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Cite as: [2007] CSOH 76, [2007] ScotCS CSOH_76

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OUTER HOUSE, COURT OF SESSION

[2007] CSOH 76

CA81/06

OPINION OF LORD REED

in the cause

JACOBS & TURNER LIMITED

Pursuers;

against

CELSIUS sarl

Defenders:

________________

Pursuers: Cormack, Solicitor Advocate; McGrigors LLP

Defenders: Howlin; HBJ Gateley Wareing (Scotland) LLP

25 April 2007

Introduction

[1] The pursuers are the manufacturers of the "Trespass" brand of sports clothing. They are based in Scotland. The defenders have for many years been their distribution agents in France and Andorra. They are based in France. In October 2006 the defenders began proceedings against the pursuers before the Tribunal de Grande Instance in Annecy, alleging various breaches of the agency agreement, and seeking certain remedies. In December 2006 the pursuers began proceedings against the defenders before this court, alleging various breaches by the defenders of the agency agreement, and seeking certain remedies. A preliminary issue which arises is whether, as the defenders maintain, this court should decline jurisdiction and dismiss the action, or in any event sist these proceedings, in accordance with article 27 or article 28 of Council Regulation (EC) No 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters.

The French proceedings

[2 ] In the initiating writ in the French proceedings, the defenders state that, subject to the provisions of mandatory French public policy, in particular Law No 91‑593 of 25 June 1991 on Commercial Agents, the law applicable to the relations between the parties is Scots law. The defenders state that they entered into an oral agreement with the pursuers in 1993 to act as the exclusive distributors of Trespass clothing in independent sports shops in France and Andorra. They performed their obligations as distributors through a network of sub-agents, who in turn had exclusive rights in respect of their respective territories.

[3 ] By way of background, the defenders state that the market for sports clothing is divided into sectors in terms of cost and quality, among other factors. The Trespass range was not aimed at mountaineers or experienced skiers, but at a less specialist and less expensive market. It was also sold in France through supermarket chains and by mail order. The defenders state, in particular, that the products of the pursuers did not compete with sports clothing sold by a company named Filia, of which the defenders' director and shareholder, Mr Ruggeri, was also a director and shareholder.

[4 ] The defenders state that, during 1994, they sought a written agreement recording their exclusive right to sell Trespass products (and other products of the pursuers) to sports shops in France and Andorra. The pursuers insisted on using their standard form of agency agreement, which contained a non-exclusivity clause. They agreed in writing, however, to confirm the defenders' exclusive right in a back letter, if the defenders signed the standard contract, and to add a schedule to the contract describing the defenders' exclusive customers. The defenders then signed the standard contract, to which a schedule had been added, describing the defenders' territory as "all independent sports retailers including ... Go Sport ..." An identical contact was signed in 1995.

[5 ] According to the defenders, the pursuers subsequently made various attempts to withdraw the exclusivity granted, by attempting to rely on alleged acts of competition by the defenders, on the basis that exclusivity required the defenders not to represent any products which competed with the Trespass range. On each occasion, the pursuers backed down following correspondence from the defenders or their lawyers, maintaining that there had been no such acts of competition.

[6 ] In April 2005 the defenders discovered that the pursuers were directly supplying a sports shop in Grenoble. The pursuers then announced that they had entered into an agreement to open a shop there. They also stated their intention to open further shops in Roubaix and Troyes. At about the same time, the pursuers made direct contact with customers of the defenders, and offered to purchase the shop of one such customer, in Chamonix, in order to open a Trespass shop. In January 2006, the pursuers confirmed their intention to sell their products directly through independent sports shops.

[7 ] The defenders maintain that the pursuers then orchestrated unfounded disputes, in order to induce the defenders to give up their agency voluntarily, or to provide ostensible grounds for terminating the agency contract without having to pay compensation under the national legislation implementing Council Directive No 86/653/EEC of 18 December 1986 on the co‑ordination of the laws of the Member States relating to self-employed commercial agents: that is to say, the Commercial Agents (Council Directive) Regulations 1993 (SI 1993 No 3053) ("the 1993 Regulations"). For example, the pursuers complained that the defenders were not selling certain accessories, when in reality the defenders had found that the accessories in question did not sell well in France, and had therefore made a limited selection of them. The pursuers also complained that sports shops in Courchevel were not selling Trespass products, when Courchevel was a de luxe resort where sports shops did not seek to sell Trespass clothing. The pursuers also complained that the defenders were selling competing products through Filia.

[8 ] In May 2006, the pursuers informed the defenders of their intention to enter into franchise agreements in France. The defenders had previously been requested to renounce their exclusivity in favour of franchisees.

[9 ] In the meantime, the Trespass shop in Grenoble had since June 2005 been selling at heavily discounted prices, causing customers of the defenders to cancel or re‑negotiate their orders, or to cease placing orders. Go Sport was one such customer. Another customer complained to the defenders of unfair competition by the shop in Grenoble. The defenders obtained evidence that the shop was operating a systematic practice of selling at discounted prices. As a consequence, the defenders' market in Grenoble was almost completely destroyed. The defenders maintain that the pursuers were supplying the shop at prices which were substantially lower than those at which they supplied other retailers, and that discriminatory pricing of this kind can be the subject of criminal proceedings under French law.

[10 ] A further problem arose in relation to a new range of sports clothing launched by the pursuers, under the brand name "T-Pass", in the same sector of the market as the Trespass brand. The defenders maintained that the T-Pass range fell within the scope of their exclusive distributorship agreement, but the pursuers advertised (under the name "Trespass") for new agents to distribute the new range, described as being launched by Trespass, in sports shops in France. They offered to allow the defenders to distribute the T-Pass range only on condition that the defenders enter into a non‑exclusive contract in relation to the Trespass range, with a third party. As the defenders declined to enter into such a contract, the pursuers refused to allow them to distribute the T-Pass range, causing the defenders problems with their representatives and customers. The pursuers thereafter refused to supply T-Pass products to the defenders' customers directly. The defenders further complain that the pursuers made it impossible for them to send customers to the pursuers' premises in Scotland, since the pursuers then dealt with them directly, granting them rebates and cutting out the defenders.

[11 ] The defenders maintain that the actings of the pursuers are in breach of the duty to act in good faith imposed upon them by regulation 4 of the 1993 Regulations, and by clause 6.1.2 of the contract between the parties. They maintain that this is a material breach of contract, justifying the termination of the contract under Scots law. They further maintain that they are entitled to compensation for the loss and damage they have suffered. A number of heads of damage are specified, including loss suffered as a result of the opening of the Grenoble shop and the illegal discriminatory practices from which it benefited, and loss suffered as a result of the loss of customers in consequence of the pursuers' behaviour and as a result of the pursuers' refusal to allow the defenders to sell the T-Pass range. In addition, the defenders maintain that they are entitled, in the absence of any material breach of contract on their own part (en l'absence de faute grave de Celsius), to compensation for the termination of their contract in accordance with the 1993 Regulations.

[12 ] The defenders invite the French court:

(1) to declare and adjudge that the defenders are exclusive commercial agents of the pursuers;

(2) to record the existence of serious breaches by the pursuers in the performance and good faith of the contract and, as a result, their breach of clause 6.1.2, and also to record that it is impossible for the defenders to proceed with the contract without serious risk;

(3) to order the judicial termination of the contract on the basis of the exclusive breach by the pursuers (prononcer la résiliation judiciaire du contrat d'agent commercial aux torts et griefs exclusifs de Jacobs & Turner);

(4) to order the pursuers to pay the defenders damages for breach of contract;

(5) to order the pursuers to pay the defenders compensation for the termination of the contract;

(6) to order the pursuers to pay the defenders' expenses; and

(7) to order interim enforcement of the judgment.

[13 ] Defences had not been lodged by the date of the present hearing: they were due on 17 April 2007.

[14 ] Each of the parties has lodged in the present proceedings an expert opinion on certain issues of French law, dated 22 and 23 February 2007 respectively. I was informed that it was a matter of agreement that those opinions stated the law correctly, subject to one qualification, which is explained below. In particular, in relation to résiliation judiciaire, the opinion obtained by the pursuers from Me. Pochet states:

"8. ... [T]here exists a general principle in French contract law enshrined in article 1184 of the French Civil Code, which we translate as follows:

'A termination clause is always implied in agreements giving rise to mutual rights and obligations, in the event that one of the parties does not fulfil its obligation.

In such event, the agreement does not terminate as of right. The party affected by the non-fulfilment of the obligation has the choice either to compel the other to fulfil the agreement when it is possible, or to request its termination with damages.

Termination must be applied for in court, and the defendant may be granted time according to circumstances.'

(emphasis added)

9. It is safe to assume, for present purposes, that Celsius would, in French law, be relying on this general principle of the French Code Civil in the pending litigation matter to seek the relief brought to our attention.

10. Under this principle, it is for the competent Court to decide, in its discretion, whether the contract must or not be terminated, taking into account the facts and evidence relied on by the parties.

...

16. We should add, for completeness, that it is equally clear to us that Celsius is asking for termination of the agreement without any retroactive effect.

17. This interpretation finds support in the fact that Celsius uses the word 'résiliation' which precisely, in French law, is widely accepted as meaning 'termination without any retroactive effect'."

[15 ] In relation to the effect of an order granting résiliation judiciaire, the opinion obtained by the defenders from Me. Radtke states:

"Finally, I have been asked to express an opinion as to the time at which a declaration by the French Court, to the effect that the contract between Jacobs & Turner and Celsius was terminated, would come into effect and whether the French Court would hold such a declaration to be inconsistent with a Scottish judgment requiring Celsius to specifically perform various obligations under the contract. In my opinion such a declaration would have effect from the date on which it was pronounced. Once the declaration had been pronounced [(and subject to any appeal by Jacobs & Turner before a French Court of Appeal)], a French court would be likely to hold a Scottish judgment requiring Celsius to specifically perform the contract to be irreconcilable with the declaration and would therefore be likely to refuse to enforce the Scottish judgment."

I was informed by the solicitor advocate appearing on behalf of the pursuers that the last sentence quoted was not accepted as being correct. That was on the basis that, under French private international law, the consequences of the termination of the contract would be governed by Scots law, as the applicable law of the contract. Under Scots law, it was submitted, a decree requiring specific performance of an obligation to provide information, where that obligation had arisen prior to the termination of the contract, would be enforceable notwithstanding the termination of the contract on the ground of material breach. It was further submitted that article 1184 of the French Civil Code was not applicable in any event, since the French court should be applying Scots law in accordance with French private international law. In support of these submissions, reference was made to a supplementary opinion obtained from Me. Pochet, which expressed the view that there was "a strong likelihood" that the French courts would hold that the remedies available should be governed by Scots law, and would exclude the application of article 1184 of the French Civil Code. Counsel for the defenders, not having had an opportunity to obtain instructions on the matter, did not concede the correctness of that opinion.

[16 ] Me. Radtke also states:

"According to Art. 367 NCPC [Nouvelle Code de Procédure Civile], the French judge can on the application of the parties or by his own decision consolidate related action, if it is in the interest of good administration of justice to hear and determine them together. If the Scottish Action were raised before the TGI [Tribunal de Grande Instance], French law would permit it to be consolidated with the French Action."

That was agreed to be an accurate statement of the position.

The Scottish proceedings

[17 ] In the present proceedings, the pursuers maintain that they entered into a distributorship agreement with the defenders in 1995 for the sale of Trespass clothing in France and Andorra, and that the material terms are set out in the contract signed that year.

[18 ] The pursuers maintain that Mr Ruggeri has been involved in the promotion and representation of competing products, ostensibly through the vehicle of Filia sarl and FKF Sports SA. They maintain that Filia, FKF Sports and the defenders all operate from the same premises, use the same fax number and share the same staff. They allege that the incorporation of multiple companies by Mr Ruggeri is a device by which the defenders seek to evade their obligations, under the 1995 contract, not to market or promote competing products. They complain that there has been a decline in the defenders' sales, notably of accessories, as a result of their involvement with competing brands. They complain that Mr Ruggeri's personal involvement with competing brands has prevented the defenders from properly marketing the Trespass brand. They maintain that the defenders' involvement with competing brands, and their failure to disclose in advance the involvement of Mr Ruggeri, Filia and FKF Sports with competing brands, constitute breaches of various clauses of the 1995 contract, including the duty to act in good faith imposed by clause 4.1.10.

[19 ] The pursuers further maintain that the defenders refused to bring all their sub-agents to a sales meeting held by the pursuers in December 2006. They complain that the defenders' refusal constituted a breach of their duty to use their best endeavours to promote and increase sales, under clause 4.1.1 of the 1995 contract.

[20 ] The pursuers further maintain that the defenders notified them in October 2006 that a request for information had been received from the French competition authorities regarding the prices used for Trespass goods in France. In their letter, which the pursuers have produced, the defenders said that the request was undoubtedly connected to a complaint from a Trespass customer concerning the shop in Grenoble. The letter also referred to the pursuers' use of different prices for different customers in France. In response to a request by the pursuers for further information about this enquiry, the defenders responded that their contact with the competition authorities was only verbal at present, and that they would keep the pursuers informed if the situation changed. The pursuers complain that the defenders have effectively refused to provide them with information, and that the alleged communication from the competition authorities is in reality a fabrication advanced to the pursuers for tactical reasons. They complain that the defenders have, in this respect also, failed to act in good faith.

[21 ] Finally, the pursuers maintain that the defenders failed to inform them of a strategy document which they received from Go Sport in 2005, stating that Go Sport had decided to cease buying certain Trespass products and to replace them with own‑brand goods. The pursuers complain that this was a further breach of the 1995 contract.

[22 ] The pursuers contend that, in these various respects, the defenders have acted in material breach of the 1995 contract, and of their obligation of good faith under regulation 3 of the 1993 Regulations. They further contend that, even if the contract between the parties is differently constituted, the defenders are in any event in material breach of their obligations.

[23 ] Against this background, the pursuers seek a declarator that the defenders have materially breached certain provisions of the 1995 contract (namely clauses 4.1.1, 4.1.3, 4.1.4, 4.1.9, 4.1.10, 4.1.11, 4.1.12, 4.1.13, 4.2, 11.1 and 11.2), together with a decree ordaining the defenders

"to implement its obligations under Clauses 4.1.1, 4.1.3, 4.1.4, 4.1.10, 4.1.11, 4.1.12 and 4.1.13 of the Agency Agreement and in particular to furnish the pursuer with: (i) all information or documents in the defender's possession, custody or control regarding the enquiry allegedly received from the French Direction Générale de la Concurrence, de la Consommation et de la Répression des Fraudes as notified by the defender to the pursuer on 20 October 2006; (ii) the strategy document received by the defender from Go Sport in September 2005 and (iii) any further information or documents in the defender's possession, custody or control regarding its subsequent communications with Go Sport in relation to Go Sport's change of purchasing strategy in favour of own-brand goods."

[24 ] The action was commenced without complying with paragraph 11 of Practice Note No. 6 of 2004 (concerned with pre-action communication). In relation to that matter, the pursuers aver:

"The pursuer is reasonably apprehensive that, if given advance notice of the intention to raise this action, the defender would seek to avoid or at least delay the exercise by this Court of its jurisdiction by amending the existing proceedings in France or raising fresh proceedings there."

In other words, it would appear that proceedings were commenced in Scotland without prior notice so as to forestall the possibility that these matters might be raised before the French court.

[25 ] Defences have been lodged. As permitted by Rule of Court 18.2, they relate only to the question of jurisdiction at this stage.

The 1995 contract

[26 ] Clause 4.1 of the 1995 contract provides:

"During the continuance of this Agreement the Agent undertakes that it shall:-

4.1.1 use its best endeavours to promote and increase sales of the Products within the Territory to the Customers and to co-operate with the Principal in this regard;

...

4.1.3 promptly provide such information relating to sales of the Products as the Principal may reasonably require from time to time;

4.1.4 promptly notify the Principal of any fact, circumstance or information of which it becomes aware which may be of benefit to the Principal in relation to the sale, marketing or distribution of the Products;

4.1.9 act in the interests of the Principal and not permit any personal interest of the Agent to conflict with the duties it owes to the Principal;

4.1.10 act in good faith towards the Principal;

4.1.11 carry out all lawful duties it has undertaken to the Principal to carry out;

4.1.12 act in accordance with the reasonable instructions of the Principal; [and]

4.1.13 not do or permit to be done any act or thing which may in the reasonable opinion of the Principal bring the Products or the Principal into disrepute or which may in the reasonable opinion of the Principal damage or conflict with the interests of the Principal ..."

Clause 4.2 provides:

"4.2 During the continuance of this Agreement the Agent undertakes that it will not without the prior written consent of the Principal be concerned or interested either directly or indirectly in the design, manufacture, production, importation, sale or advertisement of any goods in the Territory which are like or similar to, or which might directly compete or interfere with the sale of, any of the Products."

Clause 6.1 provides:

"During the continuance of this Agreement the Principal undertakes that it shall:-

....

6.1.2 act in good faith towards the Agent".

Clause 11 provides:

"11.1 The Agent undertakes to the Principal that it shall not during the period of this Agreement or for a period of one year from the date of termination of this Agreement for any reason whatsoever be engaged, concerned or interested in carrying on the promotion, sale or marketing of products which compete with or are similar to the Products in the Territory.

11.2 The Agent undertakes to the Principal that it shall promptly disclose to the Principal any other arrangement in which it is engaged during the continuance of this Agreement in respect of the promotion, sale or marketing of products (whether or not such Products compete with or are similar to the Products in the Territory."

[27 ] The contract also provides that it is terminable by either party on three month's notice (clause 3.1.3), and can be terminated by the pursuers without notice in certain circumstances, including "if the Agent fails to perform or observe any of the material provisions of this Agreement or commits any substantial breach of its obligations hereunder" (clause 12.1.1). Clause 12.6 provides:

"The expiration or termination of this Agreement shall be without prejudice to the accrued rights of the parties and any provision hereof which relates to or governs the acts of the parties hereto subsequent to such expiry or termination shall remain in full force and effect and shall be enforceable notwithstanding such expiry or termination."

The contract further provides that it is governed by Scots Law, and that the parties submit to the non-exclusive jurisdiction of the Scottish courts (clause 22).

The 1993 Regulations

[28 ] Non-derogable duties of good faith are imposed on commercial agents and their principals by regulations 3 to 5 of the 1993 Regulations:

"Duties of a commercial agent to his principal

3.-(1) In performing his activities a commercial agent must look after the interests of his principal and act dutifully and in good faith.

....

Duties of a principal to his commercial agent

4.-(1) In his relations with his commercial agent a principal must act dutifully and in good faith.

....

Prohibition on derogation from regulations 3 and 4 and consequence of breach

5.-(1) The parties may not derogate from regulations 3 and 4 above.

(2) The law applicable to the contract shall govern the consequence of breach of the rights and obligations under regulations 3 and 4 above."

[29 ] In relation to the termination of agency contracts, regulation 15 provides for a minimum period of notice of 3 months where a contract is in its third or subsequent year. Regulation 16 provides:

"Savings with regard to immediate termination

16. These Regulations shall not affect the application of any enactment or rule of law which provides for the immediate termination of the agency contract -

(a) because of the failure of one party to carry out all or part of his obligations under that contract; or

(b) where exceptional circumstances arise."

The agent's entitlement to compensation on the termination of the agency contract is governed by regulations 17 to 19:

"Entitlement of commercial agent to indemnity or compensation on termination of agency contract

17.-(1) This regulation has effect for the purpose of ensuring that the commercial agent is, after termination of the agency contract, indemnified in accordance with paragraphs (3) to (5) below or compensated for damage in accordance with paragraphs (6) and (7) below.

(2) Except where the agency contract otherwise provides, the commercial agent shall be entitled to be compensated rather than indemnified.

....

(6) Subject to paragraph (9) and to regulation 18 below, the commercial agent shall be entitled to compensation for the damage he suffers as a result of the termination of his relations with his principal.

(7) For the purpose of these Regulations such damage shall be deemed to occur particularly when the termination takes place in either or both of the following circumstances, namely circumstances which -

(a) deprive the commercial agent of the commission which proper
performance of the agency contract would have procured for him whilst providing his principal with substantial benefits linked to the activities of the commercial agent; or

(b) have not enabled the commercial agent to amortize the costs and expenses that he had incurred in the performance of the agency contract on the advice of his principal.

....

Grounds for excluding payment of indemnity or compensation under regulation 17

18. The compensation referred to in regulation 17 above shall not be payable to the commercial agent where -

(a) the principal has terminated the agency contract because of default attributable to the commercial agent which would justify immediate termination of the agency contract pursuant to regulation 16 above; or

(b) the commercial agent has himself terminated the agency contract, unless such termination is justified -

(i) by circumstances attributable to the principal;

....

19. The parties may not derogate from regulations 17 and 18 to the detriment of the commercial agent before the agency contract expires."

Regulation 44/2001

[30 ] Regulation 44/2001 is designed to unify the rules governing jurisdiction, and the recognition and enforcement of judgments, within the European Community, and so remove obstacles which would otherwise hinder the operation of the internal market. Within its scope, it replaces the Brussels Convention of 1968, and is in broadly similar terms, although with some material differences.

[31 ] In relation to concurrent proceedings, the thinking underlying the relevant provisions of the Regulation is explained in the recitals:

"(15) In the interests of the harmonious administration of justice it is necessary to minimise the possibility of concurrent proceedings and to ensure that irreconcilable judgments will not be given in two Member States. There must be a clear and effective mechanism for resolving cases of lis pendens and related actions and for obviating problems flowing from national differences as to the determination of the time when a case is regarded as pending. For the purposes of this Regulation that time should be defined autonomously.

(16) Mutual trust in the administration of justice in the Community justifies judgments given in a Member State being recognised automatically without the need for any procedure except in cases of dispute.

(17) By virtue of the same principle of mutual trust, the procedure for making enforceable in one Member State a judgment given in another must be efficient and rapid. To that end, the declaration that a judgment is enforceable should be issued virtually automatically after purely formal checks of the documents supplied, without there being any possibility for the court to raise of its own motion any of the grounds for non-enforcement provided for by this Regulation."

[32 ] Concurrent proceedings are dealt with in Section 9 of Chapter II of the Regulation. It begins with articles 27 and 28:

"Article 27

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.

Article 28

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.

2. Where these actions are pending at first instance, any court other than the court first seised may also, on the application of one of the parties, decline jurisdiction if the court first seised has jurisdiction over the actions in question and its law permits the consolidation thereof.

3. For the purposes 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."

[33 ] It is a matter of agreement in the present case that the French court has jurisdiction over both actions, within the meaning of article 28(2). It is also agreed that the French court was seised of the proceedings at the instance of the defenders before this court was seised of the proceedings at the instance of the pursuers. It is also agreed, as previously explained, that French law would permit the consolidation of the actions.

[34 ] The recognition of judgments is dealt with in Section 1 of Chapter III of the Regulation. So far as material, it provides:

"Article 33

1. A judgment given in a Member State shall be recognised in the other Member States without any special procedure being required.

...

Article 34

A judgment shall not be recognised:

...

3. if it is irreconcilable with a judgment given in a dispute between the same parties in the Member State in which recognition is sought."

[35 ] The interpretation of articles 27 and 28 of Regulation 44/2001, and of the corresponding provisions of the Brussels Convention (articles 21 and 22, respectively), has been considered on a number of occasions by the European Court of Justice. Several of these cases were central to the parties' submissions in the present case, and require to be noted.

[36 ] Case 144/86 Gubisch Maschinenfabrik v Palumbo [1987] E.C.R. 4861 concerned concurrent proceedings in Italy and Germany. In the Italian proceedings, Mr Palumbo sought a declaration that an order which he had placed with Gubisch, for the purchase of equipment manufactured by them, was inoperative, as it had been cancelled before it was accepted; alternatively, that the contract be set aside on the basis that it was vitiated by mistake or fraud; or, in a further alternative, that the contract be discharged on the basis of Gubisch's breach of contract in failing to comply with a time-limit for delivery. Gubisch entered appearance solely to contest jurisdiction on the basis that it had already instituted proceedings in Germany for payment of the price of the equipment.

[37 ] The Court began by observing (at paragraph 8) that articles 21 and 22 of the Brussels Convention were

"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. Those rules are therefore designed to preclude, in so far as is possible and from the outset, the possibility of a situation arising such as that referred to in Article 27(3), that is to say the non-recognition of a judgment on account of its irreconcilability with a judgment given in a dispute between the same parties in the State in which recognition is sought" (emphasis added).

[38 ] Article 27(3) of the Brussels Convention corresponds to article 34(3) of Regulation 44/2001. The words which I have emphasised have been repeated by the Court in subsequent judgments. One of their implications is that article 21 is engaged where there is a possibility, rather than the certainty, of irreconcilable judgments.

[39 ] The Court continued:

"13. It is therefore in the light of the aforesaid objectives and with a view to ensuring consistency as between Articles 21 and 27(3) that the question whether a procedural situation of the kind at issue in this case is covered by Article 21 must be dealt with. The salient features of that situation are that one of the parties has brought an action before a court of first instance for the enforcement of an obligation stipulated in an international contract of sale; an action is subsequently brought against him by the other party in another Contracting State for the rescission or discharge of the same contract."

[40 ] The Court then considered the terms of article 21 of the Convention (of which there was not originally an authentic English version):

"14. It must be observed first of all that according to its wording Article 21 applies where two actions are between the same parties and involve the same cause of action and the same subject-matter; it does not lay down any further conditions. Even though the German version of Article 21 does not expressly distinguish between the terms 'subject-matter' and 'cause of action', it must be construed in the same manner as the other language versions, all of which make that distinction.

15. In the procedural situation which has given rise to the question submitted for a preliminary ruling the same parties are engaged in two legal proceedings in different Contracting States which are based on the same 'cause of action', that is to say the same contractual relationship. The problem which arises, therefore, is whether those two actions have the same 'subject-matter' when the first seeks to enforce the contract and the second seeks its rescission or discharge.

16. In particular, in a case such as this, involving the international sale of tangible moveable property, it is apparent that the action to enforce the contract is aimed at giving effect to it, and that the action for its rescission or discharge is aimed precisely at depriving it of any effect. The question whether the contract is binding therefore lies at the heart of the two actions. If it is the action for rescission or discharge of the contract that is brought subsequently, it may even be regarded as simply a defence against the first action, brought in the form of independent proceedings before a court in another Contracting State.

17. In those procedural circumstances it must be held that the two actions have the same subject-matter, for that concept cannot be restricted so as to mean two claims which are entirely identical."

[41 ] Applying that reasoning to the facts of the present case, it is apparent that the French and Scottish actions are between the same parties. They are based on the same contractual relationship, and therefore on the same "cause of action", giving that expression the autonomous meaning which it possesses. The Scottish action, in so far as it seeks specific performance of the contract, is aimed at giving effect to it. The French action, in so far as it seeks résiliation judiciaire, is aimed at depriving it of effect. On the other hand, as explained below, it was argued on behalf of the pursuers that the French action, in so far as it sought résiliation judiciaire, was inept: the French court was unlikely to make such an order. It was further argued that there was in any event no doubt that the contract was binding, and could therefore be enforced, so long as it had not actually been rescinded (or so long as résiliation judiciaire had not been pronounced, on the assumption that such a remedy might be granted). The question whether the contract was binding did not therefore lie at the heart of both actions in the same sense as in Gubisch: although each party alleged material breach of contract on the part of the other, neither party had as yet rescinded the contract. The contract therefore remained binding in the meantime.

[42 ] Returning to the judgment in Gubisch, the Court concluded:

"18. If, in circumstances such as those of this case, the questions at issue concerning a single international sales contract were not decided solely by the court before which the action to enforce the contract is pending and which was seised first, there would be a danger for the party seeking enforcement that under Article 27(3) a judgment given in his favour might not be recognized, even though any defence put forward by the defendant alleging that the contract was not binding had not been accepted. There can be no doubt that a judgment given in a Contracting State requiring performance of the contract would not be recognized in the State in which recognition was sought if a court in that State had given a judgment rescinding or discharging the contract. Such a result, restricting the effects of each judgment to the territory of the State concerned, would run counter to the objectives of the Convention, which is intended to strengthen legal protection throughout the territory of the Community and to facilitate recognition in each Contracting State of judgments given in any other Contracting State.

19. The answer to the question submitted by the national court must therefore be that the concept of lis pendens pursuant to Article 21 of the Convention of 27 September 1968 covers a case where a party brings an action before a court in a Contracting State for the rescission or discharge of an international sales contract whilst an action by the other party to enforce the same contract is pending before a court in another Contracting State."

[43 ] In relation to that passage, it was argued on behalf of the pursuers that there was no danger that a Scottish decree for specific performance would not be recognised in France. The French court was unlikely to issue a judgment rescinding the contract, since the contract was governed by Scots law, which did not treat rescission as a judicial act. In any event, there was no reason why a decree for specific performance should not be enforced prior to rescission; and, after rescission, the decree would either remain enforceable, on the basis that it related to accrued rights, or it would be superseded. These arguments are explained in greater detail, and considered, below.

[44 ] The next case which requires to be noted is Case C-351/89 Overseas Union Insurance Ltd v New Hampshire Insurance Company [1991] ECR I-3317, where the Court repeated (at paragraph 16) that article 21 of the Brussels Convention was designed "to preclude, in so far as possible and from the outset, the possibility of a situation arising such as that referred to in Article 27(3)", and added:

"It follows that, in order to achieve those aims, Article 21 must be interpreted broadly so as to cover, in principle, all situations of lis pendens before courts in Contracting States."

The Court also made it clear (at paragraphs 21 and 25) that, where proceedings fall within the scope of article 21 of the Brussels Convention (or, now, article 27 of Regulation 44/2001), the court second seised may only sist the proceedings, as opposed to declining jurisdiction, if the jurisdiction of the court first seised is contested. In the present case, it is accepted that the French court has jurisdiction, and I was informed that its jurisdiction would not be contested. It was accordingly accepted that, if and to the extent that article 27 is applicable, this court should decline jurisdiction and dismiss the Scottish proceedings.

[45] The next case which has to be considered is Case C-406/02 The Tatry [1994] ECR I-5439. The case concerned the contamination of a bulk cargo which belonged to a number of different owners and had been carried under separate but identical contracts. The ship-owners brought proceedings in the Netherlands against certain of the cargo owners, seeking a declarator that they were not liable for the contamination. They later brought similar proceedings in the Netherlands against the remaining cargo owners. By then certain of the cargo owners had brought separate proceedings in England against the ship-owners, seeking damages. They later brought similar proceedings in the Netherlands, as also did the remaining cargo owners. One question which arose was whether article 21 of the Brussels Convention was applicable where proceedings involved the same cause of action and some, but not all, of the parties were the same. In view of the wording of article 21 ("proceedings ... between the same parties"), the Court considered that the court second seised was obliged to decline jurisdiction only where the parties to the two actions were identical. The Court continued:

"34. Consequently, where some of the parties are the same as the parties to an action which has already been started, Article 21 requires the second court seised to decline jurisdiction only to the extent to which the parties to the proceedings pending before it are also parties to the action previously started before the court of another Contracting State; it does not prevent the proceedings from continuing between the other parties.

35. Admittedly, that interpretation of Article 21 involves fragmenting the proceedings. However, Article 22 mitigates that disadvantage. That article allows the second court seised to stay proceedings or to decline jurisdiction on the ground that the actions are related, if the conditions there set out are satisfied."

[46] Accordingly, it appears that article 21 can apply to proceedings in part, and that article 22 may be applicable to a part of proceedings to which article 21 is not applicable. Although The Tatry was concerned with proceedings which involved different parties, I would infer that the same principle - that article 21 can apply to proceedings in part - can also apply where proceedings involve different claims. If some of the claims brought in the different proceedings were based on the same cause of action and had the same subject matter, but other claims did not, then article 21 would be engaged in respect of the former, but not in respect of the latter. In those circumstances, it appears to me that the court second seised would have to decline jurisdiction under article 21 in respect of the former claims only, although it would have to consider whether article 22 should also lead it to dismiss the latter claims (on the basis that there would be consolidation in the first court), or to sist its proceedings in order to await the outcome of the proceedings in the court first seised. I note that a similar view was expressed in The Tatry by Advocate General Tesauro, at paragraph 18 of his Opinion.

[47 ] The Court also considered in The Tatry whether an action seeking to have a defendant held liable in damages had the same cause of action and the same object as proceedings brought by that defendant seeking a declarator that he was not liable for the loss in question. The Court concluded that it did. In that regard, the Court said:

"38. It should be noted at the outset that the English version of Article 21 does not expressly distinguish between the concepts of 'object' and 'cause' of action. That language version must however be construed in the same manner as the majority of the other language versions in which that distinction is made (see the judgment in Gubisch Maschinenfabrik v Palumbo, cited above, paragraph 14).

39. For the purposes of Article 21 of the Convention, the 'cause of action' comprises the facts and the rule of law relied on as the basis of the action.

40. Consequently, an action for a declaration of non-liability, such as that brought in the main proceedings in this case by the shipowners, and another action, such as that brought subsequently by the cargo owners on the basis of shipping contracts which are separate but in identical terms, concerning the same cargo transported in bulk and damaged in the same circumstances, have the same cause of action.

41. The 'object of the action' for the purposes of Article 21 means the end the action has in view.

42. The question accordingly arises whether two actions have the same object when the first seeks a declaration that the plaintiff is not liable for damage as claimed by the defendants, while the second, commenced subsequently by those defendants, seeks on the contrary to have the plaintiff in the first action held liable for causing loss and ordered to pay damages.

43. As to liability, the second action has the same object as the first, since the issue of liability is central to both actions. The fact that the plaintiff's pleadings are couched in negative terms in the first action whereas in the second action they are couched in positive terms by the defendant, who has become plaintiff, does not make the object of the dispute different.

44. As to damages, the pleas in the second action are the natural consequence of those relating to the finding of liability and thus do not alter the principal object of the action. Furthermore, the fact that a party seeks a declaration that he is not liable for loss implies that he disputes any obligation to pay damages."

[48 ] In relation to this passage, it was submitted in the present case, on behalf of the pursuers, that the French proceedings and the Scottish proceedings did not have the same cause of action. The facts relied on were generally different: the only overlap was that Filia's conduct was relied on in the Scottish proceedings as a breach of the defenders' obligations under clause 4.2 of the contract, whereas the pursuers' complaint about Filia was relied on in the French proceedings as a breach of the pursuers' obligation of good faith. The rules of law relied on were also different: the French proceedings were concerned with the pursuers' obligation of good faith under clause 6.1.2 and regulation 4(1) of the 1993 Regulations, whereas the Scottish proceedings were concerned with various obligations of the defenders under clauses 4.1 and 4.2 of the contract, and their obligation of good faith under regulation 3(1). Nor, it was submitted, did the actions have the same object. The central issue in the French proceedings was whether the pursuers were in material breach of contract. The central issue in the Scottish proceedings was whether the defenders were in material breach of contract. Whereas it could be said in The Tatry (as it was, by Advocate General Tesauro at paragraph 16 of his Opinion) that the actions were two sides of the same coin - one side being the cargo owners seeking to establish the liability of the ship-owners, and the other side being the ship-owners seeking to establish their non-liability - that could not be said in the present case. These arguments are considered below.

[49 ] Returning to the judgment of the Court, the final matter considered in The Tatry was the scope of article 22 of the Brussels Convention (corresponding to article 28 of Regulation 44/2001). The matter arose in so far as some of the proceedings for damages had been brought by different cargo owners from those who had brought other actions. The question was asked whether actions were "related", within the meaning of article 22, where separate trial and judgment would involve the risk of conflicting decisions, without necessarily involving the risk of giving rise to mutually exclusive consequences. In that regard, it was pointed out that article 22(3) referred to the risk of "irreconcilable judgments", and that article 27(3) (corresponding to article 34(3) of Regulation 44/2001), which also referred to judgments being irreconcilable, had previously been held to require that the decisions entailed legal consequences which were mutually exclusive (Case 145/86 Hoffman v Krieg [1988] ECR 645, paragraph 22). The Court held (at paragraphs 52-58) that article 22(3) defined the expression "related actions" for the purposes of article 22; that the term "irreconcilable" had a wider meaning in article 22(3) than in article 27(3); and that judgments were "irreconcilable", within the meaning of article 22(3), if they were conflicting and contradictory, even if they did not have mutually exclusive legal consequences. Advocate General Tesauro observed, at paragraph 28 of his Opinion:

"The rationale of the provision is therefore to encourage harmonious judicial decisions and thereby obviate the danger of judgments which conflict with each other, albeit only as regards their reasoning. The court second seised should therefore be able to have recourse to the machinery envisaged by that provision whenever it considers that the reasoning adopted by the court hearing the earlier proceedings may concern issues likely to be relevant to its own decision."

That situation arose where separate proceedings were brought in respect of the liability of a ship-owner for the contamination of the same bulk cargo carried under identical bills of lading.

[50] Case C-111/01 Gantner Electronic GmbH v Basch Exploitatie Maatschappij BV [2003] ECR I-4207 is relevant in establishing that, since the situation of lis alibi pendens exists from the moment when the two courts are seised of the actions in question, and therefore before the defenders have been able to put forward their arguments, no account can be taken of the defence submissions when determining whether article 21 of the Brussels Convention is engaged. In that regard, the Court said (at paragraph 32):

"Article 21 of the [Brussels] Convention must be construed as meaning that, in order to determine whether two claims brought between the same parties before the courts of different Contracting States have the same subject-matter, account should be taken only of the claims of the respective applicants, to the exclusion of the defence submissions raised by a defendant."

Thus an action for damages brought by a distributor of goods against the manufacturer, for the termination of a dealership contract without due notice, had a different cause of action from an action brought by the manufacturer against the distributor for the unpaid price of goods supplied: the fact that the distributor claimed, by way of defence to the action for payment, to set off the liability in damages which was the subject matter of the former action, was irrelevant to the application of article 21. Advocate General Léger however observed (at paragraph 53 of his Opinion) that the court before which set-off was pleaded could stay the proceedings under article 22, solely in relation to the defence of set-off, if there was a risk that its decision on that matter might be irreconcilable with the decision of the court hearing the action of damages.

[51] The irrelevance of possible defences is also illustrated by Case C-39/02 Maersk Olie & Gas A/S v Firma M. de Haan en W. de Boer [2004] ECR I-9657, which concerned damage allegedly caused to underwater pipelines by a trawler. The shipowners commenced proceedings in the Netherlands to establish a liability limitation fund. The pipeline owners subsequently commenced proceedings for damages in Denmark. Article 21 was held not to be engaged, partly because the actions did not have the same subject matter. As the Court observed (at paragraph 35):

"Whereas an action for damages seeks to have the defendant declared liable, an application to limit liability is designed to ensure, in the event that the person is declared liable, that such liability will be limited."

The Court added (at paragraph 36):

"The fact that, in proceedings for the establishment of a liability limitation fund, the claims are verified by an administrator or may also be challenged by the debtor is not such as to cast doubt on that analysis. As the Court has already ruled, in order to determine whether two sets of proceedings have the same subject-matter under Article 21 of the Brussels Convention, account should be taken, as is evident from the wording of that article, only of the applicants' respective claims in each of the sets of proceedings, and not of the defence which may be raised by a defendant".

[52] Finally, in relation to article 22 of the Brussels Convention, it is also relevant to note the decision of the House of Lords in Sarrio SA v Kuwait Investment Authority [1999] 1 AC 32, where their Lordships rejected an approach to article 22 which distinguished between a risk of inconsistency in respect of primary or essential issues, on the one hand, and such a risk in respect of matters which were not essential to the court's conclusion, on the other hand. Lord Saville of Newdigate, in whose judgment the other members of the Committee concurred, proposed a straightforward and unrestrictive approach, stating (at pages 40-41):

"I take the view that to attempt to analyse actions so as to distinguish between different kinds of issues would be likely to add to the complexity of applications under article 22 and thus to the expense and delay in dealing with them. Instead of simply considering whether the actions were so closely connected that it was expedient that they should be heard and determined together to avoid the risk of conflicting decisions, the parties and the court would have to embark upon a sophisticated and difficult exercise of legal analysis, made more complicated by the fact that the court would be dealing not with actual judgments, but with what judgments yet to be given would be likely to contain. It must be borne in mind that article 22 is concerned not with the substantive rights and obligations of the parties, but with the ancillary and procedural question as to where in the Community those rights and obligations should be heard and determined. There is nothing in the Convention that suggests that it is in the interests of the Community that litigation on this question should be made more expensive and time-consuming than is necessary.

...

For these reasons, I am of the view that there should be a broad commonsense approach to the question whether the actions in question are related, bearing in mind the objective of the article, applying the simple wide test set out in article 22 and refraining from an over-sophisticated analysis of the matter."

[53] Following that approach, the House of Lords held that jurisdiction should be declined in proceedings for damages for negligent misrepresentation in the course of negotiations for the sale of the plaintiff's business, so that similar proceedings could be commenced in Spain and consolidated with existing Spanish proceedings between the same parties for payment under a put option forming part of the consideration for the sale.

The submissions on behalf of the defenders
[54 ] On behalf of the defenders, it was submitted that article 27 of Regulation 44/2001 was engaged. The Scottish action and the French action were between the same parties. They involved the same cause of action, namely the same underlying contractual relationship: Gubisch at paragraph 15. They involved the same subject matter. The European Court of Justice's approach to the process of identifying whether the same cause of action and the same subject matter were present was broad and largely non-technical. It did not involve a minute examination of the respective pleadings, but rather a broad assessment as to what was central to the two actions.

[56 ] Since the French court was the court first seised, and its jurisdiction was not to be challenged, this court must decline jurisdiction: Overseas Union Insurance at paragraph 21.

[57 ] If article 27 was not engaged, then article 28 was engaged. The Scottish action and the French action were related actions within the meaning of article 28. They were evidently "so closely related that it is expedient to hear and determine them together to avoid the risk of irreconcilable judgments resulting from separate proceedings": article 28(3). Both actions were pending, within the meaning of article 28(1), and both were pending at first instance, within the meaning of article 28(2). In terms of article 28(2), this court had a discretion to decline jurisdiction "if the court first seised has jurisdiction over the actions in question and its law permits consolidation thereof". It was a matter of agreement that those conditions were satisfied. The court should exercise its discretion. There was a self-evident risk that, if this court were to give judgment on the merits in favour of the pursuers, such a judgment would be irreconcilable with the judgment of the French court, particularly given the wide meaning of the term "irreconcilable" as employed in article 28. There was a risk that a French court would decline to enforce the judgment of this court under article 34(3). If the court were not minded to decline jurisdiction, it should in any event exercise its discretion under article 28(1) to sist the present proceedings pending the outcome of the French proceedings.

[58 ] In support of these submissions, reference was made to the judgments of the European Court of Justice previously mentioned, and also to Case 150/80 Elefanten Schuh GmbH v Jacqmain [1981] ECR 1671, Case 27/81 Etablissements Rohr SA v Ossberger [1981] E.C.R. 2431, Case 288/82 Duijnstee v Goderbauer [1983] E.C.R. 3663, Case 129/83 Zelger v Salinitri [1984] ECR 2397, Case C-365/88 Kongress Agentur Hagen GmbH v Zeehage BV [1990] ECR I-1845, Case C-129/92 Owens Bank Ltd v Bracco [1994] ECR I-117, Case C80/00 Italian Leather SpA v WECO Polstermőbel GmbH & Co [2002] E.C.R. I-4995, Case C-116/02 Erich Gasser GmbH v MISAT Srl [2003] ECR I-14693 and Case C-159/02 Turner v Grovit [2004] ECR I-3565. Reference was also made to the 1969 Report on the Convention on jurisdiction and the enforcement of judgments in civil and commercial matters (the Jenard Report).

[59] Reference was also made to a number of decisions of courts in the United Kingdom and Ireland: William Grant & Sons International Ltd v Marie-Brizard & Roger International SA [1996] S.C.L.R. 987, The "Happy Fellow" [1997] E.W.C.A. Civ 2192, [1998] 1 Lloyd's Rep.13, Canada Trust Co v Stolzenberg [2002] 1 AC 1, Trustor AB v Barclays Bank plc, 24 October 2000 (Rimer J., unreported), Abkco Music & Records Inc v Jodorowski [2003] E.C.D.R. 3, Carnoustie Universal SA v International Transport Workers' Federation [2002] EWHC 1624 (Comm), [2002] 2 All ER (Comm) 657, Miles Platt Ltd v Townroe Ltd [2003] EWCA Civ 145, [2003] 1 All E.R. (Comm.) 561, Bank of Tokyo-Mitsubishi Ltd v Baskan Gida Sanayi ve Pazarlama AS [2004] EWHC 945 (Ch), [2004] 2 Lloyd's Rep 395, DT v FL [2006] IEHC 98 and Royal & Sun Alliance Insurance plc v MK Digital FZE (Cyprus) Ltd [2006] EWCA Civ 629, [2006] 2 All E.R. (Comm.) 145. Reference was also made to Briggs and Rees, Civil Jurisdiction and Judgments (4^th edition, 2005).

The submissions on behalf of the pursuers
[60] As previously mentioned, it was submitted on behalf of the pursuers that, since the contract was governed by Scots law, the French courts would proceed on the basis that the consequences of breach of contract were likewise governed by Scots law: article 10(1)(c) and (d) of the Rome Convention of 1980, as given effect by the Contracts (Applicable Law) Act 1990, and regulation 5(2) of the 1993 Regulations. Reference was also made to Dicey, Morris and Collins, The Conflict of Laws (14^th edition, 2006), Chapter 32.

[61 ] Since Scots law did not provide for rescission by an order of the court, this court should therefore proceed on the basis that it was highly questionable whether the French court would apply article 1184 of the French Civil Code or would grant an order of résiliation judiciaire.

[62 ] It was necessary also to bear in mind other aspects of Scots law relating to the rescission of contracts. Rescission required to be intimated to the other party. Rights which had accrued prior to rescission could be enforced: Hyundai Heavy Industries Co Ltd v Papadopoulos [1980] 1 W.L.R. 1129, Brown v Langwords Photo Stores Ltd [1991] 1 N.Z.L.R. 173, Lloyds Bank plc v Bamberger 1993 SC 570. If a party faced with material breach elected to continue with the contract, as the defenders were doing in the meantime, they must perform their contractual obligations: Macari v Celtic Football & Athletic Co Ltd 1999 SC 628. If they failed to do so, the primary remedy available for breach of contract was specific implement. The right to rescind could also be lost by waiver or personal bar, or through the lapse of a reasonable time. Furthermore, there was no inconsistency between co-existent declarations that each of the parties to a contract was in material breach. It was also arguable that a declaration that a party was in material breach of contract was not necessarily inconsistent with an order for specific performance in favour of that party, having regard to authorities concerned with the limits of the principle of mutuality of obligations (e.g. Bank of East Asia Ltd v Scottish Enterprise 1997 S.L.T. 1213) and authorities concerned with the enforcement of obligations which, under the contract, continued notwithstanding its termination (e.g. PIK Facilities Ltd v Shell UK Ltd 2005 SCLR 958). These common law principles relating to rescission were equally applicable to the termination of commercial agency contracts, as provided for in the 1993 Regulations: Bell Electric Ltd v Aweco Appliance Systems GmbH & Co [2002] E.W.H.C. 872, [2002] Eu.L.R. 443.

[63] In relation to article 27, it followed from the foregoing that the Scottish and French proceedings would not necessarily result in irreconcilable judgments. It was unlikely that the French court would issue a judgment which had the effect of terminating the contract: under Scots law, rescission was not effected by means of a judgment. Even if the French court were to issue a judgment terminating the contract, such a judgment would not be irreconcilable with a Scottish decree of specific implement. The pursuers were seeking to enforce obligations under a contract which remained in force in the meantime. The pursuers' position was that the obligations in respect of which specific implement was sought would survive rescission. If they did not, however, then neither would the effect of the decree. It followed that, so far as the Scottish action sought to enforce the contract, article 27 was not engaged. The case of Gubisch in particular was distinguishable, in that the annulment of the contract was sought in that case, as an alternative to its termination. Specific implement was plainly incompatible with annulment, which was retroactive, but not with termination, which had only prospective effects.

[64 ] So far as the actions sought to have each party declared to be in material breach of contract, there would be no inconsistency between judgments finding both parties to be in material breach. Nor would it necessarily follow from such a declarator being granted in the pursuers' favour that they would terminate the agreement without the payment of compensation, contrary to the order sought by the defenders in the French action: they might not elect to rescind the contract, and the right to rescind might in any event have been lost.

[65 ] In relation to article 28, the complaints of breach of contract made in each action were largely unrelated: the only common issue was the pursuers' complaint concerning the defenders' involvement in the sale of competing products. There was not a real risk of irreconcilable judgments, and article 28 was therefore not engaged.

[66 ] Alternatively, if article 28 was engaged, this court should exercise its discretion in favour of permitting this action to continue. The degree of relatedness between the Scottish and French actions was minimal. The contract contained a clause prorogating the non-exclusive jurisdiction of the Scottish courts. The contract was governed by Scots law. Proceedings in this court were liable to be determined more quickly than the proceedings in France: commercial actions in the Tribunal de Grande Instance were said typically to take 9 to 18 months at first instance, and possibly 2 years on appeal. Delay in the pursuers' recovering the information and documents they sought in the Scottish action could cause them serious detriment. It was accepted on the other hand that the evidence in the Scottish action would be largely concerned with matters arising in France.

[67 ] If, contrary to these submissions, the court considered that article 27 was engaged in respect of the whole of the Scottish action, then it was accepted that the action should be dismissed. If article 27 was engaged in respect of only part of the Scottish action, then that part of the action should be dismissed. If article 27 was not engaged at all, but article 28 was engaged in respect of the whole of the Scottish action, then the action should be sisted until an application for consolidation had been considered by the French court. If article 28 was engaged in respect of only part of the Scottish action, then that part of the action should be sisted pending an application for consolidation.

Discussion
The application of article 27
[68 ] It is not in dispute that the Scottish and French proceedings are between the same parties; that the French court was the court first seised; and that the French court would have jurisdiction to deal with the matters raised in the Scottish proceedings. The remaining issue, in terms of the English text of article 27, is whether the proceedings involve the same cause of action. As previously explained, the European Court of Justice has held that, as in most of the other language versions, and in particular in the French version, there must be identity of objet and of the cause of the action. Following that approach, the Scottish and French proceedings have the same cause, as that expression has been explained by the Court, since they are based on the same contractual relationship: see, in particular, Gubisch at paragraph 15. The remaining question is whether the actions have the same objet or subject matter. That expression has been defined widely by the Court: it is concerned not with any exact or formal identity between the two actions, but rather with the question whether the two proceedings could give rise to mutually exclusive legal consequences.

[69 ] In the Scottish action, the pursuers seek a judgment declaring that the defenders have materially breached certain of their contractual obligations, and ordering them to perform their contractual obligations by providing the pursuers with specific categories of information and documents. The application of article 27 raises issues in respect of these two remedies which are to some extent distinct. Considering the action first as one for the enforcement of contractual obligations, the salient feature is that an action has already been brought in the French court for the termination of the same contract, and for compensation consequent upon its termination. At first sight, the position is indistinguishable from that in Gubisch, where the court drew no distinction (at paragraphs 13, 15, 16, 18 and 19) between the setting aside of a contract ab initio (described in the English version of the judgment as "rescission", presumably in the sense in which a contract may be rescinded ab initio: the French text uses the term "annulation") and its termination following a breach ("discharge", in the English version of the judgment; "résolution", in the French text). The Court stated in Gubisch (at paragraph 18) that there could be no doubt that a judgment requiring performance of a contract would not be recognized in the State in which recognition was sought if a court in that State had given a judgment rescinding or discharging the contract (prononçant l'annulation ou la résolution du même contrat). In the present case, Me. Radtke has similarly expressed the opinion that a French court would be likely to hold that a Scottish decree for specific performance was irreconcilable with a French judgment finding that the contract was terminated, and that the Scottish decree was therefore unenforceable. On the hypothesis on which it proceeded (namely, that the French action resulted in a declaration that the contract was terminated), that opinion did not appear to be disputed.

[70 ] The argument that an order for specific performance would not be irreconcilable with the outcome of the French action was advanced on a number of bases. First, it was said that the French court was unlikely to make an order for résiliation judiciaire, on the ground that the termination of the contract was governed by Scots law, under which the rescission of a contract was the act of a party rather than of the court. I cannot accept that submission. The first and most fundamental point is that the application of article 27 has to be judged on the basis of the claims made in the two actions, not on the basis of arguments which may be advanced by way of defence to the claims: see, in particular, Gantner at paragraph 32, and Maersk at paragraph 36. Secondly, article 27 is engaged where there is the possibility of a situation arising of the kind referred to in article 34(3): see Gubisch at paragraph 8. That possibility is not precluded by advice that there is "a strong likelihood" that the French courts would hold that the remedies available should be governed by Scots law. In any event, even if the French action did not result in an order effecting the termination of the contract, a finding (as sought by the defenders) that the pursuers had acted in material breach of contract, and that it was impossible for the defenders to proceed with the contract without serious risk, would prima facie have the legal consequence that the defenders would be entitled to rescind the contract at their own hand without further ado (on the assumption, on which the submissions for the pursuers were based, that the Scots common law of contract is applicable). Furthermore, since the defenders' claim for compensation is predicated on the termination of the contract, there would appear to me to be a risk that an award of compensation would itself be regarded as irreconcilable with an order for specific performance, whether the termination had been effected judicially or otherwise.

[71 ] In further support of the argument that an order for specific performance would not (necessarily, at least) be irreconcilable with the outcome of the French action, a variety of submissions were made, as I have explained, to the effect that the contract remained enforceable until it was rescinded; that the obligations which the pursuers sought to enforce would remain enforceable notwithstanding rescission; that, if they did not, the decree for specific performance would be of no effect; and that the right to rescind might in any event be lost, by delay or otherwise. These submissions do not persuade me that there is no risk that the Scottish and French actions might result in irreconcilable judgments. The argument that the contract remains enforceable until rescinded does not address the question as to what happens if the Scottish court issues a judgment enforcing the contract and the French court issues a judgment which terminates it, or which proceeds on the basis that it has been terminated. It would be premature to express any concluded view as to the argument that the obligations of which specific performance is sought would remain enforceable notwithstanding rescission: it is sufficient to say that there is a risk that a different conclusion might be reached, particularly when it is borne in mind that the obligations in question are expressed as existing "during the continuance of this Agreement". I did not understand the argument that, if the obligations fell on rescission, an order for specific performance would consequently be of no effect. The argument that the right to rescind might be lost is another point which might be raised by way of defence to the French proceedings: it is not germane to the application of article 27. It in any event raises no more than a possibility.

[72 ] I would also observe that the pursuers' arguments proceed on the assumption that the only rules which require to be considered are those of the Scots common law of contract; that a repudiatory breach of a commercial agency contract on the part of the principal therefore requires to be accepted by the agent if the contract is to be terminated; that the commencement of proceedings for compensation under regulation 17 of the 1993 Regulations is not itself acceptance of the breach; and that the right to terminate the contract following such a breach can therefore be lost, notwithstanding the commencement of such proceedings, through waiver or delay. I need express no view as to whether these assumptions, or the general approach on which they are based (following Bell Electric Ltd v Aweco Appliance Systems GmbH & Co), are correct; but I would observe that the 1993 Regulations are intended to give effect to Directive 86/653, and have to be interpreted and applied with that objective in mind. I note in that connection the discussion in Bowstead & Reynolds on Agency (18^th edition, 2006) at paragraph 11-055, and in Saintier and Scholes, Commercial Agents and the Law, at pages 149-151.

[73 ] Considering the Scottish action next as one in which the pursuers seek declarator that the defenders are in material breach of contract, a judgment to that effect would have the legal consequence that the pursuers were, prima facie, entitled to terminate the contract without notice and without paying compensation to the defenders, in accordance with regulations 16 and 18(a) of the 1993 Regulations. In the French proceedings, on the other hand, the defenders seek an order for the termination of the contract "on the basis of the exclusive breach" by the pursuers, together with compensation in accordance with regulation 18(b)(i). A judgment in the Scottish action granting the declarator sought, and a judgment in the French action awarding compensation to the defenders, could therefore have mutually exclusive legal consequences.

[74 ] The pursuers' submissions to the contrary appear to me to be unpersuasive. The argument that a finding that the pursuers are in material breach of contract is not inconsistent with a finding that the defenders are also in material breach of contract is correct as far as it goes, but it does not address the implications of such findings in terms of the 1993 Regulations, or the fact that the orders sought in the French proceedings include an award of compensation. The argument that the pursuers might not elect to terminate the contract, even if the defenders were held to be in material breach, appears to me to be beside the point. Article 27 is designed to preclude the risk of judgments having mutually exclusive legal consequences. The declaratory order sought in the Scottish proceedings would entitle the pursuers to terminate the contract without paying compensation. That entitlement could not co-exist with an order in the French proceedings awarding compensation to the defenders.

[75 ] For these reasons, I am satisfied that article 27 applies to these proceedings. It was a matter of agreement that, in those circumstances, the court should decline jurisdiction and dismiss the action.

The application of Article 28
[76 ] The application of article 28 only arises if I am wrong in my conclusion that article 27 is applicable. Given my conclusion about article 27, I shall consider article 28 relatively briefly.

[77 ] The first question is whether the actions are related, as that expression is defined by article 28(3). In my opinion there can be no doubt that if the actions were not within article 27, they would be related actions for the purposes of article 28. Following the general approach proposed by Lord Saville of Newdigate in the Sarrio case, and adopting the language used by Advocate General Tesauro in The Tatry at paragraph 28 of his Opinion, it appears to me to be plain that the reasoning of the French court may concern issues which are likely to be relevant to the decision of the Scottish court: for example, whether, as the pursuers maintain, the activities of Filia and Mr Ruggeri constitute a breach of the defenders' obligations in relation to competing products; whether the decline in the defenders' sales is attributable to an interest in competing products, or to the conduct of the pursuers; and whether, as the pursuers aver, there are no grounds for complaint by the French competition authorities regarding the pricing of Trespass products in France.

[78 ] Both sets of proceedings being at first instance, the French court having jurisdiction over the subject matter of both actions, and French law permitting consolidation, this court would have a discretion under Article 28(2) to decline jurisdiction. It appears to me to be difficult to see any reason why that discretion should not be exercised. If this court were to dismiss these proceedings in order for them to be consolidated with those pending in France, the outcome would be a single litigation, resulting in a decision by which both parties would be bound: a result which would be in accordance with the overall objective of Regulation 44/2001. Merely to sist the Scottish proceedings, pending the outcome of the French action, would not appear to be likely to reduce the overall length or complexity of the litigation between the parties. Nor would it eliminate the risk of inconsistency: although the judgment in the French proceedings would be given the same effect in Scotland as a Scottish judgment (Civil Jurisdiction and Judgments Order 2001, S.I. 2001 No. 3929, Schedule 1, paragraph 2(2)), the extent to which the findings or reasoning of the French court were determinative would then appear to depend primarily on the doctrine of res judicata.

[79 ] The pursuers' submissions to the contrary appear to me to be unpersuasive. Although the contract is governed by Scots law, the facts in issue have a greater connection with France: these factors do not point clearly to one forum as being more convenient than the other. On the information provided by the pursuers, it appears that commercial litigation in France may generally take somewhat longer than equivalent proceedings in this court, but the difference is not dramatic, and the length of the particular proceedings in question, whether in Scotland or in France, appears to me to be in any event difficult to predict.

Conclusion
[80 ] In the circumstances, I am satisfied that this court should decline jurisdiction. The action will accordingly be dismissed.