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The recast Brussels Regulation, which applies to proceedings commenced since 10 January 2015, contains various improvements over the previous version. These include provisions aimed at defusing so-called "torpedo" actions by which a party could seek to delay proceedings in the court the parties had chosen in their jurisdiction clause by commencing proceedings in breach of the clause elsewhere in the EU.

There has however been some doubt as to whether these new "anti-torpedo" provisions would be effective where the parties had agreed a unilateral or one-way jurisdiction clause (providing for example that one party must sue in England but the other is free to issue proceedings in any available jurisdiction), rather than an exclusive jurisdiction clause binding on both parties. 

In a recent Commercial Court decision, the judge has expressed the view (though it was not necessary for his decision) that the provisions should apply equally to a unilateral clause: Perella Weinberg Partners UK LLP v Codere SA [2016] EWHC 1182 (Comm). If this view is adopted in other cases, it will mean that a party who is required to sue in a specified jurisdiction under a unilateral clause will not be able to delay proceedings in that jurisdiction by launching a "torpedo" action elsewhere in breach of the clause.

James Allsop, a senior associate in our disputes team, considers the decision further below.

The Italian torpedo

Under the original Brussels Regulation, if parallel proceedings were commenced in two member state courts, priority was given to the court “first seised”, ie where proceedings were commenced first. Any other member state court had to stay its proceedings until the jurisdiction of the first court was established, even if the first action was brought in breach of an exclusive jurisdiction clause in favour of the second court.

This gave rise to a tactic known as the “Italian torpedo”. If a party (say, a borrower under a loan agreement) wanted to delay a judgment against it, it could race to issue proceedings in a non-chosen court; if the counterparty (say, the lender) then issued proceedings in the chosen court, they could not proceed until the first court declared it had no jurisdiction. This could give rise to lengthy delays, depending on procedures and timescales in the torpedo jurisdiction.

Anti-torpedo provisions

The recast Brussels Regulation addresses this problem by giving priority to the member state court chosen in an exclusive jurisdiction clause, regardless of which proceedings are first in time. The relevant provision is Article 31(2) which states:

"… where a court of a member state on which an agreement… confers exclusive jurisdiction is seised, any court of another member state shall stay the proceedings until such time as the court seised on the basis of the agreement declares that it has no jurisdiction under the agreement."

So essentially, this provides for an exception to the basic “first seised” rule where there is an exclusive jurisdiction clause in favour of a member state court and proceedings have been commenced in that court.

Unilateral jurisdiction clauses

As noted above, however, there has been some uncertainty over whether Article 31(2) would apply where there is a unilateral jurisdiction clause.

To take an example, a loan agreement might give exclusive jurisdiction to the English court in proceedings started by the borrower, but the lender can bring proceedings in any available jurisdiction. If the borrower starts proceedings in Italy and the lender then starts proceedings in England, it is not entirely clear that Article 31(2) requires the Italian court to stay its proceedings. Arguably, the English court is not seised on the basis of an exclusive jurisdiction agreement; it only has exclusive jurisdiction over proceedings started by the borrower, not the lender.

Comments in Perella

In Perella, the relevant jurisdiction clause provided:

"[the defendant] agrees for the benefit of [the claimants] that the court of England will have non-exclusive jurisdiction to settle any dispute which may arise in connection with this engagement."

The defendant, a Spanish company, filed proceedings in Spain. The claimants lodged a challenge to the Spanish court's exercise of jurisdiction and also issued proceedings in the Commercial Court in England. The Spanish court subsequently stayed the Spanish proceedings pending determination by the English court of whether the English court had exclusive jurisdiction.

Ultimately (and unsurprisingly) the English court found that it did not have exclusive jurisdiction; the effect of the jurisdiction clause was to allow the claimants, who had a base in London, to invoke the jurisdiction of the English courts on (as the clause said) a non-exclusive basis. There was nothing to indicate that the clause was intended to go beyond that, in particular by barring parallel proceedings by either party.

However, in preliminary comments, the judge (Walker J) noted a proviso that had been raised by the defendant in the Spanish proceedings – namely, that because the jurisdiction clause gave rise to an "asymmetry", it could not constitute an exclusive jurisdiction clause for the purposes of Article 31.2.

The judge commented that counsel for the defendant had not sought to press that argument before him, and he was "plainly right" not to do so. In the judge's view, so far as Article 31.2 is concerned, there was good commercial reason to focus on whether the party seeking to bring proceedings in a court of "another member state" had agreed that the dispute in question was to be subject to the exclusive jurisdiction of another member state's court – in other words, whether that party was bringing proceedings in breach of an obligation to sue in a named court. He added:

"Nothing in article 31.2 requires that the party relying upon the exclusive jurisdiction clause must itself be under a symmetrical obligation."

This is of course obiter. It seems however a sensible approach, as a contrary conclusion would mean a significant gap in the anti-torpedo provisions introduced by the recast Brussels Regulation.

James Allsop photo

James Allsop

Partner, Australian Registered Foreign Lawyer (Admitted in England & Wales, not admitted in Australia), Melbourne

James Allsop

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James Allsop photo

James Allsop

Partner, Australian Registered Foreign Lawyer (Admitted in England & Wales, not admitted in Australia), Melbourne

James Allsop
James Allsop