"Seising" the advantage – jurisdiction battles in international disputes
Jonathan Kitchin considers the impact of a recent case which confirms the requirements for 'seising' the English Courts and claiming 'first mover' advantage.
The law and jurisdiction of England (and Wales) has for a long time been a preferred forum for the resolution of disputes between international parties. Overseas businesses value reassurance of the rule of law, an experienced judiciary and a "cards on the table" approach to disclosure. The role of London as Europe's leading financial centre and a global finance hub has enhanced that reputation, and attracted overseas banks, insurers and investors already doing business in the city to resolve their disputes here too.
Not only did the cross-border global recession take place against this backdrop, but it was also borne out of complex financial instruments which inflated the bubble. The aftermath has left a legacy of high stakes litigation relating to credit default swaps, interest rate hedges and libor fixing being played out in the English courts.
However, before getting embroiled in the actual substance of a dispute, parties often attempt to manoeuvre where to hold their argument. From a tactical perspective, the issue of jurisdiction can quickly become the deciding factor in negotiating a favourable early resolution. A recent case has strengthened the position of domestic or foreign parties wishing to enforce a choice of law and jurisdiction clause in favour of England.
By way of background, if one of the parties to a dispute is from an EU member state (including Norway, Switzerland and Iceland), and they have agreed an EU member state has jurisdiction, the courts of that country should recognise the agreement pursuant to the Brussels Regulation. However, the EU regime also provides determined litigants with opportunities to get around an agreed choice of jurisdiction clause. For example, by arguing:
- The agreement was not properly concluded and therefore, the defendant should be sued in their home court.
- The subject matter of the dispute is property or the validity of one party's decision making powers which overrides any choice of jurisdiction clause.
- The defendant has already "entered an appearance" by taking substantive steps in the proceedings, such as filing a defence.
- There is a close factual connection with another state. For example, the place of contractual performance or where a wrongful act (ie negligence) took place.
- One party is attempting to "forum shop" by avoiding the laws of a certain territory.
The scope for jurisdiction disputes to arise is wide often leading to satellite litigation. It is not uncommon for two parties to commence proceedings in relation to the same dispute in different jurisdictions. This then leads to difficulties as to which court should proceed first and the potential creation of two contradictory and irreconcilable judgments about the same case.
In these circumstances, the general rule is that if two identical cases are being run between the same parties in different jurisdictions, the second court must decline jurisdiction until the first court has made a decision on jurisdiction. Alternatively, if two similar or related cases are being run in different jurisdictions the second court has discretion to put its proceedings "on hold" and await the decision of the first court.
It is therefore, important to determine which court seised the dispute first. The determining factor is when the document instituting the proceedings is lodged at court, provided that claimant has not failed to take any steps they are required to take to effect service on the defendant.
Coming back to how these rules affect parties wishing to litigate in England. The commencement of legal proceedings in England is a two stage process. Firstly, a "Claim Form" is issued at court identifying the parties, a brief description of the claim and its value. Secondly, the Claim Form together with more detailed "Particulars of Claim" about the case are served on your opponent(s) within four to six months. This is different to many foreign regimes where the defendant is served with legal proceedings first and they are filed at court second.
It has proved to be an important distinction in light of the fact the court first seised is the one where legal proceedings are lodged at court first. The High Court has recently confirmed this position in a case between the London office of a Swiss bank and a German defendant relating to a credit default swap subject to the ISDA Master Agreements. In that case, because the Swiss bank issued proceedings in England before the defendant filed proceedings in German, even though they had not been served on the German defendant, the English courts were entitled to decide jurisdiction for themselves and proceed with the claim.
In summary, England is an "issue and serve" rather than "serve and file" jurisdiction. Therefore, if you need to beat your opponent to the punch and claim English jurisdiction the only step that needs to be taken is to issue a Claim Form before they issue or file proceedings elsewhere. You are entitled to take between four and six months serve the proceedings, during which time you can undertake further investigations and/or negotiate providing a key tactical advantage in jurisdictional skirmishes.
Jonathan Kitchin is an Associate and member of Michelmores' Commercial Dispute Resolution and Financial Services & Markets teams. As well as advising corporates and SMEs in relation to commercial disputes, Jonathan acts for lenders, investment managers, financial planning firms and institutional or private investors. Jonathan is recognised as a Leader in his Field by Chambers and Partners Guide.