Starlight Shipping Co. v. Allianz Marine & Aviation Versicherungs AG & ors [2012] EWHC Civ 1714

When can you try to stop proceedings because of earlier proceedings elsewhere in the EU? Perhaps later than you think.

The English Court of Appeal has considered the application of Articles 27 and 28 of Council Regulation (EC) No 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (commonly referred to as the Brussels Regulation) in an insurance dispute involving multiple proceedings — first in the English, then Greek, then English courts.

The Court stayed the second set of English proceedings under Article 27 of the Brussels Regulation (applicable where the same cause of action between the same parties has commenced in another Member State) on the grounds that the Greek Court was first seised of the relevant cause of action, even though the stay was sought only on appeal.

Although the point was moot, the Court decided it could not have granted a stay under Article 28 of the Brussels Regulation (applicable where there are related actions) because an Article 28 stay can only be granted by courts other than those first seised of a related action, and here the court first seised was the English Court itself in the first English proceedings.

The key points arising from this decision are:

  • Parties should consider very carefully how and where they commence proceedings. The place of commencement can have long-lasting and serious consequences for major disputes stretching across multiple jurisdictions.
  • Applications under Articles 27 and 28 of the Brussels Regulation are not challenges to jurisdiction, unlike, for example, arguments based on jurisdiction agreements, place of contractual performance, location of damage and so on. This means that they can be advanced at a later stage than challenges to jurisdiction (which must be brought at the very outset of proceedings).
  • Challenges under Article 27 of the Brussels Regulation are concerned with mandatory stays based on identity of the substance of relevant causes of action, which can include “mirror images” such as negative declarations.
  • Challenges under Article 28 of the Brussels Regulation are concerned with discretionary stays based on related actions (i.e., proceedings), and apply only where the court first seised is in a different Member State.

Key Facts

The background facts are complex. In essence, a shipping vessel became a total loss, and its owners brought proceedings against its insurers in the English Court for the losses. The shipowners and the insurers settled, and the proceedings were stayed. The shipowners subsequently commenced proceedings in the Greek Court against the insurers for non-payment under the settlement agreement, and for losses arising from separate tortious misconduct, but dropped the first set of claims during the proceedings. The insurers then commenced fresh proceedings in the English Court for summary judgment on the settlement agreement and indemnification for losses and costs in the Greek proceedings. The English Court granted summary judgment, and declined the shipowners’ application to stay under Article 28. The shipowners appealed, in part on the basis of Article 28 but also for the first time relying on Article 27.

Legal Background

The Brussels Regulation sets out the rules for establishing which courts of which Member State should hear particular disputes. Section 9 (Articles 27 to 30) of the Brussels Regulation deals with “lis pendens – related actions”. In particular, Article 27 provides that:

“(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 is established”

and Article 28 provides that:

“(1) where related actions are pending in the courts of different Member States, any court other than the court first seised may stay its proceedings […] (3) actions are deemed to be related where they are so closely connected that it is expedient to hear and determine them together to avoid the risk of irreconcilable judgments”.

Under the English Civil Procedure Rules, CPR Part 11 provides that a defendant wishing to challenge jurisdiction must file an acknowledgement of service (often the first step in responding to proceedings) and bring an application to challenge jurisdiction within 14 days thereafter.

Challenges Brought Too Late?

The English Court held that the shipowners were not too late to apply under either Article 27 or Article 28 of the Brussels Regulation. This was because applications under Articles 27 and 28 were not challenges to jurisdiction within the meaning of CPR Part 11. Articles 27 and 28 were instead concerned with regulating proceedings in multiple Member States.

Furthermore, the English Court held that the shipowners could apply under Articles 27 and 28 even though they had disavowed an intention to do so and had received (adverse) judgment at first instance, on the basis that the judgment remained appealable.

Article 27 of the Brussels Regulation

The English Court confirmed that “same cause of action” referred to both the substance of the two proceedings and the object for which they were pursued. Accordingly, negative declarations and a substantive claim in relation to the same liability, which were “mirror images” of each other, were the “same cause of action”.

The English Court found that the key assertion in the second English proceedings was in substance that the insurers were not liable in the Greek proceedings, and that the Greek Court was first seised of the remaining (tortious) causes of action. Accordingly, Article 27 was engaged, and it mandated a stay of all the English proceedings.

Article 28 of the Brussels Regulation

The English Court confirmed that Article 28 concerned “related actions” and not “related causes of action”. The English Court held that whether actions were related should be judged when the application was made, rather than when the proceedings commenced, and accordingly the English Court could consider new causes of action. However, the issue of which court was first seised should be judged by when the action commenced.

In this case, it was the first English proceedings that were first seised of a “related action” to the second English proceedings. However, as this was not a proceeding in “a different Member State”, the English Court had no jurisdiction to stay under Article 28. Accordingly, the Court considered that it would have upheld the first instance decision to refuse to stay under Article 28, but this issue was moot given the stay under Article 27.