PHP v Tobacco Carib Sarl v BAT Caribbean SA [2016] EWHC 3377 (Comm): Brussels Recast & third party claims

This blog is by Max Archer of 12 King’s Bench Walk.

The claimant in this case was French company engaged in importing tobacco products to Guadeloupe and Martinique. The defendant was Panamanian company within the wider BAT corporate group.

The claimant had a five-year distribution agreement with the defendant. The agreement provided for English law and exclusive jurisdiction. This agreement came to an end without any further agreement to renew it.

The claimant commenced English proceedings in pursuit of what it claimed was a ‘margin pay-out’ of €6.5 million. It was claimed that it was entitled to this pay-out pursuant to the agreement as a result of the failure to renew. The defendant denied any entitlement to a pay-out and counterclaimed for numerous unpaid invoices and for €8.5 million of VAT recovered from the French VAT authorities. The Defendant argued that it was to be paid these VAT monies pursuant to an oral agreement.

The claimant denied these allegations and alleged that there was no enforceable agreement. The claimant argued that the agreement in respect of the VAT monies did not lie with itself but with the other group companies (the proposed third and fourth defendants). These companies had been subcontracted to carry out distribution in the relevant territories and had recovered the VAT monies themselves.

The Application

The defendant made an application for permission to bring additional claims against the third and fourth defendants as additional defendants to its counterclaim. The defendant wanted to pursue its contractual and unjust enrichment claims in respect of the VAT recovery by way of these proposed part 20 claims. The Claimant claimed the following:

1. The English court did not have jurisdiction to entertain the proposed claim against the third and fourth defendants;
2. The English court would be bound to stay the proposed part 20 claim against the third and fourth defendant under Article 29 of the Brussels I (Recast) Regulation; and
3. That therefore, and in any event, because of delay in making the joinder application and other discretionary factors, joinders should be refused.

It should be noted that before the application was heard by the court the third and fourth defendant issued proceedings in France against the defendant seeking negative declaratory relief.

Judgment

Judgment was given by Mr Justice Barker.

It was held that art. 8(2) was broad enough to deal with the third party claims brought by the defendant. It was not, as the claimant had submitted, limited to third party claims where the defendant sought to pass on liability to a third party by way of a contribution or indemnity. The judge found that the only express limitation on its use was directed at preventing third party claims aimed at removing a party from the jurisdiction of a court that would otherwise be competent. It was felt that the ECJ and domestic authorities indicated that a close connection was required between the additional claims and the original proceedings. In this case there was a close connection given the nature of the counterclaim for the VAT brought against the Claimant.

It was held that once the proposed defendants were joined the English proceedings against them would be stayed under art. 29 so that the French court could consider the defendant’s challenge to the French jurisdiction.

Comment

This case serves as a useful reminder to all private international law practitioners that Brussels I (Recast) can be interpreted very broadly. The claimant’s attempt to give art 8(2) a narrow reading was defeated by the judge’s interpretation of the ECJ authorities which highlight the importance of there being a close connection between the additional claims and the proceedings. This would seem to be a practical approach to art. 8; it would be very surprising if there was no room for counterclaims of this nature within the regulations. This does not mean that all third party claims will come under this article, as the judge said, there is an express limitation. That this limitation did not apply here seems uncontroversial, the connection between the claim brought meant that surely this was not a case of the defendant solely attempting to subvert the jurisdiction of a court elsewhere.