Lis pendens under Brussels I (Recast): two recent cases

In this blog post, Lizzie Boulden considers two recent cases applying the lis pendens provisions of Brussels I (Recast). They are: The Federal Republic of Nigeria v Royal Dutch Shell Plc and Ors [2020] EWHC 1315 (Comm) and Awendale Resources Incorporated v Pyxis Capital Management Ltd [2020] EWHC 1286 (Ch).

It will be recalled that, under art. 29 of Brussels I (Recast), the court must of its own motion stay its proceedings where proceedings “involving the same cause of action and between the same parties are brought in the courts of different Member States.” The key points arising from the two new cases are as follow:

• The starting point in considering lis pendens under art. 29 remains the comprehensive guidance of Lord Clarke in The ‘Alexandros T’ [2013] UKSC 70. This important guidance is set out in full below.
• The fact that the parallel proceedings involve slightly different constellations of parties does not affect the analysis of whether there exists a lis pendens in respect of any two of those parties.
• Two technically separate legal entities will, in certain circumstances, be considered “the same parties” for the purposes of the lis pendens rules.
• If the parties are the same, the question then becomes whether the basic facts and basic claimed rights in the two sets of proceedings are the same when “due allowance” is given for any minor differences between proceedings brought in different national courts.
• Although art. 29 requires the court to stay the proceedings “of its own motion”, it can apparently decline to do so where a defendant has failed to make a timely request for a stay under CPR r. 11(4) (although Lord Clarke did not think that this approach was “acte claire” in The ‘Alexandros T’ [2013] UKSC 70).
• A defendant’s request for an extension of the time limit under CPR r. 11(4) will be dealt with under the court’s general powers of case management and not as an application for relief from sanctions (but contrast the approach in Lackey v Mallorca Mega Resorts and Anor [2019] EWHC 1028 (QB), which we blogged about here).
• In considering such an application, the risk of irreconcilable judgments in different EU Member States seised with proceedings falling under art. 29 will be a strong reason for granting an extension of time for compliance with CPR r. 11(4).
  

Lis Pendens

Both of these cases centred around art. 29 of the Brussels I (Recast), which says this:

1. Without prejudice to Article 31(2), 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. In cases referred to in paragraph 1, upon request by a court seised of the dispute, any other court seised shall without delay inform the former court of the date when it was seised in accordance with Article 32.
3. 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.

The judges in both cases agreed that the starting point in interpreting this provision is Lord Clarke’s analysis at paragraph 28 of The ‘Alexandros T’ [2013] UKSC 70. He said:

“(i) The phrase “same cause of action” in Article [29] has an independent and autonomous meaning as a matter of European law; it is therefore not to be interpreted according to the criteria of national law […]

(ii) In order for proceedings to involve the same cause of action they must have ‘le même objet et la même cause’. This expression derives from the French version of the text. It is not reflected expressly in the English or German texts but the CJEU has held that it applies generally […]

(iii) Identity of cause means that the proceedings in each jurisdiction must have the same facts and rules of law relied upon as the basis for the action: see The Tatry at para. 39. As Cooke J correctly stated in JP Morgan Europe Ltd v Primacom AG [2005] 1 CLC 493 at para 42:

“The expression “legal rule” or “rule of law” appears to mean the juridical basis upon which arguments as to the facts will take place so that, in investigating “cause” the court looks at the basic facts (whether in dispute or not) and the basic claimed rights and obligations of the parties to see if there is coincidence between them in the actions in different countries, making due allowance for the specific form that proceedings may take in one national court with different classifications of rights and obligations from those in a different national court.”

(iv) Identity of objet means that the proceedings in each jurisdiction have the same end in view […]

(v) The assessment of identity of cause and identity of object is to be made by reference only to the claims in each action and not to the defences to those claims […]

(vi) It follows that Article [29] is not engaged merely by virtue of the fact that common issues might arise in both sets of proceedings. I would accept the submission on behalf of the CMI that this is an important point of distinction between Articles [29] and [30]. Under Article [30] it is actions rather than claims that are compared in order to determine whether they are related. […]”

FRN v Royal Dutch Shell Plc [2020] EWHC 1315 (Comm)

Background

This case revolved around allegations of bribery in respect of the purported acquisition of an oil exploration licence. There were 13 defendants, of which the first defendant, Royal Dutch Shell Plc, was the anchor defendant.

Criminal proceedings against some of the defendants or their employees, including Royal Dutch Shell Plc, had been brought in Italy. The individual employees were charged with international bribery, and Royal Dutch Shell Plc and another of the defendants had been charged with administrative wrongdoing.

Civil proceedings had also been brought in Italy, as an adjunct to the criminal proceedings, against Royal Dutch Shell Plc and some of the other defendants, effectively alleging vicariously liability for the individual employees’ alleged misconduct.

The claimant sought financial remedies in both the English and the Italian civil proceedings, although the claimant also sought the rescission of an agreement in the English civil proceedings. The defendants disputed the jurisdiction of the English court on the basis of the Brussels I (Recast) lis pendens provisions.

Decision

Mr Justice Butcher held that, pursuant to art. 29 Brussels I (Recast), the English court had to decline jurisdiction over the action brought by the claimant against Royal Dutch Shell Plc. Accordingly, as Royal Dutch Shell Plc was the anchor defendant, the court had no jurisdiction over the other defendants.

In reaching this decision, the judge considered whether the English and Italian civil proceedings had the “same cause” and “same object”, as well as giving consideration to whether the two sets of proceedings were between the same parties. The judge reached the following conclusions:

• The English and Italian civil proceedings were between the same parties. The claimant had contended that the proceedings were not between the same parties because the Italian proceedings also included the Public Prosecutor of Milan (“PPM”) as a party. The judge rejected this argument, finding that the PPM was not a party to the civil proceedings, and that the Italian criminal proceedings did not fall under the scope of art. 29.
• Further, the fact that each set of proceedings involved other parties did not prevent the application of art. 29, which would apply insofar as there were parallel proceedings between the Federal Republic of Nigeria and Royal Dutch Shell Plc in the two jurisdictions.
• The judge also determined that, just because one party might have a degree of control over the proceedings (as the PPM was said to have over the Italian criminal proceedings), it did not mean that this party should be regarded as the relevant party for the purposes of determining whether art. 29 applied.
• The “cause” was the same in the two sets of proceedings against Royal Dutch Shell Plc. Mr Justice Butcher found that the basic facts were the same in the two sets of proceedings. He also found the basic claimed rights to be the same. The judge noted that the different formulations of these rights in the two claims fell under the “due allowance” for differences between proceedings brought in different national courts.
• The “object” of the English and Italian civil proceedings was the same. The judge held that the claims against Royal Dutch Shell Plc in both sets of proceedings had the “same end in view”. He noted that the only relief claimed in the Italian proceedings was monetary relief, which was a key part of the relief claimed in the English proceedings. He rejected the claimant’s argument that the other remedies claimed the English proceedings meant that the two sets of proceedings had different objects: he found that the tracing claims against defendants other than Royal Dutch Shell Plc were not of relevance as there was no tracing claim against Royal Dutch Shell Plc; he found that there was no claim for rescission against Royal Dutch Shell Plc, who were not party to the relevant agreement; and he held that the seeking of a declaration in the English proceedings did not make the “end in view” different to that in the Italian proceedings. The judge also noted that there was a risk of inconsistent decisions as to the validity of certain agreements if the two sets of proceedings were to go ahead in different jurisdictions.

Awendale Resources Incorporated v Pyxis Capital Management Ltd [2020] EWHC 1286 (Ch) (22 May 2020)

Background

In this case, the claimant company sought payment of a debt from the defendant company, such debt being alleged to be due pursuant to a series of loan agreements.

The defendant, Pyxis, admitted that it had failed to make the repayments of the principal sum and interest due; however, it argued, inter alia, that the loan agreements were void or voidable, that the provision for default interest was a penalty and unenforceable, and that there was an agreement to defer payments. The loan agreements had a clause for exclusive jurisdiction of the English courts.

In Cyprus, derivative proceedings had been brought by a shareholder of Pyxis, with the defendants being Awendale and Pyxis, as well as the former director of Pyxis. The shareholder sought a declaratory judgment for, inter alia, deceit, fraud and unlawful means conspiracy. The relief claimed included, in brief (i) a declaration that the interest rate and repayment margin terms of the loan agreements were invalid and (ii) a declaration that the loan agreements were invalid.

In the English claim, Pyxis did not dispute jurisdiction on the acknowledgement of service, and nor did it file an application to dispute jurisdiction within 14 days of this in accordance with CPR r. 11(4). The defence (by agreement served approximately two months later) then raised the argument that the Cypriot court had exclusive jurisdiction because the derivative claim was pending and Awendale had entered an unconditional appearance there and thus submitted to the jurisdiction. Over three weeks later, Pyxis made an application to dispute jurisdiction seeking a stay under art. 29 until the jurisdiction of the Cypriot court was established.

Decision

In summary, Tom Leech QC, sitting as a Judge of the Chancery Division, concluded that the English and Cypriot proceedings involved the same cause of action and were between the same parties. The judge granted an extension of time for Pyxis’ application made under CPR r. 11(4), and, accordingly, the English claim was to be stayed under art. 29.

• The judge held that the two sets of proceedings involved the same cause of action. The question of whether the loan agreements (and the default interest provision) were binding was at the heart of the two actions. Any claims against the former director in the Cypriot proceedings were held to be irrelevant to the question of whether the claim by the shareholder against Awendale in the Cypriot court was the mirror image of the claim by Awendale against Pyxis in the English court.
• The judge also held that the same parties were involved in both the Cypriot and English proceedings. The judge quoted paragraphs 86-90 of Kolden Holdings Ltd v Rodette Commerce Ltd [2008] 1 Lloyd’s Rep 434, in which Lawrence Collins LJ set out the test for separate entities being regarded as identical for the purposes of Article 29. In brief: 1) the parties must be “identical” (although two separate legal entities could be identical), 2) a decision against one must be res judicata against the other, and 3) their interests must be “identical” and “indissociable”.
• The issue between the parties in the instant case was whether, on the facts, the shareholder had standing to bring the derivative action in Cyprus; however, the judge held that, in line with Kolden, there only needed to be a “good arguable case” that the interests of the parties were “identical” and “indissociable”. On the facts, the judge found that there was a good arguable case that the shareholder had standing to bring the derivative action in Cyprus. Further, he found that the fact that Pyxis was a defendant rather than a claimant to the Cypriot proceedings was a matter of form and not substance – any remedy in the Cypriot proceedings would be awarded to Pyxis and not to the shareholder bringing the proceedings.
• The judge held that any party who failed to apply to stay proceedings under art. 29 within the time limit in CPR r. 11(4) would be deemed to have submitted to the jurisdiction. He therefore declined to stay the proceedings under art. 29 unless the defendant was able to persuade him to extend the time for compliance under CPR r. 11(4).
• However, the judge exercised his case management powers pursuant to CPR r. 3.1(2)(a) to extend the time for the defendant to comply with CPR r. 11(4) (namely, the 14-day time limit for a defendant to apply to dispute jurisdiction after filing the acknowledgement of service). He rejected the claimant counsel’s argument that the Denton test for relief from sanctions applied, using the reasoning of Blair J at paragraph 30 of SET Select Energy GmbH v F & M Bunkering Ltd.
• One of the factors which the judge took into account in the exercise of his discretion was the context in which the application for extension of time was made, i.e. that it was an application under art. 29, as per paragraph 27 of SET Select Energy. He held that the context – namely, the risk of irreconcilable judgments in different EU Member States seised with proceedings which fell under art. 29 – was a strong reason for him to extend time for compliance under CPR r. 11(4). Further, the claimant, Awendale, was not able to point to any specific prejudice or detriment that it had or would suffer if the time for compliance were to be extended.

The exclusive jurisdiction clause in the loan agreements arose under this point. Whilst, in the normal course of events, the judge would have given effect to this clause and refused an extension of time, Awendale had provided no explanation for its failure to apply to set aside the Cypriot court’s order for service out of the jurisdiction or for its failure to apply for a stay in the Cypriot court pursuant to art. 31(2). The judge held that it was Awendale’s decision to submit to the jurisdiction of the Cypriot court pursuant to art. 26.

Comment

These two cases give clarification of the principles to be considered and applied when applications are made to contest jurisdiction pursuant to art. 29 of Brussels I (Recast). In particular, the cases of The ‘Alexandros T’ and Kolden Holidings continue to provide helpful guidance on whether two sets of proceedings in different jurisdictions have the same parties and the same cause of action. The key learning points are summarised at the start of this blog.