QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Strand, London, WC2A 2LL |
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B e f o r e :
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DEUTSCHE BANK AG LONDON BRANCH |
Claimant |
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- and - |
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PETROMENA ASA (in bankruptcy, represented by the chairman of the board of directors, Enterprise No. 987 727 713) PETROMENA ASA KONKURSBO (represented by the Administrator, Enterprise No. 994 922 270) |
First Defendant Second Defendant (discontinued) |
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Mr David Wolfson QC and Mr Henry Forbes Smith (instructed by Quinn Emanuel) for the Defendant
Hearing dates: Monday 4th March 2013
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Crown Copyright ©
Lady Justice Gloster :
Introduction
i) the English Court does not have jurisdiction under Article 5 of the Lugano Convention[1] ("the Convention"); Petromena's claims fall to be characterised as contractual for the purposes of the Convention, and England is not the place of performance of the obligation in question under Article 5.1; even if (as DB contends) Petromena's claims are to be characterised as tortious, rather than contractual, the harmful event did not occur in England for the purposes of Article 5.3;
ii) in any event, even if Article 5 conferred jurisdiction on the English court, that jurisdiction is ousted in favour of Norway under Article 23, because the claims fall within the scope of a Norwegian exclusive jurisdiction agreement contained in a loan agreement dated 22 May 2006 pursuant to which Petromena issued certain bonds ("the Loan Agreement").
i) Article 5.1 of the Convention does not apply, since the claims sought to be asserted by Petromena, are plainly claims in tort/delict and not contractual; accordingly, the English Court has jurisdiction under Article 5.3 on the basis that the place where the harmful event alleged by Petromena occurred was England;
ii) the Norwegian jurisdiction clause is irrelevant since the claims made by Petromena against DB do not arise out of, or in connection with, the Loan Agreement; the causes of action asserted by Petromena are founded upon an allegation that DB assumed the role of an adviser to Petromena, in addition to its role as bondholder; and it is DB's alleged assumption of that role of adviser to Petromena, rather than any term of the Loan Agreement, that is said to have given rise to the various duties that were allegedly breached.
The relevant provisions of the Convention
"General provisions
Article 2
1. Subject to the provisions of this Convention, persons domiciled in the State bound by this Convention shall, whatever their nationality, be sued in the courts of that State…..
Special jurisdiction
Article 5
A person domiciled in a State bound by this Convention may, in another State bound by this Convention, be sued:
1. (a) in matters relating to a contract, in the courts for the place of performance of the obligation in question;
(b) for the purpose of this provision and unless otherwise agreed, the place of performance of the obligation in question shall be:
- in the case of the sale of goods, the place in a Member State where, under the contract, the goods were delivered or should have been delivered,
- in the case of the provision of services, the place in a Member State where, under the contract, the services were provided or should have been provided,
(c) if subparagraph (b) does not apply then subparagraph (a) applies;
…….
3. in matters relating to tort, delict or quasi-delict, in the courts of the place where the harmful event occurred or may occur;
…….
5. as regards a dispute arising out of the operations of a branch, agency or other establishment, in the courts for the place in which the branch, agency or other establishment is situated;
Prorogation of jurisdiction
Article 23
1. If the parties, one or more of whom is domiciled in a State bound by this Convention, have agreed that a court or the courts of a State bound by this Convention are to have jurisdiction to settle any disputes which have arisen or which may arise in connection with a particular legal relationship, that court or those courts shall have jurisdiction. Such jurisdiction shall be exclusive unless agreed otherwise….."
Factual background
"Disputes arising out of or in connection with the Loan Agreement which are not resolved amicably, shall be resolved in accordance with Norwegian law and in the Norwegian courts."
"Through their subscription in the Loan the Bondholders have acceded to the Loan Agreement (i.e.):
* The Bondholders are bound by the terms of the Loan Agreement provided that information about the accession was given in the subscription documents. …"
Chronology of the various proceedings in Norway and in England
i) In or about winter 2008/2009, DB (acting through its London Branch):
a) advised Petromena in connection with obtaining additional funding and/or sought to facilitate the obtaining of such funding; and/or
b) engaged itself as financial adviser to Petromena; and/or
c) was given access to confidential information regarding Petromena's financial and/or commercial circumstances; and/or
d) provided investment services to Petromena (notwithstanding that DB's London Branch was (allegedly) not entitled to offer cross-border services from England to Norway).
ii) In performing some or all of the above roles (and/or by reason of some or all of the matters there referred to), DB:
a) assumed and/or owed a duty to advise Petromena and/or to act as financial adviser to Petromena and/or to exercise reasonable care and skill in advising Petromena when acting as financial adviser to it;
b) owed a duty of loyalty to Petromena and/or a duty to avoid conflicts between its own interests and those of Petromena and/or a duty not to give priority to its own interests over those of Petromena;
c) owed a duty of confidentiality and/or secrecy to Petromena;
d) was subject to the requirements of "good business conduct" pursuant to the Norwegian Securities Trading Act and/or Directive 2004/39/EC; and
e) was subject to a requirement under the Norwegian Securities Trading Act not to misuse inside information and/or a requirement not to employ unreasonable business methods in trading in financial instruments.
iii) DB acted in breach of some or all of the above duties and/or requirements and thereby caused loss and damage to Petromena.
"(a) save as expressly set out in the Loan Agreement, the Claimant has assumed no obligation, duty or other responsibility, whether of a contractual, tortious, fiduciary or other nature to the First and/or Second Defendants, alternatively that any such duty, obligation or responsibility undertaken by the Claimant to the First and/or Second Defendants has been lawfully performed and discharged without breach; and/or
(b) the Claimant has not caused and/or is not liable to the First and/or Second Defendants (whether in contract or tort, under statute or otherwise) in respect of any loss or damage that they (or either of them) have suffered, including, but not limited to, as a result of the failure of the First Defendant to obtain additional funding or to secure a restructuring of its indebtedness, or as a result of the Claimant's instruction to Norsk Tillitsmann to declare an event of default in respect of the 9.75% Bond."
"1.1 Subject-matter – Background
This case concerns a claim for damages from Petromena …, under bankruptcy…… against [DB].. as [their] financial adviser, based on the general law of non-contractual damages
…….
Petromena maintains that the company would have been able to arrange these supplementary financing if [DB] had complied with its responsibility as financial advisor and acted loyally, including not selling their bonds in 9.75 loan at the time in question.
Petromena will claim that [DB], as their financial adviser and as bondholder, acted with negligence giving rise to entertaining liability in relation to Petromena, and the bank is thus liable to cover Petromena's losses due to this negligent behaviour.
1.2.1 Legal venue
As this is a dispute between a Norwegian and a German joint-stock company for damages outside contract, the legal venue – and thus which country's court has competence to consider and decide in this matter – is determined by the Lugano Convention.
As this is a claim for damages outside contract [tortious damages], legal proceedings must be instituted at the place where the harmful event occurred ... cf. The Lugano Convention Art. 5.3 and the Dispute Act Section 4-5.3.
The damage arose in Norway through DB's advice, actions and omissions in relation to Petromena, a Norwegian joint-stock public company with its registered place of business in Norway. DB's negligent actions lead to the termination of Petromena's bond loan, a loan subject to Norwegian law.
The effects of the harmful event definitively occurred in Norway, whereby Petromena, a Norwegian joint-stock public company with shares quoted on the Norwegian Stock-Exchange, lost the majority of its assets through the bankruptcy, which was instituted in Oslo and where the bankruptcy proceedings are still in progress.
Based on the above, Petromena presumes that Oslo is the correct forum for the legal proceedings against DB.
5.1 Claim for damages
Petromena will assert that DB has acted negligently in relation to Petromena, and that the bank through its negligent actions has caused a financial loss for the company, equivalent to the total value of the company.
In accordance with the general law of tortious damages, the claim for damages is conditional on Petromena substantiating that there is a basis of liability, i.e. a liability-inducing act or omission on the part Petromena of DB." [Emphasis added.]
i) The discontinuation of the Norwegian conciliation process ended the lis pendens effect, so that the Norwegian court was first seised on 5 September 2012 and not earlier, on 29 December 2011, when the conciliation began. This was the effect of the Norwegian Supreme Court decision in Aftenposten (2012).
ii) The English and Norwegian proceedings involved the same parties, such that DB (the defendant in Norway) and DB London (the claimant in England) are one and the same legal entity, so that a ruling in England is against, and is binding on, DB.
iii) The English and Norwegian proceedings involve the same cause of action, in that DB's negative claim mirrors Petromena's positive claim.
Petromena's submissions in relation to the issue of jurisdiction
Article 5.1 - "matters relating to a contract"
i) The burden was on DB to show a good arguable case that the jurisdictional facts in Article 5 existed. This meant that DB had to have a much better argument than Petromena on the material before the court: Canada Trust Co v. Stolzenberg (No 2) [1998] 1 WLR 547, 555G per Waller LJ, affirmed [2002] 1 AC 1, 13H per Lord Steyn; Bols Distilleries v. Superior Yacht Services [2007] 1 WLR 12, [28] per Lord Rodger; and approved in a different context AK Investment CJSC v. Kyrgyz Mobil Tel Ltd [2011] UKPC 7, [2011] 1 CLC 205, [71] per Lord Collins.
ii) Article 5 could apply to negative declarations. In Boss Group Ltd v. Boss France SA [1997] 1 WLR 351, the Court of Appeal held that a claim for a declaration of non-liability in contract was a matter relating to contract under Article 5.1. In Folien Fischer AG v. Ritrama SpA (C-133/11) [2013] ILPr 1, the ECJ held that a claim for a negative declaration of non-liability in tort was a matter relating to tort under Article 5.3. Of course, a party seeking negative declaratory relief may itself deny the jurisdictional facts in Article 5: thus DB may say there was no obligation, tort, or harm. However, DB was still able to establish a good arguable case that the jurisdictional facts in Article 5 existed. As Saville LJ said in Boss Group at 357B, DB could for this purpose rely on Petromena's contentions: 'the plaintiffs establish a good arguable case by relying on the fact that this is what the defendants are contending against them'.
iii) In applying Article 5, therefore, the focus was on the claims advanced by the defendant (Petromena). It did not matter how weak or strong Petromena's claims were: for jurisdictional purposes, the sufficient strength of the claims was confirmed by DB's decision to seek a negative declaration in respect of them. What mattered was whether Article 5 would permit Petromena to pursue its claims in England assuming them to be well-founded.
iv) DB must have much the better of the argument that Article 5 would be satisfied if Petromena sued here. If the matter were finely balanced, or if Petromena had the better of the argument, jurisdiction should be declined. Because it was an exception to the general rule under Article 2 (under which jurisdiction was based on the domicile of the defendant), Article 5 was to be interpreted restrictively; see Kalfelis v. Bankhaus Schröder Münchmeyer Hengst & Co [1989] ECR 5565, [19]; Somafer SA v. Saar-Ferngas AG [1978] ECR 2183, 2191, [7].
v) Articles 5.1 and 5.3 were mutually exclusive: in relation to any particular claim, one or the other might apply, but not both; thus in Kalfelis at [17] the ECJ defined the scope of Article 5.3 so as to be exclusive of the scope of Article 5.1; see also: Agnew v. Länsforsäkringsbolagens AB [2001] 1 AC 223 (a Lugano Convention case), where Lord Woolf said at 244H-245A:
"It is accepted that if this case falls within article 5(1) it does not fall within article 5(3). It is not possible for the same issue to be classified under both heads.";
per Staughton LJ in Source Ltd v. TUV Rhineland [1998] QB 54, at 63G; and per Kenneth Rokison QC (sitting as a Deputy High Court Judge) in Alfred Dunhill Ltd v. Diffusion Internationale de Maroquinerie de Prestige sarl [2002] AER (Comm) 959, at 962F, who said:
"It was common ground that, as is clearly established by the authorities, and, in particular, the European Court decision in [Kalfelis] and the recent House of Lords decision in [Agnew], Article 5.1 and Article 5.3 are mutually exclusive, and to the extent to which the claim falls within Article 5.1, as a matter relating to a contract, it cannot also fall within Article 5.3. … the claimant in such cases does not have a choice."
vi) Accordingly, the court's first task was to determine whether Petromena's claims were to be characterised as 'matters relating to contract' within the meaning of Article 5.1. So far as this was the case, the existence of special jurisdiction was exclusively determined by Article 5.1, and Article 5.3 was irrelevant. It was only so far as Petromena's claims were not 'matters relating to contract' under Article 5.1 that Article 5.3 might potentially apply.
vii) While all of Article 5 should be interpreted restrictively, some parts should be interpreted more restrictively than others. In so far as Article 5.1 identified a narrower range of venue than Article 5.3, this supported giving Article 5.1 a wider interpretation and Article 5.3 a correspondingly narrower one.
viii) As the ECJ stated in Jakob Handte & Co GmbH v. Soc. Traitements Mécano-Chimiques des Surfaces [1992] ECR I-3967, [10] the phrase "matters relating to a contract" in Article 5.1 was to be given an autonomous meaning, having regard to the objectives and the general scheme of the Convention, in order to ensure as far as possible a uniform application of the Convention in all the Contracting States. Accordingly, how the claim was characterised as a matter of national law (i.e. whether as contractual or tortious) was not dispositive of how it was characterised under the Convention.
ix) The essential test was that an obligation which was freely entered into by one party to another was a 'contractual obligation' under Article 5.1, regardless of whether it was a 'contractual obligation' under national law. Putting the matter negatively, the ECJ said in Handte at [15]:
"It follows that the phrase 'matters relating to a contract' within the meaning of Article 5(1) of the Convention should not be understood to cover a situation where there is no obligation freely entered into by one party to another."
Likewise, putting the matter positively, the ECJ said in Engler v. Janus Versand GmbH [2005] IL Pr 8, [51]:
"Accordingly, the application of the rule of special jurisdiction provided for matters relating to a contract in Art. 5(1) presupposes the establishment of a legal obligation freely consented to by one person towards another and on which the claimant's action is based."
x) Although Article 5.1 required an obligation voluntarily entered into by one party towards the other, it did not require the conclusion of a contract. Thus in Engler, the ECJ said at [45]:
"it must be stated at the outset that, as it appears from its very wording, Article 5(1) of the Brussels Convention does not require the conclusion of a contract."
Likewise, in Fonderie Officine Meccaniche Tacconi spa v. Heinrich Wagner Gmbh [2002] ECR I-7357, the ECJ said at [22]:
"Moreover, while Article 5(1) of the Brussels Convention does not require a contract to have been concluded, it is nevertheless essential, for that provision to apply, to identify an obligation, since the jurisdiction of the national court is determined, in matters relating to a contract, by the place of performance of the obligation in question."
And in Ilsinger v. Dreschers [2009] ECR I-3916, the ECJ said at [57] that Article 5.1 might encompass pre-contractual or quasi-contractual situations.
xi) Moreover Article 5.1 did not even require any agreement between the parties in any relevant sense: it might apply where the defendant by unilateral acts towards the claimant freely assumed an obligation, even if that obligation was imposed by mandatory rules of law. This was confirmed by the cases of Engler and Ilsinger. In Ilsinger the ECJ noted at [53] that Article 15 required a concluded contract, and said at [57] that Article 5.1 might apply even without a concluded contract, because Article 5.1 could apply to pre-contractual or quasi-contractual situations:
"such a situation would at most be liable to be classified as pre-contractual or quasi contractual and might therefore, where appropriate, be covered solely by Article 5(1) …, a provision which must be acknowledged as having, on account of its wording and position in the scheme of [the Regulation], a broader scope than that of Article 15 thereof";
(see, by analogy, with regard to the Brussels Convention, Engler, at paragraphs 44 and 49).
xii) The provision of financial advice (as Petromena alleged was given in this case) was addressed in Civil Jurisdiction and Judgments, Briggs & Rees, 5th Ed (2009) at paragraph 2.153 (pages 223-224). In particular Mr Wolfson QC placed reliance on the following passage in relation to liability for negligent misstatement under the rule in Hedley Byrne & Co Ltd v. Heller & Partners Ltd:
"As to the second, it may be necessary to distinguish cases where the parties are in a relationship equivalent to privity, where advice was given directly by the defendant to the claimant (such as was the case in Hedley Byrne), from those where the claimant is a stranger to the advice-giving-and-receiving relationship, albeit that it is foreseen and predictable that he will rely on the advice primarily given to another. In the former case, it is only the absence of consideration which prevents the relationship being contractual as a matter of substantive English law: it is strongly arguable that the relationship between the parties would satisfy the definition in Handte. In the latter case, it is much less clear, as the relationship between the parties is constituted less directly. But if one were to accept that the basis for the imposition of Hedley Byrne liability is that the defendant has voluntarily accepted the risk, or voluntarily assumed liability in relation to the third party, then the foundation exists for the argument that the matter is one which falls comfortably within the autonomous definition of matters relating to a contract offered in Handte."
xiii) This was obviously right. Where a defendant provided advice directly to the claimant without consideration, giving rise to liability under Hedley Byrne, a claim for negligent advice fell within Article 5.1 regardless of the fact that, as a matter of substantive English law, the claim arose in tort rather than contract. Requirements for consideration were exactly the kind of national detail which Handte makes irrelevant to the autonomous concept of contract in Article 5.1.
xiv) In the present case, Petromena's main claim was that Deutsche Bank breached, not an obligation to take reasonable care in providing advice, but an obligation of loyalty arising from the provision of advice. This obligation of loyalty essentially encompassed the related obligation to avoid a conflict of interest by prioritising Petromena's interests over its own interests as Bondholder. Although arising under Norwegian law, this obligation of loyalty was akin to a fiduciary obligation under English law. In relation to claims for breach of fiduciary duty, Briggs & Rees stated at paragraph 2.153 (page 225):
"Jurisdiction in an action to enforce fiduciary duties may be thought to raise further difficulties. It cannot be reasoned that claims to enforce fiduciary duties fall outside Article 5(1), by reasoning that fiduciary duties arise in equity rather than from the common law of contract, for such insular distinctions within substantive law are most unlikely to have been replicated in the autonomous jurisdictional scheme of the Regulation. Nor can it be argued, it is submitted, that because fiduciary duties are imposed by equity on a defendant who has placed himself in a position where those duties are owed, then they are not to be seen as having been freely undertaken. The better view [footnote: But one which is believed to be free from authority] is that if they result from a relationship which was freely entered into, such as between agent and principal, company and office-holder, or solicitor and client, their enforcement is, for jurisdictional purposes, within Article 5(1). If, by contrast, they are imposed on a defendant who has, without the agreement of the claimant, placed himself in a position where equity requires him to act as a fiduciary, such as an accomplice to another's breach of trust, the case will not fall within Article 5(1). "
This was clearly correct, although, as, noted above, Engler and Ilsinger showed that the claimant's agreement might not always be required: a unilateral undertaking towards the claimant might also fall within Article 5.1 without the need for agreement.
xv) In addition to its claim for breach of an obligation of loyalty, Petromena also sought compensation for harm caused by providing advice without a licence contrary to the Norwegian Securities Trading Act, or for misuse of confidential information. The German Supreme Court (Bundesgerichtschof) decision in Re Asset Management showed that such claims might fall within Article 5.1.
Article 5.1 - place of performance of the obligation in question
i) Once the court had decided that a claim fell within Article 5.1, the focus of inquiry turned to the place of performance of the obligation in question. Article 5.1 conferred special jurisdiction on the courts of that place. In this case, that did not, however, mean England.
ii) This was a case of the provision of services in the form of advice. Petromena maintained that Deutsche Bank provided it with financial advice, and as a result, came under obligations of loyalty which were breached. Under Article 5.1(b), the courts of the place where the advice was provided had Article 5.1 jurisdiction. Article 5.1(b) provided that 'in the case of the sale of goods', the courts in the place where the goods 'were delivered or should have been delivered' had Article 5 jurisdiction, while 'in the case of the provision of services', the courts in the place where the services 'were provided or should have been provided' had Article 5.1 jurisdiction.
iii) That was so regardless of which party was the claimant or what obligation had been breached: Car Trim GmbH v. KeySafety Systems Srl [2010] Bus LR 1648, [50].
iv) In Car Trim, the ECJ said at [60] that in the case of sale of goods, the 'place of delivery' was the place where the goods were physically transferred to the purchaser at their final destination; not where the goods were produced or handed to a carrier for transmission. Similarly, in the case of provision of services in the form of advice, the 'place of provision' is the place where the advice was received, not where it was uttered or put into circulation. In this case, the advice was received in Norway; it was provided in Norway, and the courts of Norway therefore had Article 5.1 jurisdiction. The advice was not provided in England, and, as such, the English courts had no jurisdiction.
Article 5.3 "matters relating to tort, delict or quasi-delict"
i) Because Articles 5.1 and 5.3 were mutually exclusive, in so far as Petromena's claims fell within Article 5.1, they could not fall within Article 5.3.
ii) However, even if (contrary to Petromena's primary submission), some or all of Petromena's claims fell outside Article 5.1, and therefore within Article 5.3, Article 5.3 still did not confer jurisdiction on the English court.
iii) That was because Article 5.3 conferred special jurisdiction on the courts of the place where the harmful event occurred. In Handelskwekerij GJ Bier NV v. SA Mines de Potasse d'Alsace [1976] ECR 1735, [1978] QB 708, the ECJ said at [24-25] that the 'harmful event' meant either (1) the damage itself (the so-called "first limb of Bier"), or (2) the event giving rise to the damage (the "second limb of Bier"), with the result that the courts of the place where the damage occurred, and of the place where the event giving rise to the damage occurred, will both have jurisdiction, with the claimant being entitled to choose between them.
iv) There was no suggestion of Petromena having suffered any damage in England; it was irrelevant for the purposes of this argument whether the damage had been suffered in Norway or elsewhere. The first limb of Bier therefore did not confer jurisdiction on the English court.
v) Accordingly the only question was whether the second limb of Bier conferred jurisdiction on the English court: i.e. whether England was the place of the 'event giving rise to the damage'.
vi) Whilst the first limb of Bier might potentially confer jurisdiction on the courts of more than one country, the second limb of Bier could not. In other words, where the damage occurred in more than one country, the courts of each country might have Article 5.3 jurisdiction under the first limb of Bier; but where the events giving rise to the damage were spread across state borders, the damage caused would be held to be localised in a single state which alone would have Article 5.3 jurisdiction under the second limb of Bier.
vii) A centre-of-gravity approach applies to the second, but not the first, limb of Bier; see Shevill v. Presse Alliance SA [1995] ECR I-0415; Minster Investments Ltd v. Hyundai Precision & Industry Co Ltd [1988] 2 Lloyds Rep 621; Domicrest v Swiss Bank Corpn [1999] QB 548.
viii) However, the place where the defendant acted was not always the place of the event giving rise to the damage. The purpose of Article 5 was to confer special jurisdiction on courts having a 'particularly close connection' to the case: Martin Peters Bauunternehmung Gmbh v Zuid Nederlandse Aannemers Vereniging [1984] 2 CMLR 605 at [11]. This suggested that, as Shevill and Minster confirm, the centre-of-gravity aspect of the second limb of Bier was to be used wisely to confer jurisdiction on the courts of the place where in substance the events giving rise to the damage had occurred. The event which was the 'origin of the damage' was not necessarily the earliest event in the chain: nor was it necessarily the place from where the defendant implemented that plan or where the plan found fruition and effect. The court had to look at the events as a whole and to ask, as Steyn J did in Minster, where in substance the events giving rise to the damage occurred. Briggs & Rees at paragraph 2.189 (page 279) cautiously supported this:
"if the events took place in more Member States than one, it may be difficult to identify the court with special jurisdiction under the second limb of Bier [the event giving rise to the damage]. A centre-of-gravity approach may commend itself to the Court more than it did in relation to the case of multi-state damage, but it is too early to tell."
ix) In the present case, the event giving rise to the damage was first, DB's sale of the Bonds to Seadrill, and more proximately, DB's demand to the Loan Trustee to accelerate all the Bonds by letter dated 2 April 2009. Those events had a multinational dimension. The fact that the acceleration demand was sent by DB by email from outside Norway (if that is where the email was sent from) to the Loan Trustee in Norway did not change the reality that, in substance, the acceleration demand was an event which occurred in Norway. From the start, DB's conduct in this case was overwhelmingly directed at Norway, and the foreign aspects of the story were always insignificant. It did not matter where the letter of 2 April 2009 was sent from: whether by email from London, Stockholm, St Lucia or Timbuktu was irrelevant. It does not matter where DB was when it decided to sell the Bonds, whether in London, Brussels, Frankfurt or on a conference call on a plane. What mattered was that those steps, like the advice which preceded them, were (as intended) communicated to Norway and (again as intended) took effect in Norway.
x) The second limb of Article 5.3 could only confer jurisdiction on one court: it was intended to confer jurisdiction on a court with a close connection to the facts, and it would be bizarre for that court to be anything other than Norway. In summary, therefore, even if Article 5.3 applied, the English court did not have jurisdiction because neither the event giving rise to the damage, nor the damage itself, occurred in England.
Article 23 - the exclusive jurisdiction clause in the Loan Agreement
xi) Petromena's third submission was that, even if the English court did have jurisdiction under Article 5, such jurisdiction was ousted under Article 23 because Petromena's claims fell within the scope of the Norwegian jurisdiction clause contained in clause 21 of the Loan Agreement. In particular:
a) DB London's acceleration demand dated 2 April 2009 (which was the event which breached DB's duty of loyalty and gave rise to the damage in this case) was expressly an act done under clause 15.3(b) of the Loan Agreement. Thus the question of DB's liability to Petromena for sending the acceleration demand was subject to the exclusive jurisdiction of the Norwegian courts under Article 23.
b) Jurisdiction and arbitration agreements were intended to have an extremely broad scope and to act comprehensively to resolve disputes which arose between the parties, without argument about what disputes were, and were not, covered. The House of Lords so held for arbitration agreements in Fiona Trust & Holding Co v. Privalov [2007] UKHL 40, [13] [AB21], and the same approach was to be taken to jurisdiction agreements: see e.g. UBS AG v. HSH Nordbank AG [2009] EWCA Civ 585, [82] per Lord Collins.
c) Accordingly, any dispute between Petromena and DB concerning the Bonds fell within the scope of the Norwegian jurisdiction clause. That was so regardless of whether the legal restriction alleged by Petromena to have been imposed on DB's right to sell and accelerate the Bonds free from liability derived from the terms of the Loan Agreement or from other obligations or provisions of law. Such argument applied to all the claims which Petromena pursued, since they all related to the Bonds (including advice about the Bonds). Given that the parties only made one jurisdiction agreement, the law gives it the broadest possible effect.
d) Accordingly, Norway was where DB and Petromena agreed to litigate this claim, and the English court must decline any jurisdiction it might otherwise have had under Article 5.
DB's submissions in relation to the issue of jurisdiction
Article 5.1 - "matters relating to a contract"
i) It was accepted that the expression "matters relating to a contract", as used in Article 5.1 had an autonomous meaning. Petromena's central contention was that, where an alleged obligation had been "freely entered into", it would be regarded for the purposes of Article 5.1 as contractual. Whilst it was true that, in general (though not invariably: see, e.g., Civil Jurisdiction and Judgments, Briggs & Rees, 5th Ed (2009) at paragraphs 2.150 and 2.151), it was necessary, in order for a claim to fall within Article 5.1, that the obligation in question should have been "freely entered into" (an expression that the ECJ has used many times since its decision in Jakob Handte & Co GmbH v. Soc. Traitements Mécano-Chimiques des Surfaces [1992] ECR I-3967, [10]), it did not follow that, merely because an obligation had been "freely entered into", such obligation was be regarded, for jurisdictional purposes, as contractual; satisfaction of that requirement was not by itself sufficient.
ii) While Article 5.1 did not require the conclusion of a contract which was valid under any particular system of national law, it did require that the obligation in question should have arisen by virtue of an agreement (see, e.g. Briggs & Rees at paragraph 2.149). The claim advanced in the Norwegian proceedings was not premised on any form of agreement between DB and Petromena: rather, Petromena alleged that, essentially, DB foisted itself upon Petromena and undertook unilaterally to act as its "advisor", in order to mitigate its own exposure to Petromena's bonds. This was clear from the Oslo writ, in which not only was the claim advanced solely in tort (and any contractual claim was expressly disavowed), but also from the factual allegations that, for example, DB acted "on its own initiative" (page 2) and had "taken on" a role as financial advisor (page 8). Thus it was not alleged that DB was acting pursuant to any form of agreement between the parties: there was no allegation that Petromena accepted any kind of offer from DB, and there was no explanation as to what the terms of any alleged agreement might have been. Further, although the absence of consideration did not necessarily mean there was no contract, it was still relevant to the proper characterisation of the parties' relationship that DB was not to be paid for its alleged "services".
iii) Petromena's argument that Article 5.1 did not in fact require an agreement between the parties was not supported by any authority. The only authorities cited by Petromena for this proposition were the decisions of the ECJ in Engler v. Janus Versand GmbH [2005] IL Pr 8, [51] and Ilsinger v. Dreschers [2009] ECR I-3916. Those two cases actually said nothing of the sort, and were in fact contrary to the submission made by Petromena. In Engler it was part of the court's reasoning, in concluding that Article 5.1 was engaged, that the recipient of the unilateral offer made in that case had expressly accepted it (see paragraphs 55 and 56 of the judgment), and Ilsinger did not in fact concern Article 5.1 at all, but Article 15 (which related to consumer contracts); the brief remark in paragraph 57 of the judgment (relied upon by Petromena) that "pre-contractual or quasi-contractual" claims "might ... where appropriate" fall within Article 5.1 cannot be interpreted as saying that there was no requirement under Article 5.1 for an agreement between the parties.
Article 5.1 - place of performance of the obligation in question
i) Petromena's case was that jurisdiction in this case was governed by the second indent of Article 5.1(b) of the Convention, because the alleged contract was one for the provision of services (namely financial advice). This meant that "the place of performance of the obligation in question" was the place "where, under the contract, the services were provided or should have been provided".
ii) Petromena's argument was not that the alleged contract itself stipulated where the alleged services were to have been provided; rather, its argument was that the issue under Article 5.1(b) was "where the advice was provided"; Petromena's submission that this was Norway, because there was "where the advice was received, not where it was uttered or put into circulation" based upon an unconvincing analogy with contracts for the sale of goods, and the case of Car Trim GmbH v. KeySafety Systems Srl [2010] Bus LR 1648, [60] was ill-founded.
iii) The correct approach was that laid down in the decision of the ECJ in Wood Floor Solutions Andreas Domberger GmbH v Silva Trade SA [2010] ECR I-2121, in particular at [33]. That case held that, in order to decide in which state the services were provided for the purposes of Article 5.1(b), the task was to identify "the place of the main provision of services" by the service-provider.
iv) In the present case, it was not in dispute that those individuals within DB alleged to have been responsible for providing advice to Petromena (or performing the other duties alleged) were based primarily in London, although they also worked elsewhere on occasion. London was where DB carried out its alleged work on behalf of Petromena. Insofar, therefore, as the alleged contract can be said to have itself provided for a place of performance, that place must have been England. It certainly was not Norway (and nor was this contended by Petromena).
v) Even if it were the case that the "place of the main provision of services" could not be deduced from the alleged contract itself, the remainder of the reasoning in Wood Floor pointed clearly to England. In paragraph 40 of its judgment the ECJ said that, in such a case:
"If the provisions of a contract do not enable the place of the main provision of services to be determined, either because they provide for several places where services are provided, or because they do not expressly provide for any specific place where services are to be provided, but the agent has already provided such services, it is appropriate, in the alternative, to take account of the place where he has in fact for the most part carried out his activities in the performance of the contract, provided that the provision of services in that place is not contrary to the parties' intentions as it appears from the provisions of the contract. For that purpose, the factual aspects of the case may be taken into consideration, in particular, the time spent in those places and the importance of the activities carried out there. It is for the national court seised to determine whether it has jurisdiction in the light of the evidence submitted to it."
vi) Applying this reasoning to the facts of this case as they appeared from the evidence before the court, it was clear (and in any event undisputed) that the place where DB for the most part carried out its activities in the performance of the alleged contract was London. The relevant DB employees spent the overwhelming majority of their time in London, and carried out nearly all of their activities there. It was immaterial that Petromena may have received DB's advice in Norway. The focus, according to the ECJ, was where the relevant work was done by the provider of the service. The location of the recipient of the service was insignificant.
vii) For these reasons, therefore, even if the claim were properly to be characterised as contractual for the purposes of Article 5.1, the English court had special jurisdiction over it pursuant to Article 5.1(b).
Article 5.3 - "matters relating to tort, delict or quasi-delict"
i) The claims sought to be asserted by Petromena in the Oslo proceedings, in respect of which DB claimed a declaration of non-liability in the English proceedings, clearly fell within the scope of Article 5.3. Those claims were plainly claims in tort/delict: this was clear, in particular, from paragraphs 1.2.1, 1.2.2, 5.1 and 6.2.1 of the writ in the Oslo proceedings.
ii) The words "the place where the harmful event occurred" in Article 5.3 had an autonomous meaning. They permitted the claimant to choose to sue (1) in the courts for the place where the damage occurred, or (2) in the courts for the place of the event giving rise to the damage: see Briggs & Rees, paragraph 2.183, citing Handelskwekerij GJ Bier NV v SA Mines de Potasse d'Alsace (Case 21/76) [1976] ECR 1735.
iii) DB relied upon the second limb of the Bier test, i.e. the courts for the place of the event giving rise to the damage. The place of the event giving rise to the damage was to be understood in the sense of enquiring where that event originated: as Briggs & Rees put it (at paragraph 2.188), the focus is on the event at the start, rather than at the end, of the story.
iv) A clear analogy could be drawn in the present case with the approach taken by Rix J in Domicrest v Swiss Bank Corpn [1999] QB 548. In that case Rix J considered the application of Article 5.3 of the 1988 Lugano Convention[2] to a claim based on negligent mis-statement. After reviewing the authorities, Rix J held (at 567H-568C) that the place where the harmful event giving rise to the damage occurred in a case of negligent mis-statement was the place where the mis-statement originated, rather than the place where the mis-statement was heard or acted upon. Rix J reasoned:
"Although it may be argued that in the case of instantaneous communications and perhaps especially in the case of telephone conversations the mis-statement occurs as much where it is heard as where it is spoken, nevertheless it remains true as it seems to me that it is the representor's negligent speech rather than the hearer's receipt of it which best identifies the harmful event which sets the tort in motion. To prefer receipt and reliance as epitomising the harmful event giving rise to the damage in the case of negligent mis-statement is, I think, to ignore the fact that the plaintiff also has the option of suing in the courts of the place where the damage occurs – which is quite likely to be at the place of receipt and reliance."
v) In the present case, the place where the harmful event occurred was England. England was the place where the relevant individuals at DB who were alleged to have acted as advisers to Petromena were based and from where they operated; and it was also the place where any breach of their (alleged) duties would have taken place. It was relevant to note that, consistent with DB's analysis, Petromena alleged in terms in its Oslo writ that DB rendered its services from London: see paragraphs 5.2 and 5.4.2 of the writ.
vi) Accordingly, for those reasons, the English Court had jurisdiction over the present proceedings under Article 5.3. Petromena's submission in paragraph 9 of Mr East's first statement that there was no connecting factor linking the proceedings with England was wrong.
Article 23 - the exclusive jurisdiction clause in the Loan Agreement
Petromena's contention that the Norwegian Courts have jurisdiction under Article 5.3 was wrong
Discussion and determination
Article 5.1 - "matters relating to a contract"
"…it appears to be Board that, if the standard of "a good arguable case" is properly understood and applied, there is no risk that the effectiveness of the Regulation will be impaired. The rule is that the court must be satisfied, or satisfied as it can be having regard to the limitations which an interlocutory process imposes, that factors exist which allow the court to take jurisdiction. In practice, what amounts to a "good arguable" case depends on what requires to be shown in any particular situation in order to establish jurisdiction."
See also per Toulson LJ (as he then was) in WPP Holdings Italy v. Benatti [2008] 1 Lloyds Rep 396, at [37] - [44].
"To my mind there are "matters relating to a contract" in the present case. There is a lively dispute between the parties as to whether there is a contract between them under which the defendants are the exclusive distributors for the plaintiffs in France. It is true that the plaintiffs, who seek to sue here, are asserting that no such contract exists, but equally the defendants are asserting the contrary. In my judgment, the fact that it is this way round does not make the article inapplicable. Article 5(1) is not confined to actions to enforce a contract or to obtain recompense for its breach, but refers generally to "matters relating to a contract."
The defendants submit that assertions are not enough, since the court must be satisfied that the essential prerequisites for jurisdiction exist. Building on this, they submit that it is incumbent on a plaintiff to satisfy the court at least that there is a "good arguable case" that such prerequisites do exist, and rely on authorities such as New England Reinsurance Corporation v. Messoghios Insurance Co. S.A. [1992] 2 Lloyd's Rep. 251 for that proposition. Since the plaintiffs are claiming that there was no contract, the defendants submit that it inevitably follows that the plaintiffs cannot fulfil this requirement.
I agree with the premise on which this argument is based, but to my mind the conclusion does not follow. The article allows a party to be sued in matters relating to a contract in the courts for the place of performance of the obligation in question. That party in the present case is the defendants. It seems to me that it is entirely illogical and wrong for that party to assert that there is a contract and that the plaintiffs have broken it (which is what the defendants have done in France, where they have themselves relied on article 5(1)) whilst simultaneously contending the contrary here in order to avoid the application of article 5(1). To my mind, in a case such as the present, the plaintiffs establish a good arguable case that there is a matter relating to a contract by relying on the fact that this is what the defendants are contending against them. Unless the defendants withdraw their contentions (which they have not done) it seems to me that they cannot challenge the jurisdiction on the basis that they should not be sued here because there is (contrary to those contentions) no contract. Once one has removed the self-contradictory stance taken up by the defendants, it seems to me that it is self-evident that there are matters "relating to a contract" between the parties."
"In Handte the manufacturer had not, so far as he knew, entered into any form of undertaking to or with the sub-buyer, with the result that the sub-buyer's relationship with him, and claim against him, was not one which related to a contract. That was so even though the original contract of sale had triggered the dispute, and the claim in some sense4 related to it, and even though the French courts would have understood the claim of the sub-buyer to have been contractual in nature. It follows that "matters relating to a contract" will describe cases which can be said to be founded on an agreement between claimant and defendant. However, it does not necessarily follow that every case in which there is such an agreement, or involves the voluntary assumption of a risk by one in relation to another, proceedings between the parties are to be seen, for special jurisdictional purposes, as brought in a matter relating to a contract.
At a general level, the decision in Handte may be thought to have been supported by the distinction found in civilian systems between contractual and non-contractual obligations5. In French law in particular there is a distinction between "contracts, or obligations arising from agreement in general",1 "obligations which arise without agreement".2 It is, therefore, part of the infrastructure of French law to distinguish between obligations which arise from the agreement the parties made (which are seen as being contractual), and those where the law attaches consequences to the act of a person (which are seen as being non-contractual).
4Cf for a very different approach to a rule worded similarly, Greene Wood & McLean LLP v Templeman Insurance Ltd [2009] EWCA Civ 65, [2009] 1 CLC 123.
5 That article 5(1) is confined to the law of obligations appears to follow from the decision in C-261/50 Reichert v Dresdner Bank (No 2) [1992] ECR I-2149, discussed at paras 2,172 et seq., below, for the further view, that Rome I and Rome II regulations divide the whole of the law of obligations into contractual and non-contractual, see below para 2,172.
1 Covered by Articles 1101-1369 of the Civil Code.
2 Covered by Articles 1370-1386."
"In that latter case, such a situation would at least be liable to be classified as pre-contractual or quasi contractual and might therefore, where appropriate, be covered solely by Article 5.1 all that regulation [ Regulation No 44/2001], a provision which must be acknowledged as having, on account of its wording and its position in the scheme of that regulation, a broader scope than that of Article 15 thereof (see, by analogy, with regard to the Brussels Convention, Engler, paragraphs 44 and 49)."
However, that statement cannot in my view be regarded as laying down a rule that there is no requirement under Article 5.1 that there should be some sort of actual or envisaged agreement or consensus between the parties, which gives rise to the relevant obligation, albeit that the agreement itself may be at the pre-contractual stage or not contractually concluded.
Article 5.1 - place of performance of the obligation in question
i) that where there were several places in different member states for the delivery of services, the "place of performance" must be understood as being the place with the closest linking factor between the contract and the court having jurisdiction; see paragraph 22 and paragraphs 31-33 of the judgment;
ii) that, in accordance with the objectives of proximity and predictability established by the Convention, the court within the jurisdiction of which the place of the main provision of services was situated was, as a general rule, the one which had jurisdiction to hear and determine all the claims arising from the contract; see paragraphs 31-33;
iii) that, so far as possible, the place for the main provision of services was to be deduced from the provisions of the contract itself; see paragraph 38;
iv) that, if the terms of the contract did not enable the place of the main provision of services to be determined, either because they provided for several places where services were to be provided, or because they did not expressly provide for any specific place where such services were to be provided, it was appropriate, in the alternative, to take account of the place where the service provider had in fact for the most part carried out his activities in the performance of the contract, provided that the provision of services in that place was not contrary to the parties' intentions as they appeared from the provisions of the contract; for that purpose, the factual aspects of the case might be taken into consideration, in particular, the time spent in those places and the importance of the activities carried out there; and it was for the national court seised to determine whether it had jurisdiction in the light of the evidence submitted to it; see paragraph 40;
v) that, if the place for the main provision of services could not be determined on the basis of the provisions of the contract itself, or on the basis of its actual performance, the place must be identified by another means which respected the objectives of predictability and proximity of the Convention; in those circumstances it was necessary to consider, as the place of the main provision of the services provided, the place where the agent was domiciled; that place could always be identified with certainty and was therefore predictable; moreover it had a link of proximity with the dispute since the agent would in all likelihood provide a substantial part of the services there; see paragraphs 41-42.
Article 5.3 "matters relating to tort, delict or quasi-delict"
"not intended to, and shall not give rise to, any legally binding obligations on the part of Deutsche Bank AG, London branch and/or its affiliates"
and that it should be governed by and construed in accordance with English law.
i) In Shevill v. Presse Alliance SA the Court of Justice held that:
"In the case of a libel by a newspaper article distributed in several Contracting States, the place of the event giving rise to the damage, within the meaning of those judgments, can only be the place where the publisher of the newspaper in question is established, since that is the place where the harmful event originated and from which the libel was issued and put into circulation."; see paragraph 24 of the judgment.
ii) In Dumez France SA the Court of Justice said at paragraph 17:
"It is only by way of exception to the general rule whereby jurisdiction is attributed to the courts of the defendant's domicile that Title II, 2, attributes special jurisdiction in certain cases, including the case envisaged by Article 5.3 of the Convention. As the court has already held ([Bier] paragraphs 10 and 11), those cases of special jurisdiction, the choice of which is a matter for the plaintiff, are based on the existence of a particularly close connecting factor between the dispute and courts other than those of the defendant's domicile, which justifies the attribution of jurisdiction to those courts for reasons relating to the sound administration of justice and the efficacious conduct of proceedings."
iii) In Domicrest v Swiss Bank Corpn [1999] QB 548 Rix J (as he then was) held at page 567 H:
"Applying that formula, it seems to me that the place where the harmful event giving rise to the damage occurs in a case of negligent mis-statement is, by analogy with the talk of defamation, where the mis-statement originates. It is there that the negligence, even if not every element of the tort, is likely to take place; and for that and other reasons the place from which the myths-statement is put into circulation is as good a place in which to plant jurisdiction as the place where the miss-statement is acted on, even if receipt of alarms are essential parts of the tort. For these purposes it seems to me that there is no difference between a written document and or other instantaneous communication sufficient to distinguish between such cases."
He then went on to state what I have quoted above when rehearsing Mr Handyside's submissions.
iv) I am satisfied that, consistent with the above authorities, the events giving rise to the damage, for the purposes of the second limb of Bier, occurred in England. The allegedly "harmful events" clearly originated there. If indeed DB London had been subjected to obligations of loyalty, or to take reasonable care, or was subject to restrictions on its activities pursuant to the Norwegian Securities Trading Act, such that its ability to demand an acceleration of repayment of the Bonds, or its ability to sell the Bonds to Seadrill, was restricted, those obligations and restrictions would necessarily have to have taken effect in England. There is no doubt in my mind that "the centre of gravity" of DB London's operations, activities and alleged breaches of duty, which have given rise to Petromena's claims, was London. Likewise there is no doubt in my mind that the court having a 'particularly close connection' to the case is the English court: see Martin Peters at [11]. I accordingly conclude that the place where in substance the events giving rise to the damage had occurred was in England.
Article 23 - the exclusive jurisdiction clause in the Loan Agreement
Petromena's contention that the Norwegian Courts have jurisdiction under Article 5.3 was wrong
Disposition
Note 1 The relevant Lugano Convention is the 2007 Convention, which came into force as between the Member States of the European Union and Norway on 1 January 2010. [Back] Note 2 There was no difference between the wording of Article 5.3 in the 1988 Lugano Convention and the 2007 Lugano Convention. [Back]