until 31 March 2010 (the end date of the term of the loan) or alternatively are not enforceable until PAG's financial crisis ends. In particular they are not enforceable in relation to the interest instalment due on 31^st December 2004. Additionally Primacom maintains that the SSLs are not entitled to accelerate repayment of capital or terminate the SSFA.
28. These pledge agreements are part of the security for the performance of PAG's obligations under the SSFA and Primacom's arguments are based on the premise that, under German law, a pledge does not exist if the claim which its secures is invalid. The pledges are said to be unenforceable as long as the claims secured by them are unenforceable. These proceedings are therefore entirely parasitic upon the Mainz proceedings.

The SSFA

29. Clause 7 of the SSFA sets out provisions as regards to the rate of interest and payment in respect of it. Clause 20 sets out a series of covenants given by PAG and PMG upon which both rely in the Mainz and Frankfurt proceedings as unduly restrictive of their ability to run their businesses. Reliance appears to be placed on every provision in Clause 20, which is a lengthy clause running to 11 pages in the printed SSFA, as repressive. These provisions are relied on as demonstrating the immorality of the contract as a whole. Amongst them is Clause 20.2.5 which requires PAG not to dispose of certain assets without the prior approval of an instructing group of the SSLs and Clause 20.1.7 which requires PAG to give access to JP Morgan, to the extent requested by it, in given circumstances, to its business accounts, records and documents. JP Morgan and the SSLs rely upon Clause 7, 20.2.5 and 20.1.7 in the context of the English proceedings which they have commenced but additionally they seek orders for specific performance of other clauses such as Clause 18.1.4 and 18.5 in relation to the provision of the PwC preliminary report.
30. In the Injunction Proceedings reliance is placed upon Clause 20.2.5 by JP Morgan in seeking a permanent injunction to restrain Primacom from acting in breach of it, in particular by disposing of Multikabel. Various declarations are sought in relation to the obligations of PAG under that clause. JP Morgan already has the benefit of an interim injunction in substantially the same terms as the clause and a further interim injunction to the effect that Primacom will not dispose of its assets without the prior written consent of an instructing group unless it is been determined in the Injunction Proceedings that approval is unnecessary or cannot be lawfully withheld.
31. In the Declaratory Proceedings, JP Morgan seeks declarations as to the validity and enforceability of Clause 7 and as to whether PAG's failure to pay interest constitutes a event of default within the meaning of SSFA and the consequent rights of the SSLs in those circumstances.
32. In the PwC Proceedings, specific performance is claimed of PAG's information providing obligations under the clauses of the SSFA to which I have already referred.

Article 27

33. There is only one issue between the parties in relation to the application of this Article and that is the question whether or not the English and German proceedings involve the same cause of action. If they do, the German Courts are the courts first seised and it is incumbent upon the English Court to stay its proceedings until such time as the German Courts have decided upon their own jurisdiction, as provided by Article 27.1. Once a decision has been reached by the German Courts, then if they decide that they have jurisdiction, the English Court is bound to decline jurisdiction in favour of those Courts under Article 27.2.
34. It is difficult to see how the German Courts could find that they are entitled to exercise jurisdiction in the face of the exclusive jurisdiction clause in the SSFA. It is common ground between the parties that clauses of this kind have an existence independent of the balance of the contract so that issues relating to the unenforceability of the substantive provisions of the SSFA do not affect the validity of the exclusive jurisdiction clause, as is plain from the decisions in Case C-269/95 Benincasa v Dentalkit Srl [1997] ECR I-3767 (at paragraphs 28 and 29) and Case C-159/97 Transport Castelletti v Trumpy [1999] ECR I-1597 (at Paragraph 48). Mr Ali Malek QC on behalf of Primacom maintained that it was clear that Primacom did contest the applicability of the jurisdiction clause from the very fact that proceedings had been commenced in Germany. He also suggested that there might be some public policy argument against the effectiveness of the clause but there was no German Law evidence of any kind suggesting that there were any arguments available to Primacom in this respect.
35. Nonetheless Mr Malek maintained that the German Courts were the Courts first seised and that the principles enunciated by the European Court of Justice (ECJ) meant that this Court must stay the three sets of English proceedings until the German Courts had determined their own jurisdiction in Mainz and Frankfurt.
36. Despite the arguments of Mr Carr QC for JP Morgan, I hold that this is the effect of the decision of the ECJ in Case C-116/02 Erich Gasser GmbH v MISAT Srl [2005] QB 1, if the causes of action in the English and German proceedings are the same. The terms of paragraphs 41-54 set out the rationale of Article 27. Articles 27 and 28 are "intended, in the interests of the proper administration of justice within the Community, to prevent parallel proceedings before the Courts of different contracting states and to avoid conflicts between decisions which might result therefrom ". The rules are therefore "designed to preclude, so far as possible and from the outset, the possibility of a situation arising such as that referred to in Articles 27 (3) of the Convention [Article 34 (3) of the Regulation], that is to say the non recognition of a judgment on account of its irreconcilability with a judgment given in the proceedings between the same parties in the state in which recognition is sought".
37. In paragraph 51 reference is made to the possibility of disputes, which could arise as to the existence of an exclusive jurisdiction agreement of the kind found in the present case. If there is such a dispute so that there is doubt whether an agreement complies with the terms of Article 23, such a dispute must be determined in the Court first seised. In paragraph 53 however reference is made to the situation where there is in truth no genuine argument to be raised with regard to the applicability of the exclusive jurisdiction clause in the following terms:-

"Finally, the difficulties of the kind referred to by the UK Government stemming from delaying tactics by parties who, with the intention of delaying settlement of the substantive dispute, commence proceedings before a Court which they know to lack jurisdiction by reason of the existence of a jurisdiction clause, are not such as to call into question in the interpretation of the Brussels Convention, as deduced by its wording and its purpose."

The ECJ went on to find that the equivalent provision in the Brussels Convention to Article 27 in the Regulation had to be interpreted as meaning that a Court second seised, whose jurisdiction was claimed under an agreement conferring jurisdiction, had nonetheless to stay its proceedings until the Court first seised had declared that it had no jurisdiction.

38. It is therefore clear that the only issue which arises for me to decide under Article 27 is the question whether or not the same cause of action is involved in one or more of the English and German proceedings.
39. The term "cause of action" in Article 27 is an independent autonomous term which is not to be confused with the use of the same term in English legal jargon. As pointed out in Case C-406/92 The Tatry [1994] ECR I-05439 at paragraph 38 and by Rix J in Glencore International AG v Shell International Trading and Shipping Co Limited [1999] 2 Lloyds Reports 692 at page 694, the French and other versions of article 27 refer not simply to "the same cause of action" but to two concepts - "la meme objet et la meme cause ". The latter "comprises the facts and the rule of law relied on as the basis of the action" whilst the former means "the end the action has in view" according to paragraphs 39 and 41 of the Tatry decision and as reinforced by the Court of Appeal in Haji Ioannou v Frangos [1999] 2 Lloyds Reports 337 at page 351.
40. Rix J in the Glencore decision stated that the court's task in identifying the objet of any action was to identify objectively the essential issue raised between the parties to that action.
41. Mr Malek QC for Primacom contends that the facts and the rule of law relied on are the same in each of the different sets of proceedings, as is the end in view in each. All, he says, turn upon the question of the enforceability of the SSFA and that is enough for the purposes of article 27.
42. Mr Carr QC argued that the English and German proceedings did not involve the same cause, as neither the same facts nor the same rule of law were involved. He relied on the decision of the ECJ in Maersk Olie and A/S v Firma M De Haan (case C-39/02) [2005] 1 Lloyds Reports 210. At paragraph 38 the Court distinguished between the legal rule invoked as the basis of a claim for damages for a tortious act in damaging a pipeline and the legal rule which formed the basis of a limitation action and the establishment of a limitation fund under the International Convention relating to the Limitation of the Liability of Owners of Sea-Going Ships 1957 and the Netherlands legislation which gave effect to it. The expression "legal rule" or "rule of law " appears to mean the juridical basis upon which arguments as to the facts will take place so that, in investigating "cause" the court looks to the basic facts (whether in dispute or not) and the basic claimed rights and obligations of the parties to see if there is co-incidence between them in the actions in different countries, making due allowance for the specific form that proceedings may take in one national court with different classifications of rights and obligations from those in a different national court. With regard to the objet, the search is for "the end the action has in view" or the "essential issue raised between the parties".
43. If consideration is given to the Declaratory Proceedings in England, it is clear that JP Morgan seeks a declaration that clause 7 of the SSFA is binding, that there has been an event of default in failure to pay interest and that a valid default notice has been served with the result that it is open to PAG to accelerate repayment of the entire loan. In the Mainz proceedings, Primacom is attempting to persuade the court that the interest provisions are unenforceable and that capital repayment cannot be accelerated in consequence. When looking at the objet, the end that both actions have in view is identical inasmuch as the essential issue raised between them on an objective basis is the enforceability of the interest provisions and its consequent effect upon other provisions in the agreement relating to default and the repayment of capital.
44. The only basis for distinguishing between the German proceedings and the Declaratory Proceeding is the issue of the "legal rule" or "rule of law". The Declaratory proceedings will self-evidently proceed on the basis of applicable English law, where Primacom have not as yet put forward any answer to JP Morgan's claim. The Mainz proceedings will however proceed on the assumption that the provisions of the contract are valid under English law but will consider issues of German public policy, in the light of German domestic law relating to immoral or unconscionable agreements. The question is whether or not the "legal rule" of each set of proceedings is the same or different in such circumstances.
45. Fundamentally, it is the rights and obligations of the parties in relation to the same facts which, in my judgment, matters here. Each court will be concerned with the respective rights and obligations of the parties, however those are classified and determined by the national courts of each country. I consider therefore that, notwithstanding the different approach to the question of enforceability of the interest provisions and the consequent effect, the Declaratory Proceedings and the Mainz proceedings do involve the same cause of action within the meaning of article 27.
46. If I had applied the test set out in Briggs and Rees, Civil Jurisdiction and Judgments at paragraph 2.189, I would have come to a different conclusion, because it is there suggested that another way of determining this point is to ask whether a decision in one set of proceedings would be a conclusive answer to the questions raised in the other. A decision in the English Court would not answer the question which the German Courts have to consider as a matter of public policy. Equally, a decision by the German Courts will assume the validity of the SSFA under English law which, in the absence of any argument advanced to the contrary, is the conclusion which the English Court seems bound to reach.
47. It appears to me however that this is too narrow an approach, since otherwise it would be possible to argue that Article 27 did not apply to proceedings where a national court's decision, based on the application of its domestic law (which it found to be applicable under its rules of private international law) did not answer the question determinable by a different national court under its own law (which it regarded as applicable under its own rules of private international law). The way the claim is framed and the arguments in support of it may fall to be taken into account, but ultimately, the question must be seen broadly in terms of the judgment sought and not in terms of the issues raised on the way (see The Happy Fellow [1998] 1 Lloyd's Reports 12 at pppl7-18 and, by way of example, The Sennar no 2 [1985] 1 Lloyd's Reports 521).
48. I am mindful, in coming to my conclusion, of the possibility, however remote, that Primacom might succeed in maintaining German jurisdiction and that the Mainz Court might ultimately decide, in accordance with its Ordre Public that the interest provisions are unenforceable to a greater or lesser extent. Although Primacom would not seek to export the order as such, if faced with an action in England for damages for breach of the exclusive jurisdiction clause, it would undoubtedly argue that the Mainz Court's decision ought to be recognised here. Issues would then arise under article 34.1 as to whether recognition of the Mainz Court's decision, reached in breach of the exclusive jurisdiction clause as a matter of English law, and based on German public policy and contrary to the provisions of English law, should be enforced or whether recognition of such an order or judgment would be manifestly contrary to public policy in this jurisdiction.
49. Despite these potential problems, I am driven to the conclusion, by reference to the ECJ decisions that the same cause of action is involved in these two sets of proceedings in relation to interest and that the requirements of legal certainty, comity, and trust in the judicial institutions in the Community require me to stay the Declaratory Proceedings under article 27.1 until such time as the Mainz court decides upon its own jurisdiction.
50. Insofar as the Frankfurt proceedings are concerned, where it is contended that there is no entitlement in the SSLs to terminate the SSFA because Primacom has complied with its provisions (on the basis that the interest provisions are unenforceable), there is, for the same reasons as set out above, the same cause of action involved as in the Declaratory Proceedings with the result that a stay of the Declaratory Proceedings must also be granted until the decision of the Frankfurt Court on its own jurisdiction.
51. With regard to the Injunction Proceedings and the PwC Proceedings, it is clear that the objet of each of these proceedings is not the same as that in the Mainz or Frankfurt proceedings. The end which the Injunction Proceedings have in view is the enforcement of clause 20.2.5 of the SSFA and the prevention of the sale to Multikabel without the required consent. Whilst it is true that a challenge is made in the Mainz proceedings to the enforceability of the interest provisions on the basis that the SSFA as a whole is immoral, there is no specific challenge of any kind to clause 20.2.5, nor to the right to enforce it.
52. Whilst it is said in terms that the SSFA is immoral, unethical or unconscionable, the consequences of such a finding by the court would be that the interest provisions were unenforceable, either permanently or temporarily. The Mainz statement of case puts the point thus, in translation: "it is clear that the loan agreement is immoral and therefore an obligation to pay interest does not exist".
53. The German law evidence shows that the German courts will only override English law "if and to the extent that there is a strong violation of important and fundamental principles of German public policy", which amounts to "the rule of the smallest possible interference with the applicable foreign law ". Thus, if the German courts did conclude that Article 6 was engaged, they would only be concerned with declining to enforce the consequences of the applicable English law to the extent necessary to cure the violation of German public policy. The German courts would, at most, in accordance with what they are being asked to do, refrain from enforcing the interest provisions either to their full extent or at all, but would treat all other provisions of the SSFA, including those relied on in the pleading as demonstrating the restrictive nature of the SSFA, as valid. There is no plea of any kind which challenges the enforceability of the clauses which form the basis of the English Injunction Proceedings and PWC proceedings.
54. The facts in issue in the Mainz and Frankfurt proceedings equally do not coincide with the facts which are relevant for the Injunction Proceedings, save insofar as the existence of the SSFA is common to both. Different issues arise. Different facts are relevant, including the threat of a proposed sale and the absence of any request for consent. The central issues are not the same so that the "cause " as well as the "objet" is different.
55. Equally, the end that the PwC Proceedings have in view is the specific performance of clauses 18.1.4 and/or 18.5 and/or 20.1.7 of the SSFA and the provision of the PwC preliminary report. This issue does not arise in the German proceedings and is in no sense the end that either German action has in view. The central issues of those actions are different from the central issue in the PwC Proceedings. Once again for similar reasons to those already set out in relation to the Injunction Proceedings, the objet is not the same, because the Mainz and Frankfurt proceedings look to the issue of interest and its effect on the SSFA and capital repayment obligations and no more than that. The relevant facts upon which reliance is placed in relation to the failure to provide information and the efforts to obtain it under the relevant clauses do not feature in the German proceedings either, so that neither the "cause" nor the "objet" are the same.
56. For these reasons therefore there is no basis to stay the Injunction Proceedings or the PwC Proceedings on the basis of Article 27 and it becomes necessary to examine the position under Article 28.

Article 28

57. If I had not found that the Declaratory proceedings involved the same cause of action as the Mainz proceedings, I would have found that the two actions were connected but not that it was expedient to hear and determine them together to avoid the risk of irreconcilable judgements resulting from separate proceedings. I have in mind the comments of Lord Saville in Sarrio Sa v Kuwait Investment Authority [1999] AC 32 at page 40, but here the two actions are not capable of being heard and determined together in any real sense of the word because the Declaratory Proceedings will proceed on the basis of English law whilst the German actions proceed on the basis of the validity of the SSFA as a matter of English law but then seek to apply German public policy considerations.
58. The Declaratory Proceedings could not be heard together with either the Mainz or Frankfurt actions because they proceed on a different footing and it would plainly be inexpedient for the Declaratory Proceedings in this jurisdiction to be conjoined in any way with the German actions because the considerations which the German courts would apply, would ex hypothesi, if applicable, override any decision based on English law.
59. If matters proceeded in both jurisdictions, there would be a decision in this country based on the proper law of the contract, whilst the Mainz and Frankfurt decisions would be based on ordre public in Germany, on the assumption that the English law judgment was valid. There may therefore in truth be no irreconcilability of judgments, even though the German Courts might hold that the interest provisions were unenforceable in part or whole in Germany and the English Courts might hold that the interest provisions were enforceable as a matter of English law. Nor in my judgment is there a risk that the reasoning in the judgments of the different courts may conflict, because the German Courts will accept the validity of the provisions as a matter of English law as the premise to their own consideration of issues of German public policy.
60. Although each party might seek to export a judgment in its favour to other Convention countries for recognition, it would then be a matter for the courts of each such country to decide the issue of recognition or enforcement, if necessary by consideration of issues under Article 34.1 as a matter of its own public policy. The inconsistency of the German and English judgments on this hypothesis is superficial only. On examination, they are found, not only to be capable of reconciliation, but the German Courts' judgment in favour of Primacom would proceed on the premises that the English Court's judgment in favour of JP Morgan was, as a matter of English law, correct.
61. Moreover, as a matter of discretion, for reasons which appear in relation to the other two sets of English proceedings, I would not have been prepared to stay the Declaratory proceedings in any event.
62. The Injunction Proceedings and the PwC Proceedings raise no possibility of inconsistent or irreconcilable judgments with the German proceedings. Moreover the degree of connection is much less. Each of the actions arises in respect of the SSFA but the issues in the Mainz and Frankfurt proceedings, insofar as they directly concern the SSFA, relate primarily to the enforceability of the interest provisions in that contract and their knock-on effect, whilst the Injunction Proceedings in England relate to the enforceability of clause 20.2.5 and the PwC Proceedings relate to the enforcement of the information provisions in clauses 18.1.4, 18.5 and 20.1.7. Although some of those clauses are relied on by Primacom in support of its German law contentions that PAG's freedom to operate commercially has been repressed, no specific allegation is made in relation to the enforceability of any of those provisions. The same features fall for consideration here under Article 28 as apply under Article 27 when looking at the elements involved in each action, albeit in a different context. In my judgment therefore the Injunction Proceedings and PwC Proceedings are not so closely connected with the German proceedings that it is expedient to hear and determine them together to avoid the risk of an irreconcilable judgment. The connection is more limited than might appear at first sight and there is no risk of irreconcilable judgments because of the different basis upon which each proceeds.
63. Furthermore, as a matter of discretion all the discretionary factors are against a stay of either of the Injunction Proceedings or the PwC Proceedings.
64. The court must exercise its powers under Article 28 in accordance with the purpose and object for which the power was granted, which is to minimise the possibility of concurrent proceedings and to ensure that irreconcilable judgments will not be given in two member states. I have already dealt with the question of irreconcilable judgments but also bear fully in mind the undesirability of concurrent proceedings. Because these two sets of English proceedings and the German proceedings involve different issues however, there is no impairment to the harmonious administration of justice in allowing the concurrent proceedings to move forward and, in the light of the law, jurisdiction and forum conveniens clauses in the SSFA, it is hard to see how the court could properly exercise its discretion to stay proceedings which were brought in accordance with the terms of those clauses to which Primacom agreed.
65. Even if I had found that these two sets of proceedings and the German proceedings were related within the meaning of Article 28, "the strong presumption" which "lies in favour of the applicant" on an application for a stay would be overridden here by virtue of the terms of the SSFA. Although the ECJ decision in Gasser means that a stay is mandatory where Article 27 applies, there is no reason why weight should be given to that decision in the context of Article 28, where a discretion is given to the court, the jurisdiction of which has been agreed by the parties as exclusive. It is nothing to the point that an English court could not have issued an anti-suit injunction to prevent the German proceedings (as per C-159/02 Turner v Grovit [2004] 2 Lloyds Reports 169). The injustice of giving precedence to proceedings brought in breach of an exclusive jurisdiction clause where the parties have agreed that England is the appropriate forum is self-evident. To breach the clause and to gain the benefit of priority for the German Courts by such breach offends justice, where the Court has a discretionary decision to make.
66. Although the jurisdiction challenges may be heard in Germany within a period of about four months, there is apparently an unrestricted right of appeal in Germany which could result in considerable further delay. There is some urgency in the English actions brought by JP Morgan where it intends to proceed to summary judgment as soon as possible in order to ascertain the financial position of Primacom and to take decisions as to the SSLs' future course of action in relation to the SSFA. The need for the injunctions speaks for itself. I can see no reason why JP Morgan should be prevented from pursuing matters in the way it desires in the English Courts in accordance with the terms of the SSFA
67. There is no indirect interference with the German courts and the issues with which they are concerned and the evidence indicates that Primacom have brought proceedings in Germany with a view to delaying or frustrating the exercise by JP Morgan and the SSLs of their contractual rights.
68. In such circumstances I have no hesitation in refusing to stay the Injunction Proceedings and the PwC Proceedings by reference to the terms of Article 28.

Article 31

69. As I have refused a stay of the Injunction Proceedings, the interim injunctions already granted in relation to the disposal of assets, and in particular Multikabel, remain in being.
70. If I had been persuaded that the Injunction Proceedings should be stayed the issue would then have arisen as to whether or not this Court should continue the interim injunctions as protective measures under Article 31. In case C-391/95 Van Uden Maritime BV v Firma Deco-Line [1998] ECR I-07091 the ECJ considered the basis upon which a court might grant protective measures. At paragraph 19 the point is made that, where a court has jurisdiction as to the substance of the case under the terms of the Convention (now the Regulations) it also has jurisdiction to order any provisional or protective measures which may prove necessary. On this basis JP Morgan argues that the protective measures are available because the English Court retains substantive jurisdiction and thus jurisdiction to order protective measures, even if it stays the matter and that it should, in the circumstances of this case, exercise that jurisdiction. Alternatively, if the court has no jurisdiction over the substance of the case, there are sufficient links to justify the granting of protective measures in accordance with decided authority. Primacom resists the maintenance of injunctions on both bases.
71. The terms of Article 27.1 and 27.2 draw a distinction between the situation before the court first seised decides on its own jurisdiction and the position thereafter. Under Article 27.1, the court second seised must stay its proceedings until such time as the court first seised makes its own decision on jurisdiction. Under Article 27.2 however, once the jurisdiction of the court first seised is established by that court, any court seised thereafter must decline jurisdiction.
72. In my judgment this distinction is significant with the result that, until the court first seised does decide upon its own jurisdiction, proceedings are stayed by the court second seised, even though it maintains Convention jurisdiction until the first court's decision. If the court first seised then declines jurisdiction, the court second seised can exercise the Convention jurisdiction which it already had. Jurisdiction lies with the English court here by virtue of the exclusive jurisdiction clause and Convention jurisdiction is thus not lost until it declines jurisdiction on the basis of the first court's decision that it has convention jurisdiction. It follows therefore that the English court can grant protective measures.
73. Regardless of substantive jurisdiction resting in the English court, Article 31 provides that this court can order protective measures even if the courts of another member state have jurisdiction as to the substance of the matter. The decision in Van Uden, at paragraph 40 sets out the need for the existence of a real connecting link between the subject matter of the measures sought and the territorial jurisdiction of the state of the court before which the measures are sought. The decision is based upon the premise that this is an exorbitant jurisdiction which is to be exercised with great caution. The courts of the place where the assets subject to the measures sought are located are usually the courts best able to assess the circumstances which might lead to the grant or refusal of the measures sought.
74. In Motorola Credit Corporation v Uzan and others (no. 2) [2004] 1 WLR 113, a case not involving Convention jurisdiction, the Court of Appeal considered the circumstances in which a worldwide freezing injunction might be granted by the English courts where there was no substantive jurisdiction in relation to the underlying claims. Potter LJ at paragraph 115 referred to five considerations which appear to me to be of relevance to the exercise of jurisdiction under Article 31. Those factors are as follows.

i) First, whether the making of the order will interfere with the management of the case in the primary court e.g. where the order is inconsistent with an order in the primary court or overlaps with it. As there is no contrary order in Germany, the point does not arise here.

ii) Second, whether it is the policy in the primary jurisdiction not to make orders of the kind sought. On that point there is no evidence in the present case.

iii) Third, whether there is a danger that the orders made will give rise to disharmony or confusion and/or risk of conflicting, inconsistent or overlapping orders in other jurisdictions, in particular in the court of the state where the person enjoined resides or where the assets affected are located. For much the same reasons that I have already given in relation to the arguments under Article 27 and Article 28, it does not seem to me that there is any real danger of this in the present case.

iv) Fourth, whether at the time the order is sought there is likely to be a potential conflict as to jurisdiction, rendering it inappropriate and inexpedient to make a worldwide order. As applied to the present case, this consideration is said to militate in favour of Primacom, inasmuch as there is a conflict on jurisdiction in both the English and German courts.

v) Fifth, whether in a case where jurisdiction is resisted and disobedience is to be expected, the court would be making an order which it could not enforce. There was no evidence here that Primacom would disobey any order of the English courts.

75. Multikabel is situated in the Netherlands whilst Primacom is in Germany. The SSLs consist of a number of banks in various jurisdictions. There is however a major connecting link to England in the SSFA itself and in its provisions relating to English law, exclusive English jurisdiction and England as the forum conveniens. This provides a strong link to the English Courts which entitles this Court to order protective measures, even though the threatened sale is by a German company of a Netherlands asset outside the territorial jurisdiction. Although, on the hypothesis under which Article 31 falls to be considered, there is a conflict over jurisdiction, the conferring of jurisdiction on this court by agreement of the parties is a very strong factor in the consideration of the link to this Court and the appropriateness of injunctions until the German Courts have decided on their own jurisdiction. The existence of injunctions would in no way interfere with the German Courts' decision making processes and would merely preserve the position until the German Courts made their jurisdiction decisions, whereas, if the injunctions were lifted, there remains the possibility of a disposal in breach of the SSFA before the German Courts have decided the position.
76. If therefore it had been necessary to consider an order under Article 31, I would have made such an order and continued the injunctions already granted in respect of disposal of assets (and Multikabel in particular) until the determination by the German Courts of their own jurisdiction.

Conclusion

77. For all the above reasons, Primacom's application for a stay of the Declaratory Proceedings succeeds under Article 27 but its applications for a stay of the Injunction Proceedings and the PwC Proceedings fail, whether under Article 27 or 28. The interim injunctions in the Injunction Proceedings continue until trial or further order herein. The stay of the Declaratory Proceedings against PAG and PMG operates until the Mainz Court decides on its own jurisdiction (since both Primacom defendants are parties there) and in the case of PMG also operates until the decision of the Frankfurt Court on its jurisdiction (since only PMG and not PAG is party to those proceedings).
78. Unless there are special factors of which I am unaware, it appears to me that any order for costs which I make must reflect the relative success and failure of each of the parties on the applications. There will undoubtedly be consequential matters which need to be considered and directions to be given. If the parties can reach agreement about these issues, so much the better. If not I will hear submissions upon them.