A recent decision of the English Supreme Court, the “Alexandros T” [2013] UKSC 70, saw the Court grapple with the issues of a complex jurisdictional battle between English insurers and the Greek owners of the vessel “Alexandros T”. The case involved an extensive examination by the Supreme Court of various articles of EC Regulation 44/2001 (commonly known as the Brussels Regulation) and European and domestic case law.

The Brussels Regulation - Background

The Brussels Regulation was implemented in furtherance of the EU’s objective of developing an area of freedom, security and justice, in which the free movement of persons is ensured. To achieve this goal, the Member States identified that measures relating to judicial cooperation in civil matters were necessary for the sound operation of the internal market. The Brussels Regulation provides a framework (a) for the courts of Member States to establish jurisdiction over matters; and (b) to simplify the formalities for the recognition and enforcement of judgments given in Member States.

Article 27 of the Regulation aims to prevent the courts of Member States giving inconsistent judgments in circumstances where proceedings involve the same cause of action and the same parties. Article 28 of the Regulation is concerned with avoiding the risk of irreconcilable judgments in related actions. Where actions are deemed to be ‘related’ according to the Brussels Regulation (i.e. so closely connected that it is expedient to hear and determine them together), courts of the Member States other than the court first seised have discretion to stay proceedings or decline jurisdiction.

The facts of the "Alexandros T"

Following the total loss of the vessel "Alexandros T" in May 2006, proceedings were issued by its Greek owners, Starlight Shipping Company, in the English Commercial Court in August 2006 against its insurers (the 2006 English Proceedings), who had declined to indemnify Starlight. The defendant insurers were Company Market Insurers (CMI) and Lloyd’s Market Insurers (LMI). The policies issued by both the CMI and LMI contained jurisdiction clauses providing for the parties to submit to the exclusive jurisdiction of the English Court.

The 2006 English Proceedings were settled by the LMI in December 2007 and by the CMI in January 2008. The settlement agreements included terms inter alia that (a) the settlement was in “full and final settlement” of claims relating to the loss of the "Alexandros T"; (b) Starlight and the managers of the vessel, OME, agreed to indemnify insurers against any claims brought against them by Starlight (or associated companies) in relation to the loss of the vessel; and (c) the settlement agreements were subject to English law and the exclusive jurisdiction of the English Court.

Background to the appeal

In April 2011, Starlight and other associated parties issued nine sets of proceedings in Greece against various defendants including the LMI and CMI (the Greek Proceedings). In response, the LMI and CMI issued applications in the 2006 English Proceedings for, amongst other things, declarations that the Greek claims fell within the terms of the releases in the LMI and CMI settlement agreements and declaratory relief and damages for breach of the exclusive jurisdiction clauses in the insurance policies and the settlement agreements. In addition to issuing applications in the 2006 English Proceedings, the insurers also brought fresh English Proceedings against Starlight and OME seeking similar relief to that sought in the applications made in the 2006 English Proceedings.

At first instance, the judge had to decide whether the English Proceedings brought by insurers should be stayed pursuant to Article 28 of the Regulation, which gives discretion to a court of a member state of the EU to stay related pending actions if it is not the court first seised. The judge held that insurers were entitled to summary judgment for, among other things, a declaration that the matters sought to be raised in the Greek Proceedings were part of the settlement of the claim and as a result Starlight was bound to indemnify insurers against any costs incurred and any sums adjudged against them in the Greek Proceedings. At first instance, Starlight did not rely on Article 27 of the Regulation.

However, on appeal Starlight relied on Article 27 of the Regulation submitting that the claims advanced by insurers in England involved the same cause of action as the claims in the Greek Proceedings. Furthermore, Starlight submitted that the Greek court was the court first seised as the Greek Proceedings had been commenced before the relief being sought by insurers in England and therefore a stay of the English Proceedings was mandatory. The Court of Appeal found in favour of Starlight and held that it was bound to stay the English Proceedings pursuant to Article 27 of the Regulation. As a result of the Court of Appeal’s finding in relation to Article 27, any issues concerning Article 28 were rendered academic as the Court of Appeal did not need to reach a finding in relation to the application of Article 28.

The Supreme Court decision

The insurers appealed against the Court of Appeal’s finding in relation to Article 27 of the Regulation and submitted that the judge at first instance was correct to refuse a stay under Article 28 of the Regulation. Starlight cross-appealed the judge’s finding in relation to Article 28.

Article 27

Delivering the leading opinion and the majority decision of the Supreme Court, Lord Clarke stated that the essential question was ‘whether the claims in England and Greece are mirror images of one another, and thus legally irreconcilable … in which case Article 27 applies, or whether they are not incompatible … in which case it does not.’

The claims advanced by the insurers (the claims of the LMI and CMI were examined separately) were considered under three heads: indemnity, exclusive jurisdiction, and release. As explained above, for Article 27 to apply the respective causes of action being examined for the purposes of Article 27 must have the same object and the same cause. Lord Clarke found that that the causes of action being relied upon in the Greek Proceedings were claims in tort (or its Greek equivalent) and the object of the Greek Proceedings was to establish liability under Greek law akin to tort. These claims were not a ‘mirror image’ of the claims brought in England by insurers which were contractual claims (even if the outcome might be the same).

Lord Clarke held that Article 27 did not apply to any of the causes of action advanced by or against the insurers and therefore the English Court should refuse a mandatory stay of the English Proceedings.

Article 28

It was not in dispute that the various proceedings were related for the purposes of Article 28.

The Supreme Court held that the English Court was first seised for the purposes of Article 28 as the 2006 English Proceedings had been stayed by virtue of the settlement agreements entered into by the LMI and CMI and Starlight. As such, the 2006 English Proceedings were still on foot and, according to Lord Clarke, the ‘actions remained unstayed for the purposes of carrying into effect the terms agreed and were otherwise stayed.’ As the English Court was first seised, the English Court did not have the discretion to grant a stay pursuant to Article 28.

However, the Supreme Court considered the issue of discretion on the assumption that the English Court was second seised for the purposes of Article 28. The grant of a stay under Article 28 is discretionary and not mandatory. Lord Clarke held that there was a strong argument that the Greek Proceedings had been brought in breach of the terms of the settlement agreements and the insurance policies (both of which were subject to the exclusive jurisdiction of the English Court). In addition, Lord Clarke held that there was no reason why, in exercising discretion under Article 28, the court should not take into account that the parties had previously agreed an exclusive jurisdiction clause in favour of the English Court. As a result, the Supreme Court upheld the decision of the first instance judge in refusing a stay under Article 28.

Comment

This decision reflects the forthcoming (January 2015) amendments to the Brussels Regulation, which will give precedence to the court chosen by the parties over all other courts regardless of when proceedings are started. The recast Regulation will also exclude arbitration from its scope, and introduce a discretion to stay proceedings in favour of non-EU courts. This will mean that the court specified in the clause can determine jurisdiction and proceed with litigation, regardless of whether it was the court first seised.

Now that the Supreme Court has ruled there is to be no stay in the English Proceedings, the case will go back to the Court of Appeal for it to determine the remaining outstanding issues.