Bringing a claim - initial considerations

Key issues to consider

What key issues should a party consider before bringing a claim?

There are a number of factors that a party should consider before issuing proceedings. These involve, for instance, considering whether it has sufficient information and evidence to be able to claim against the defendant (including whether any relevant evidence is retained by third parties who may be subject to Norwich Pharmacal orders).

Establishing jurisdiction

How is jurisdiction established?

Gibraltar is part of the European Union under the United Kingdom. In the first instance, the rules on jurisdiction derive from EU laws and, if those do not apply, then traditional English rules on private international law will apply. Under EC Regulation No. 1215/2012 (Brussels I recast), the general rule is that jurisdiction is determined based on the defendant’s country of domicile. The general domicile rule can be displaced: with contractual disputes, jurisdiction can be determined based on the country in which the contract is performed (ie, where the services are rendered or goods delivered). Further, there are mandatory rules on jurisdiction that cannot be displaced, even by contract: for example, if the dispute involves rights in rem in immoveable property, then courts of the member state in which the property is situated shall have exclusive jurisdiction to determine the proceedings.

If the EU laws on jurisdiction do not apply (generally these will be cases involving non-EU domiciled parties), then English traditional rules on jurisdiction will be relied upon. If a party is validly served with proceedings (eg, by personally serving an individual), then irrespective of that party’s nationality or domicile, the Court will exercise jurisdiction. The served party can then dispute the Court’s jurisdiction pursuant to Part 11 of the (English) Civil Procedure Rules 1998 (CPR). If that is the case, the Court will then consider whether Gibraltar is the appropriate forum in which to litigate the dispute based on forum non conveniens principles, such as whether the contract or dispute is closely connected with Gibraltar.

Where a defendant has commenced proceedings outside the EU, the aggrieved party may apply for an anti-suit injunction. This is a useful tool previously used in Gibraltar where, for instance, a party has commenced proceedings in a non-EU country in breach of a jurisdiction clause.

However, if a party wrongfully commences proceedings in the EU (eg, sues in France in breach of a jurisdiction clause favouring the Court) then the Court cannot issue an anti-suit injunction, as that remedy has not been upheld when EC rules on jurisdiction apply. The court second seised must stay or decline jurisdiction until the court first seised determines whether or not it has jurisdiction to determine the dispute.

Preclusion

Res judicata: is preclusion applicable, and if so how?

If proceedings have been adjudicated by a court of competent jurisdiction, then that decision becomes res judicata, estopping the unsuccessful party from bringing the same cause of action and against the same party in Gibraltar. It is generally available in two situations: first, where the claimant loses in a foreign country, in which case he or she cannot then commence proceedings afresh in Gibraltar against the same defendant; second, where the claimant wins abroad but does not obtain full compensation, in which case he or she is generally precluded from bringing an action in Gibraltar for the rest of the claim.

Applicability of foreign laws

In what circumstances will the courts apply foreign laws to determine issues being litigated before them?

Typically, foreign laws will be upheld before the Court if there is a binding applicable law clause in a contract. It is possible for jurisdiction to be exercised by the Court while applying foreign law to the dispute, in whole or in part. For instance, the principle of dépaçage allows for different parts of a contract to be governed by different laws. Foreign procedural laws allow for litigation to be drawn out for a longer period of time by, for example, having longer periods within which statements of case are to be lodged and served between the parties.

Initial steps

What initial steps should a claimant consider to ensure that any eventual judgment is satisfied? Can a defendant take steps to make themselves ‘judgment proof’?

A claimant should consider four overarching factors:

  • whether the defendant is cash solvent to be able to compound any eventual judgment;
  • whether any insurers can meet a judgment;
  • whether the defendant has any assets within the jurisdiction that could be targeted in the event that judgment is not satisfied; and
  • whether an eventual judgment or order can be enforced in any country in which the defendant has assets.

Once proceedings are issued and jurisdiction established, it is difficult for the defendant to make himself or herself judgment proof.

Freezing assets

When is it appropriate for a claimant to consider obtaining an order freezing a defendant’s assets? What are the preconditions and other considerations?

Generally, in cases where there is a real risk that the defendant’s assets can be dissipated, whether locally or internationally, the Court grants injunctions where it is just and convenient to do so. The application could be refused if the prejudice caused to the respondent outweighs the benefit to be gained by the applicant. The applicant must show, inter alia, that it has acted reasonably and promptly, that it has a good prospective cause of action against the respondent and that the Court has jurisdiction to determine the dispute.

Pre-action conduct requirements

Are there requirements for pre-action conduct and what are the consequences of non-compliance?

Yes, the CPR requires parties to comply with the pre-action conduct and protocols. Generally, parties are required to exchange information and narrow down issues between them at an early stage of litigation. Non-compliance could, for example, result in adverse costs orders.

Other interim relief

What other forms of interim relief can be sought?

The Court can also grant a number of interim relief measures, such as search orders (enabling the applicant to enter and search the respondent’s premises to preserve evidence or property), Norwich Pharmacal orders (compelling the respondent to disclose information) and security for costs or payments into court. The relief measures available to parties in Gibraltar are, to a large extent, the same as those available in England.

Alternative dispute resolution

Does the court require or expect parties to engage in ADR at the pre-action stage or later in the case? What are the consequences of failing to engage in ADR at these stages?

Parties are required to engage in ADR at the pre-action stage following the CPR, and failure to do so may result in adverse costs consequences even where the party that is the subject of the costs order succeeds in the lawsuit or application.

Claims against natural persons versus corporations

Are there different considerations for claims against natural persons as opposed to corporations?

The main distinction is that a corporate entity has a separate legal identity from that of its shareholders. Although a corporation is administered by individuals, it is regarded as an artificial person in law with the capacity to sue or be sued. Shareholders do not have personal liability for any wrongdoing by the corporation. If the wrongdoing is done by directors, the corporation would still be accountable against third parties (as it would be vicariously liable for the directors’ actions or omissions) but it is possible for the corporation to bring an action against directors under, for example, breach of fiduciary duties.

Class actions

Are any of the considerations different for class actions, multi-party or group litigations?

The same principles apply to class actions. Class actions or group litigations are generally uncommon in Gibraltar, but the market has been growing for insolvency cases (eg, liquidators bringing claims as trustees on behalf of unsecured creditors). There are some technical and practical factors to consider when bringing a group litigation action: first, limitation periods are to be observed, as it often takes more time to organise and issue a class action claim; and second, it is important for a main solicitor to be appointed to manage the group litigation (this could entail, for example, ensuring that the register of group claimants is up to date and that documents are filed on behalf of all claimants who have common issues.

The Court will provide directions as to, for example, which issues are shared between the group claimants to the action or how any adverse costs are to be met by the group.

Third-party funding

What restrictions are there on third parties funding the costs of the litigation or agreeing to pay adverse costs?

There are currently no restrictions in Gibraltar on litigation funding, but in practice, most funding is typically obtained through English registered funders. Litigation funders have recently been considering the possibility of setting up a presence in the jurisdiction. We expect litigation funding to start emerging in Gibraltar. At present, the most common type of funding available is after the event insurance (ATE insurance), which generally allows the recovery of disbursements and the opposing side’s costs in the event of defeat. The costs of taking out ATE insurance are typically not recoverable.

Contingency fee arrangements

Can lawyers act on a contingency fee basis? What options are available? What issues should be considered before entering into an arrangement of this nature?

Yes, contingency fee arrangements (CFAs) are available in commercial litigation cases. With a CFA, legal fees are charged by reference to the time spent on a matter, but the law firm agrees to work for a reduced fee or no fee if the case does not succeed, and for a higher fee if the case succeeds. Damages-based agreements (DBAs) are also available. This is a contingency fee arrangement where the fee charged by the lawyer or law firm is calculated as a percentage of the damages recovered in the case.

There are three main issues to consider: whether one should opt for a CFA or DBA; whether the law firm is setting a minimum recoverability on fees under a CFA; and the merits of the case. On this last point, if a case has little or no merit, it is very unlikely that a law firm will be interested in engaging on a CFA or DBA basis.