In a jurisdictional challenge taken by one of the defendants in pending legal proceedings, the Irish Commercial Court (the Court) has delivered an ex-tempore decision confirming that the Irish Courts have jurisdiction to resolve an insurance claim against a Russian insurer related to aircraft stranded in the Russian Federation (Russia).
The Irish Court confirmed that the aircraft lessor had discharged the burden of proof when seeking and obtaining an earlier Order from the Court granting liberty to the lessor to issue and serve proceedings out of the jurisdiction.
In this article, we consider the decision and explore the relevant legal principles.
The proceedings arose from Russia’s invasion of Ukraine in 2022 and concerned the claim made by an Irish lessor for payment under an insurance policy relating to two aircraft leased to a Russian airline.
Service in Russia
The jurisdictional challenge arose from a decision of the High Court (McDonald J) to grant the plaintiffs leave to issue and serve the intended proceedings on a Russian registered insurance company that was one of a number of insurers named as defendants in the proceedings. The other defendants were EU registered companies who accepted the Irish Court’s jurisdiction to deal with the lessor’s claim.
The application for liberty to issue and serve the proceedings on the Russian insurer in Russia was grounded on an affidavit which explained that the lessor’s policy entitled, and indeed required, the lessor to sue all of the defendants in Ireland. Detailed affidavit evidence and legal submissions were put before the Court, grounding the application for leave pursuant to Article 25 of Regulation (EU) No. 1215/2012 (the Brussels Recast Regulation) and Order 11 of the Rules of the Superior Court (RSC).
Grounds of Challenge
In the application to set aside the Order for service of the proceedings in Russia, the Russian insurer sought to rely on the fact that it is domiciled in Russia. It further sought to argue that a separate policy of insurance held by the aircraft operator (the operator’s policy) provided for Russian jurisdiction. It was argued that the operator’s policy superseded the lessor’s policy. The operator’s policy was mentioned in the lessor’s policy.
Article 25 of the Brussels Recast Regulation
Article 25 of the Brussels Recast Regulation deals with the issue of jurisdiction in contracts to which EU registered companies are a party. Article 25 provides that where parties have contractually agreed to confer exclusive jurisdiction upon a court of an EU member state, it will be assumed that they expect those courts to determine any dispute in accordance with that clause irrespective of where the parties are domiciled. That contract must be in writing, or evidenced in writing, or in a form which accords with the practice that the parties have established between themselves or in international trade or commerce.
Order 11 RSC
In the case of the Russian insurer that challenged the Irish Court’s Order for service out of the jurisdiction, the lessor had to discharge the burden of proof and show that:
- the action was brought in relation to a contract that by its terms or implication is governed by Irish law and/or
- the action is founded on a tort committed in this jurisdiction and/or
- the second named defendant is a “necessary or proper party” to the proceedings
As in all applications under Order 11 RSC, the lessor also had to demonstrate that the case is a proper one for service out of the jurisdiction in accordance with Order 11 rule 2 and rule 5, having regard to the cost of the proceedings and the convenience of the chosen forum.
In refusing the Russian insurer’s application, the Court found in favour of the lessor both in relation to the application of Article 25 of the Brussels Recast Regulation and of Order 11 rule 1(e)(iii), rule 1(f) and rule 1(h).
Article 25 of the Brussels Recast Regulation
In relation to Article 25 of the Brussels Recast Regulation, the Court concluded that on the basis of the material before the Court, the test required to fall within the Brussels Recast Regulation was satisfied.
Notably, the Court specifically addressed the application of Article 25 to the parties “regardless of their domicile”. In summary, the Judge found that the policy document relied on by the plaintiffs is an agreement in writing evidencing a consensus between the parties that the terms and conditions contained therein govern the relationship between the parties. The Court rejected the contention made on behalf of the Russian insurer that there was any overriding clause in a separate aircraft operator’s policy document which would render the exclusive jurisdiction clause in the lessor’s policy inoperative.
Order 11 RSC
Turning to the relevant rules under Order 11, the Court confirmed that, even if the Court had not found in favour of the plaintiffs in relation to Article 25, the lessor was entitled to proceed and to have served the proceedings on the Russian insurer in Russia under Order 11 RSC. The Judge dealt with each rule relied on by the lessor in turn and below is a summary of the Court’s conclusions.
- Order 11 rule 1(e)(iii): the Court found that it was clear that, at a minimum, the lessor had established that it had a good arguable case that the relevant contract is governed by Irish law. The Court was satisfied that the jurisdictional gateway contained in that rule was met.
- Order 11 rule 1(f): the Court noted that the test to satisfy this rule is one of a good arguable case that an actionable tort was committed in the jurisdiction, not that the case is going to succeed and that the test is a low bar. On that basis, the Court held that it could not say that it was an argument that was not capable of being put forward at trial and therefore found that the lessor had satisfied the test.
- Order 11 rule 1(h): this rule required the lessor to show that the Russian insurer was a necessary or proper party to proceedings brought against other defendants within the jurisdiction. The Court identified a number of considerations arising:
- The insurer defendants are severally liable under the policy and if the plaintiffs succeed in recovering under the policy, they would not be able to recover the full amount of what they allege to be due/owed under the insurance policy unless all the defendants (including the Russian insurer) are party to the proceedings.
- If the lessor was to recover under its claims for damages for breach of contract and/or in tort, an issue would arise under the Civil Liability Act 1961 if the Russian insurer was not a party to the proceedings. The other insurer defendants could make the case that the lessor failed to pursue the Russian insurer and they should not be held liable for that party’s share of the damages.
- The question that is often asked in the case law is whether the plaintiffs would have joined the defendant if the defendant was an Irish entity. The Court said that, in this case, “the answer to that question undoubtedly is yes.”
- It is also necessary when considering this rule to identify that the lessor has a good cause of action against the other insurers in the proceedings, as well as the party outside of the jurisdiction. The Court was satisfied on the basis of the evidence before the Court that the lessor has a good arguable case against all of the insurers.
- Order 11 rules 2 and 5: In addition to satisfying one or more of the above “gateway provisions “, the Court identified the requirement for the insurers to establish that all of the criteria in rules 2 and 5 of Order 11 have also been met. The Court held that that it might naturally be concluded that Russia would be the most convenient jurisdiction in which to pursue a claim against a defendant domiciled in Russia and where the relevant assets are in Russia. However, the Court identified three countervailing factors in its assessment as to the forum conveniens for an action of this kind against Russia-based defendants:
- Risk of conflicting decisions arising between the courts of Ireland and the courts of Russia
- Possible fragmentation of the claim
The Court pointed to the possible “mischief of fragmentation” as identified by the Court in IBRCas a consideration which applies very strongly in this case and which favours Ireland as the convenient forum to hear and determine this claim. The Court pointed to the decision in IBRC that the consideration of the most convenient forum in relevant cases “requires the court to consider whether the claim is part of a larger overall dispute which would be damaged by being fragmented.” The Court concluded that “…it would make no sense that the claim against the insurers would not be pursued in a single claim where all of the issues are likely to arise...”
- Difficulties in pursuing the claim against the Russian defendant in Russia
The Court referred to the uncontroverted evidence adduced on behalf of the lessor concerning the difficulties that would arise if the proceedings had to be commenced in Russia against the Russian defendant. Examples referred to by the Court included:
- The requirement for the lessor to adduce expert evidence on Irish law in Russian courts
- The additional costs of running a second set of proceedings
- The prevailing political circumstances of relations between the EU and Russia
- The apprehension the lessor had in obtaining services in Russia necessary to travel to, and litigate in, that jurisdiction including transport, security, translation, legal, accommodation and other services
- The necessity for a party who wishes to transact with Russians or Russian entities to undertake significant due diligence to establish that its actions are not contrary to applicable sanctions
- The difficulties in obtaining banking and messaging services in Russia
- The guidance from the Irish Department of Foreign Affairs to Irish citizens about the safety concerns in respect of travel to, and spending time in, Russia
The High Court’s decision in this case is currently under appeal by the Russian insurer with a decision of the Court of Appeal expected within the coming months.
This decision of the Commercial Court sets out comprehensively the considerations that will be relevant both to an application to serve out of the jurisdiction and to an application to set aside such service. Notably, the Judge considered both the position under Article 25 of the Brussels Recast Regulation and the gateway provisions under Order 11 RSC. Of particular interest may be the comments made by the Court in respect of the countervailing factors that the Court considered in the context of the analysis of the requirement to identify the forum conveniens under rules 2 and 5 of Order 11 RSC.
We will provide updates as this matter progresses.