The Court of Appeal ruled that a company which provides benefits to employees of associated group companies may be regarded as an employer if it provides those benefits to reward and encourage the employees for the benefit of their employer and the group as a whole. The decision gives a wide interpretation to the meaning of 'employer' under the Recast Brussels Regulation.

Blog by Amelia Payne and Simon Hart

The US parent company was considered to be the "employer" of its English subsidiary's senior employee under Section 5 of the Recast Brussels Regulation (1215/2012) (the "Regulation") despite there having been an express choice of Massachusetts law and exclusive jurisdiction clause in favour of the courts of that state incorporated into a share distribution scheme agreement. The Court of Appeal also granted an anti-suit injunction prohibiting the parent company from continuing proceedings brought against the employee in Massachusetts.

The facts

James Petter was employed by EMC Europe Ltd ("EMC Europe"), an English company. However, a large part of Mr Petter's remuneration comprised shares in EMC Corporation ("EMC Corp"), the US parent company, granted under a share distribution scheme (the "Stock Plan").

Mr Petter left EMC Europe and began working for a competitor of EMC Corp. In response, EMC Corp began proceedings against Mr Petter in Massachusetts seeking declarations that it was entitled under the terms of the Stock Plan to rescind the most recent awards of stock to him (the "US Proceedings").

Mr Petter began proceedings in the English High Court against both EMC Europe and EMC Corp claiming, inter alia, that the relevant provisions of the Stock Plan were unenforceable, and also seeking an anti-suit injunction prohibiting EMC Corp from pursuing the US Proceedings. Mr Petter served EMC Corp out of the jurisdiction on the basis that it was his employer and party to a contract of employment within Article 20 of the Regulation.

EMC Corp challenged the jurisdiction of the English court on the grounds that the Stock Plan stipulated submission to the exclusive jurisdiction of the Massachusetts courts.

Decision

The facts of the case bore a striking similarity to those of Samengo – Turner v J&H Marsh & McLennan (Services) Ltd [2007] EWCA Civ 723 and the Court of Appeal focussed heavily on the decision. In Samengo-Turner the Court of Appeal granted employees an anti-suit injunction to restrain proceedings brought against them in New York under a bonus scheme containing a New York jurisdiction clause, on the grounds that the US parent was an "employer" under the old Brussels I Regulation entitling the employees to be sued only in England.

Jurisdiction

The Court of Appeal held that the Stock Plan with EMC Corp formed part of the contact of employment and therefore the provisions of section 5 of the Regulation applied, which governs jurisdiction over individual contracts of employment, so as to render EMC Corp an "employer" of Mr Petter where it might not otherwise have been so under a strict English contract law interpretation. As a result, the English court had jurisdiction under Article 21 as the country in which Mr Petter had last habitually carried out his work for the EMC group.

The decision also meant that EMC Corp could only bring proceedings against Mr Petter in England pursuant to Article 22 as his country of domicile. The jurisdiction clause in favour of Massachusetts was, in the case of Mr Petter, of no legal force as a result of Articles 23 and 25. Article 23 provides that the provisions of Section 5 may be departed from only by an agreement which is entered into after the dispute has arisen; or which allows the employee a wider choice of venue than indicated in the Section; and under Article 25, agreements conferring jurisdiction have no legal force if they are contrary to Article 23.

Anti-suit injunction

At first instance, Cooke J, refused to grant an anti-suit injunction to restrain EMC Corp from pursuing the proceedings in Massachusetts on grounds of international comity and because the court did not consider the proceedings to be vexatious or oppressive (given that the Massachusetts courts had been agreed as the contractual choice of forum). Cooke J did not consider himself to be bound by the decision of Samengo-Turner as his decision involved an exercise of discretion.

The Court of Appeal disagreed. Moore-Bick LJ, giving the lead judgment, stated that the principle emerging from Samengo-Turner was that in a case falling within section 5 of the Regulation, an anti-suit injunction should ordinarily be granted to restrain parallel proceedings and protect the employee's rights.

Vos LJ did, however, consider that the argument for an injunction based on an agreed exclusive jurisdiction clause was more attractive than one based on a statutory right. However, he considered that the court was bound by Samengo-Turner to grant an anti-suit injunction.

A flurry of activity

In a pre-emptive strike to the Court of Appeal judgment, between the hearing and judgment being handed down, EMC Corp moved the Massachusetts court to grant an injunction restraining Mr Petter from taking any further steps in the English proceedings and applied for summary judgment on the claim.

Naturally, such activity led to a further judgment of the Court of Appeal, in which it criticised EMC Corp's behaviour and granted a further injunction, mandating EMC Corp to withdraw its motion for summary judgment in Massachusetts. Moore-Bick LJ stated that, whilst the court was "acutely conscious of the demands of comity and the courtesy due from one court to another…the course of events…strongly suggested that EMC had made a last minute attempt to pre-empt the decision of this court by seeking to obtain an anti-suit injunction before this court was able to deliver its judgment…EMC had demonstrated not only that it was prepared to engage in a race to judgment, but that, if an order were made in this jurisdiction first, it was unwilling to abide by the outcome".

Comment

This decision suggests that Samengo-Turner cannot be dismissed as an aberration. English courts have little choice but to follow it when presented with similar facts, even if that involves disregarding an exclusive jurisdiction agreement.

The decision has sparked a degree of controversy as to the Court of Appeal's apparent willingness to exercise a jurisdiction beyond the limits of its own territoriality under the Regulation.