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ceri_morgan_phThe Supreme Court has recently heard an appeal on the interpretation of Article 27 of Regulation 44/2001 of the Council of the European Union (the Judgments Regulation).

Background Facts

This case arises out of the sinking of a vessel known as the “Alexandros T”.  The owners, Starlight Shipping Company made a claim against their insurance policy, and when the claim was not paid, commenced proceedings in England against their insurers (the “Original Action”).  The insurance policies contained clauses providing for the exclusive jurisdiction of the Court of England and Wales, hence the Original Action was brought in this jurisdiction.  The insurers vigorously denied liability, principally because of allegations that Starlight (and their managers) knew that the Alexandros T was unseaworthy.  Starlight countered this with allegations of serious misconduct by the defendant insurers in tampering with and bribing witnesses to give false evidence and in spreading false and malicious rumours against Starlight.  The Original Action was compromised by written settlement agreements for 100% of the claim (but without interest and costs) and recorded in Tomlin Orders.  Both settlement agreements had English jurisdiction clauses, one was exclusive and one was not.

However, more than three years later, Starlight (together with its manager and co-assureds) commenced nine actions in Greece claiming damages from the insurers for late payment of the insurance monies and in respect of misconduct by the insurers in the context of the insurance claim (the “Greek Proceedings”).  The insurers made an application to the English court pursuant to the Tomlin Orders for summary judgment for (inter alia): (i) a declaration that the subject matter of the Greek Proceedings was part and parcel of the settlement of the Original Action; and (ii) that Starlight (and their managers) were bound to indemnify the insurers against any costs or sums incurred as a result of the Greek Proceedings.  The insurers also commenced various sets of fresh proceedings (without prejudice to their application in the Original Action above) against Starlight, its manager and co-assureds.  The summary judgment application and fresh proceedings will be referred to together as the “New English Proceedings”.  Starlight and its associates applied for a stay of the New English Proceedings, originally on the basis of Article 28, and later pursuant to Article 27 of the Judgments Regulation.

Decision of the High Court

Mr Justice Burton found for the insurers and granted summary judgment in the terms sought.  He held that the Greek Proceedings contained claims that were within the scope of the settlement agreements in the Original Action, and so the revival of such claims was in breach of those agreements.  He also held that the Greek Proceedings constituted a breach of the jurisdiction clauses in the settlement agreements and original insurance policies.  The Judge acknowledged that the Greek court would need to proceed to consider the Greek Proceedings, but found that the English Court was plainly first seised of the matters in issue as they were raised in the Original Action (and that they were also within the ambit of the settlement agreements and therefore the Tomlin Orders).

The application by Starlight and its associates for a stay under Article 28 of the Judgments Regulation was issued extremely late in the day, just before trial.  Article 28 gives the court of an EU member state the discretion to stay related pending actions, if it is not the court first seised.  Burton J decided that the English court was first seised of the Original Action and as such he had no discretion to exercise.  Whilst he accepted that the English court was not first seised in relation to the fresh claims issued in the New English Proceedings, he found that Starlight and its associates were too late to apply for a stay because they had already submitted to the jurisdiction by filing acknowledgments of service and defences.  Even if he was wrong on this point, he would have refused a stay because Starlight and its associates were in breach of the exclusive jurisdiction clauses in the insurance policy and the settlement agreements.

Article 27 was not raised before Burton J at first instance, but Starlight applied for permission to appeal on the basis of both Articles 27 and 28 and permission on both points was granted.  The Court of Appeal therefore had to consider both Articles.

Decision of the Court of Appeal

The Court of Appeal first looked at Article 27, which states as follows:

“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 of the action 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.”

The insurers argued that it was too late for Starlight and its associates to rely upon Article 27 (or Article 28), because they had already filed acknowledgments of service (without indicating an intention to challenge jurisdiction) and defences.  However, applications under Articles 27 and 28 are not challenges to the jurisdiction, but rather tools to regulate the situation where there are proceedings pending in the courts of multiple member states.  If an application is made under either Article, there is an acceptance that the court to which the application is made may have jurisdiction, but the application requests the court to refrain from exercising that jurisdiction.  Accordingly, the Court of Appeal held that submission to the jurisdiction was not a bar to later raising arguments under these Articles.  Various other arguments as to timing were also dismissed.

The key issue on appeal was whether the various proceedings in England and Greece contained the same cause of action, and if so, which court was first seised.  This differed to the discussion at first instance, where only Article 28 was considered, and at which point the question was simply whether the actions were related.  The Court of Appeal carefully considered the principles derived from the key authorities in which Article 27 has been discussed.  In his leading judgment, Longmore LJ explained that whether a cause of action is the same means “whether the substance of the proceedings and the object for which they are being pursued are the same”.  This involves looking at the complaint and not the defences.  However, where there is a claim for a declaration of non-liability which is the ‘mirror image’ of a cause of action in another member state, then those causes of action will be considered the same, for the purpose of Article 27.  The Greek Proceedings originally claimed damages from the insurers for late payment of the insurance monies.  This was problematic for the Starlight parties in the context of their jurisdictional argument, as the Greek claim relied upon the same contact of insurance as the one in issue in the Original Action.  However, Starlight and its associates subsequently abandoned all reliance on the contract of insurance in the Greek Proceedings (presumably after realising the effect it would have on arguments under Article 27).  The remaining claims in the Greek Proceedings were all based in tort, similar to the torts of defamation and malicious falsehood in English law.

At the heart of the New English Proceedings were assertions by the insurers that they were not liable in respect of the claims in Greece.  On that basis the court held that there was an identity of issues between the Greek Proceedings and the New English Proceedings and the respective causes of action were the same.  To the extent that the allegations in the New English Proceedings related to breach of the settlement agreements or breach of the jurisdiction clauses, the court found that they were parasitic and dependent on the basic cause of action for a declaration of non-liability. The court held that there was a considerable risk of inconsistent judgments if one of the sets of proceedings was not stayed and the rationale behind Article 27 therefore favoured a stay if the Greek court was the court first seised.

As to which court was first seised, the Court of Appeal again emphasised that Article 27 only has regard to causes of action, rather than proceedings.  It was impossible to consider the Greek Proceedings (containing tortious claims for defamation and malicious falsehood) as being the same as the Original Action in England (containing Starlight’s original claim to be indemnified under the insurance policy).  The Original Action was therefore irrelevant on this question of jurisdiction under Article 27.  Of the Greek Proceedings and New English Proceedings, those in Greece were clearly commenced first in time.

The Court of Appeal therefore decided that the New English Proceedings should be stayed under Article 27 and made an order to set aside the summary judgment granted by Burton J.  It was not necessary for the court to consider Article 28.

Appeal to the Supreme Court

The insurers appealed to the Supreme Court on the basis of Article 27, and there was a 2-day hearing before Lords Neuberger, Mance, Clarke, Sumption and Hughes on 8 and 9 July 2013.  It will be interesting to see whether they take a broader approach to the interpretation of Article 27 than the Court of Appeal.