When considering the detailed and somewhat rigid jurisdiction rules set out in the Recast Brussels Regulation (EU 1215/2012) (the "Regulation"), it is easy to forget that they apply only to disputes concerning "civil and commercial matters". This is for the simple reason that most B2B disputes fall squarely into this category. So long as none of the exceptions in Article 1 of the Regulation applies - for example, because the case concerns revenue matters or arbitration - its material scope is usually broad enough to encompass the dispute in hand. The fact that "civil and commercial" is not fully explained in the Regulation may worry some academics, but does not generally present a problem in practice.
So the recent jurisdictional skirmish between Goldman Sachs International and others (the "Claimants") and Novo Banco SA (the "Defendant") is something of an exception. Here the claimants, who were owed by the Defendant around $835 million, asserted that the unpaid debt was a "civil and commercial matter" and therefore subject to the usual jurisdictional rules set out in the Regulation. The Defendant took the opposite view, relying on the fact that the loan had initially been made to Banco Espírito Santo SA ("BES"), before the Bank of Portugal ("BoP") transferred some of BES' assets and liabilities to the Defendant, exercising powers given to BoP under the Bank Recovery and Resolution Directive (2014/59/EU) (the "Directive"). This provides a Europe-wide mechanism for the rescue of credit institutions and investment firms in serious financial difficulty.
The situation was complicated further by BoP subsequently declaring that the debt in this dispute had not in fact been transferred to the Defendant. However, the court found this to be of limited significance under the applicable (English) law, given that BoP made the declaration without exercising its powers under the Regulation, and the Claimants anyway did not rely on the declaration when formulating their claim, which was the main point of reference for jurisdictional purposes.
The Defendant argued that BoP's actions were administrative acts, and it was these acts, not any term, breach or consequence of the relevant facility agreement, that were the real issue in the dispute. Accordingly, the case should be tried in Portugal as a matter of public law. At stake, essentially, was the efficacy of a clause in the facility agreement that gave English courts exclusive jurisdiction over any dispute arising from the loan.
The court sided with the Claimants, holding that the debt claim concerned private law rights conferred by the facility agreement, and was necessarily a civil and commercial matter and therefore subject to the Regulation. The nature of the claim was not affected by any novation or statutory transfer. Moreover, even if the claim did arise from the exercise of a public power, the claim was not brought against BoP but instead against the Defendant, which was not a public body or a body exercising public powers.
Because the Regulation applied, the jurisdiction clause was effective and binding under Article 25. However, even if the Regulation did not apply, and the Defendant's analysis was correct, the English proceedings had been validly served on the Defendant, and under common law rules this was sufficient to give the court jurisdiction over the dispute.
An interesting point arose as to whether the Defendant could be bound by a jurisdiction agreement to which it had not originally been a party. Both sides conceded that this was a question of English law, and the court emphasised that it was not a straightforward one. According to the authorities, the court had to evaluate whether the Claimants had the "better argument on the material available". The court decided that the Claimants did have the better argument because they had an arguable case that the debt had been transferred to the Defendant by virtue of the actions of BoP, and the Defendant had no principled answer to this.
The Defendant's last line of defence was that, even if the English court did have jurisdiction under the Regulation to try the dispute, it should avoid doing so in order to respect the principle of non-justiciability or act of state. The court dismissed this argument out of hand, holding among other things that, at the jurisdictional stage at least, it is doubtful whether there is room for the application of a comity doctrine. This is surely correct, given that where the Regulation gives a court jurisdiction, and proceedings are commenced in that court, it is generally obliged to accept jurisdiction, subject only to limited exceptions. For example, it sometimes has a discretion to decline jurisdiction where identical proceedings are already underway in a third state, those proceedings could result in a judgment that could be recognised or enforced within the EU, and "a stay is necessary for the proper administration of justice" (Article 33, setting out a new rule introduced in January 2015).
The court also dismissed suggestions that it should stay the proceedings, notwithstanding the provisions of the Regulation. Although the court did have case management powers that allowed this, they were very limited in scope in this context, precisely because they should not be used to circumvent the Regulation unless necessary to prevent injustice, and should in any event be exercised only in "rare and compelling cases".
Hamblen J's judgment deals with a number of technical points, mainly raised by the Defendant in order to muddy the waters where the basic jurisdictional issues should have been reasonably clear. But the judgment does serve to highlight and explain the material scope of the Regulation, which is not defined and is rarely looked at in detail. It is also the latest of a series of recent developments which have the effect of strengthening jurisdiction agreements generally.
On 10 January 2015 the Regulation replaced earlier EU rules that often allowed a court "first seised" to try a case even where it was not the one originally chosen by the parties. Now the chosen court takes priority (Article 31(2)).
At the global level, the 2005 Hague Convention on Choice of Courts Agreements has finally come into force, albeit only between two entities (the EU and Mexico), after having lain dormant for ten years. When more countries ratify the 2005 Convention, principles similar to those embodied in the Regulation will begin to be applied by courts across the world and not just within the EU, further supporting the principle of party choice and bringing a greater degree of certainty to jurisdiction matters.