Comparison of the Traditional English Laws & European Community (EC) Laws on Jurisdictional Values
6 months ago Rohit Shetty Comments Off on Comparison of the Traditional English Laws & European Community (EC) Laws on Jurisdictional Values
Introduction: This paper endeavors to compare the traditional English law and the European Community (EC) law on jurisdictional values, in that, it seeks to understand and elucidate why the former set of jurisdictional rules value flexibility and justice while the latter values certainty and predictability vis-à-vis the other. It shall analyze their historical or political background, their objectives, and basis for assuming jurisdiction. It shall highlight the areas of differences between these jurisdictional regimes with the assistance of authorities like significant Court cases and books that have besides explaining or simplifying the law have also helped its evolution.
Definition: The word ‘Jurisdiction’ can have several meanings, but if understood in context with the Court of law it generally means the ability or authority of a particular Court to determine the issues before it on which a decision is sought. The rules on Jurisdiction play a pivotal role in determining the Court’s ability to address the issues in a given matter.
Jurisdictional issues become complex on the involvement of more than one Court having jurisdiction. This is certainly an area of concern not only for the international trade or business (who may be put in an invidious position where they are unaware of the extent of their liability) but also the sovereign states that seek to trade with each other without having to spoil their amicable relationship.
The English Law: The English Legal system (having the common law at its core) has had and still continues to have a formidable place in expounding the law on several issues, mostly due to the availability of intellectuals and experts that have helped it in doing so.
Traditional English law (the common law) is basically the case laws that have over the period of time become an authority with regard to the matter determined therein. Prior to entering the European Union (EU) by signing the document of accession in 1978, in the U.K, along with the judge made laws, even legislations played a significant role though it may have been more or less remedial in nature. However, it seems logical to allow the judge made the law to test the legislation whenever it is so required by the change in circumstances which can be given effect to with relative ease as in comparison with the legislation process.
Before the advent of the Brussels/Lugano system and the Modified Regulation, the traditional rules were applied in all cases, and it is their historical roots that make it appropriate to refer to them as the traditional English law/rules.
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The jurisdiction of English courts is determined by different regimes:
1. The Brussels I Regulation (hereinafter the ‘Regulation’) (an amended version of the Brussels Convention but notwithstanding the amendments, it applies a similar system of rules on jurisdiction);
2. The Modified Regulation which allocates jurisdiction within U.K under certain circumstances; and
3. The traditional English rules.
There are other sets of rules on jurisdiction like the EC/Denmark Agreement on jurisdiction and the those contained in the Lugano Convention, but their ambit is restricted in application to the cases where the defendant is domiciled in Denmark in a case of the former and in an EFTA member state in case of the latter. There is also the Brussels Convention which applies to Denmark alone.
The EC law: In contrast to the traditional English law, the European Community seems to place more importance on the legislative work than the judge made laws. Apparently, for the EC, it is more important that the basic edifice of their legal system should be based on a codified structure which it defends on the grounds of ease of understanding amongst other reasons. Whereas, English laws seem to put more emphasis on having a common law or judge-made law background. On this anvil, one begins to understand the differences that exist between the respective legal systems and their values, that is, a basic difference in the manner of approaching the issues even in cases where their objectives may be same.
The EC law on jurisdiction is more inclined towards the importance of predictability and certainty in the rules than towards matters like justice and flexibility as can be understood upon reading the 11th recital of the Regulation that states: ‘The rules of jurisdiction must be highly predictable and founded on the principle that jurisdiction must generally be based on defendant’s domicile and jurisdiction must always be available on this ground save in few defined situations…’
Whereas, the only mention of flexibility in the Regulation is contained in the 26th recital wherein it provides that the rules in the regulation may be flexible only to the extent of allowing specific procedural rules of member states.
According to the EC law on jurisdiction, it seems that this particular requirement of predictability is necessary for parties to a dispute to know exactly within which jurisdiction(s) they can sue and be sued. The EC law gives priority to the primary objective of harmonizing the laws of jurisdiction within the territory of its member states and therefore makes it mandatory to uphold the strict accuracy to its principle while giving secondary status to the objective of justice for the parties. The EC law, as well as the traditional English law, may very well have their own justifications and reasons for following a particular system; but it is submitted that this seems to be not only a matter of difference in manner of approach or attitude but also a matter of prioritization of the objectives by both the EC law and traditional English law on jurisdiction. The list of cases mentioned hereinafter for the benefit of elucidating the topic under discussion is, as shall be evident, decided under the Brussels Convention which can be used for interpreting the rules under the Regulation.
Comparison of EC Law v English Law:
1. Bases of Jurisdiction: The most significant difference that exists between the traditional English laws and the EC law on jurisdiction is the element of discretion that the respective body of law gives to the judges in determining the jurisdictional issues. Under the Regulation, the assumption of jurisdiction is largely mandatory with the court not being free to decline jurisdiction; whereas under the English traditional rules the assumption of jurisdiction is discretionary.
The Regulation applies only to matters that are civil and commercial in nature and not to those that have been explicitly excluded from its application (for e.g. Cases pertaining to arbitration, succession, wills, and bankruptcy have been excluded from the application of the Regulation). Whereas, the traditional English rules apply not only to cases that fall outside the scope of Art.1 of the Regulation but also to those that fall within its scope where the defendant is not domiciled in any member state and the jurisdiction is not allocated by any of the rules which apply, regardless of domicile.
A. In the traditional English rules the court has jurisdiction in three situations:
i. If the defendant is present in England (though the court may stay the proceedings on the ground that another court is a more appropriate forum). Jurisdiction under this situation is dependent on the presence of the defendant in the country whereby the claim form may be served to him.
ii. If the defendant submits to the court’s jurisdiction: wherein the defendant submits by not contesting jurisdiction or by arguing the case on its merits.
iii. If the claim falls within Practice Direction: (CPR PD 6B) (which is dependent on the court giving permission to serve process out of its jurisdiction) where the court considering England to be the most appropriate forum (despite absence of reasons under i. or ii. on the basis of some connection between England and the defendant. There seems on a perusal of this provision, a functional similarity with Arts.5 & 6 of the Regulation.
B. Jurisdiction under the EC Law: Except for certain instances where the applicability of the EC law on jurisdiction does not depend on the defendant’s domicile (Art.22 Exclusive Jurisdiction and Art.23 Prorogation of Jurisdiction) the EC law on jurisdiction rests on the domicile of the defendant, and makes it mandatory for the court of a member state to determine the jurisdictional issues and other issues where the defendant is domiciled in its jurisdiction.
The Brussels Regulation does provide for instances where the defendant can be sued in another Member state though he is not domiciled in that particular state, these cases have been very explicitly outlined in the regulation leaving little or no scope for the exercise of discretion by the judge. However, Art.4 of the Regulation provides that a member state can (subject to the provisions of Articles 22 and 23 of the Regulation) exercise its traditional laws of a jurisdiction in cases where the defendant is not domiciled in any of the member states. This provision while giving scope for the applicability of the traditional rules has at the same time also given rise to the idea that there is now only one source of jurisdictional rules, namely the Brussels Regulation.
C. Mandatory rules under EC law v Forum Conveniens:
Forum convenience: upon bringing an action in England, the claimant has to prove that it is the forum convenient, that is, the matter can be tried therein in the interest of justice; and the relevant factors in considering this are the same as under forum non conveniens. Forum conveniens is determined in two stages, namely:
i. Where in the 1st stage the claimant should show that England is an appropriate forum (considering, among other things, the nature of the dispute, issues involved and in cases where relevant, the availability of witnesses.
ii. At the 2nd stage the claimant must establish that even if there is another forum, justice will not be done there, showing thereby that England is the more appropriate forum.
However, England may not be the appropriate forum where the claimant will only be deprived of some legitimate personal or juridical advantage like a higher compensation award.
Mandatory rules under EC law: Unlike the Traditional English rules, under the Regulation, if the court has jurisdiction under any of the provisions thereof (e.g. Arts.2 or 5) it cannot refuse jurisdiction on the grounds that some other court is best suited to determine the matter, showing the mandatory nature of the rules.
In a case of lis pendens (Art.27) or proceedings in 2 or more states (Art.28) the Regulation gives precedence to the court first seized (Art.29 & 30) regardless of the actual jurisdiction being in the court 2nd seized.
These rules are mandatory in so far as they fall within the scope of Art.1 of the Regulation; no deviation thereof is permitted on the grounds of justice or convenience or any like reason. Paraphrasing the reasoning of the ECJ, the reason for such mandatory compliance is the promotion of legal certainty and predictability and the free flow of judgments amongst the member states on the basis of the codified rules in the Regulation which is not dependent on any judge’s discretion.
2. Forum nonconveniens and lis pendens:
A. Forum nonconveniens: Jurisdiction under the traditional rules also depends on whether the court shall decline jurisdiction or stay the proceedings. An English court shall in determining jurisdiction under its traditional rules try to ascertain which is the more appropriate forum and may even stay its proceedings in cases where it thinks that another forum is best suited for the case and in doing so it employs what may be called the basic test i.e. whether it is in the interest of the parties and would meet the interest of justice.
However, it was the Spiliada Case which promulgated another test i.e. ‘the two stage test’ for deciding the more appropriate forum for determining the case before the court. Where the court considers, in the 1st stage which is prima facie the most appropriate forum (burden being on the defendant) on the basis of connecting factors like (territorial connection) place where the parties reside, the law applicable, the availability of witnesses (if any), balance of convenience (applied in Spiliada itself) and where proceedings between the same parties arising out of the same dispute are pending before a foreign court, show how long the trial has been in existence which would be a strong argument in favour of forum non conveniens where such case is on the verge of resolution one (unlike Art. 27 of the Brussels Regulation, the traditional rules do not endorse a simple ‘first come, first serve’ approach) and whereas in the 2nd stage (burden shifting on the claimant) upon considering the relevant connecting factors it thinks that the dispute is more closely connected with a foreign court.
B. Lis alibi pendens: The doctrine of Lis Pendens under Art.27 of the Brussels Regulation makes it mandatory for the court which is second seized (in proceedings having same cause of action and same parties and the dispute is before the courts of two or more member states) to stay its proceedings in favour of the court first seized until such time till the latter has not established its jurisdiction notwithstanding that the court second seized may actually have prima facie grounds for the exercise of its jurisdiction (For example Arts. 22 and 23).
In contrast to the traditional English law, the Brussels Regulation gives absolutely no discretion to the judge to stay its own proceedings and grant jurisdiction in favour of another court on grounds of availability of a more appropriate forum. For instance, in the Owusu case wherein the European Court of Justice held that Brussels Convention precludes a Court of a contracting state from declining jurisdiction conferred on it by Art.2 on the ground that a court of a non-contracting state would be more appropriate forum for the trial of the action even if the jurisdiction of no other state is in issue or the proceedings have no connecting factors to any other contracting state. This regardless of the fact that the person putting up a plea of forum nonconveniens is able to prove that he may not be able to secure justice in a foreign court or that he is, in fact, devoid of any access to effective justice.
The doctrine of Lis Pendens may seem like a simplified manner of approaching simultaneous proceedings in different courts vis-à-vis the doctrine of forum nonconveniens which is dependent on the judge’s discretion; and also seems logical in cases where there could be a possibility of having two conflicting decisions as may happen under the traditional rules. At the same time, it also seems arbitrary in that it makes mandatory for the court first seized to decide upon its jurisdiction before the court second seized, regardless of any pressing evidence adduced that places jurisdiction elsewhere.
The doctrine of lis pendens seeks to support the object of the drafters of the Brussels Regulation which is to promote confidence in the internal market, to reduce disparities between national laws on the jurisdictional front; and to strengthen the belief of persons domiciled in the member states under the present jurisdictional set-up, so as to safeguard their legal and large monetary interests and this in turn leads to the creation of legal certainty which view or observation is supported by several bearers of intellect in the concerned field of study.
Art. 27 of the Regulation requires the court second seized to stay its proceedings until the court first seized has established its jurisdiction. This provision seems to give ample room for parties to commercial matters, in particular, to take advantage of the loopholes available in the legal framework established under the Brussels Regulation which is best explained by the explanation of the term ‘Italian Torpedo’.
Art. 27 while intending certainly has ended up providing an avenue for a rat race of sorts to the courthouse for the parties having a dispute in civil and commercial matters as well as those that wish to obstruct the course of justice. A party seeking to prolong the outcome of the dispute can approach the court of a member state which otherwise on the merits of the case may not have the requisite jurisdiction to hear it (e.g. Italy); and where the hearing and official determination of only the jurisdictional issues may possibly take long enough to frustrate the objectives of the party seeking an early resolution or remedy for the mischief of the other party.
In the Transport Castelletti case where a Danish shipping company had to contest a jurisdictional issue before the Italian court for eight years when the receiver of the cargo under its Bill of Lading brought proceedings in Italy this notwithstanding the fact that the Bill of Lading which it delivered to an Argentinean shipper for voyage from Argentina to Italy had explicitly mentioned a ‘choice of court clause’ favouring England. This outcome does beg the question if there are any provisions that guarantee a fair and speedy delivery of justice. This requirement seems to have been overlooked even by the European Court of Justice, specially, with regard to the lack of efficiency which the Italian courts have shown in dispensing speedy remedies.
This issue was once again put to test in the Erich Gasser GmbH v MIST Srl which was pertaining to patent rights and also involved a ‘choice of court agreement’ (Art.17 of the Brussels Convention) whereby the parties are free to choose which court shall have exclusive jurisdiction or if the parties require they may even make it a non-exclusive jurisdiction clause by stating the courts that shall have jurisdiction.
Gasser, an Austrian firm and MISRAT an Italian Company had submitted to the exclusive jurisdiction of an Austrian court by virtue of statement granting jurisdiction to the Austrian court contained in all invoices transacted under by the parties. But knowing that there was a possibility that Gasser may file a suit under the choice of court agreement, Mist with the intent to prolong the proceedings and the outcome of the case sought to invoke the jurisdiction of the Italian court and filed a suit there thereby making it the court first seized of the matter.
The case was pending before the Italian court for a period of eight years simply to have its jurisdiction established though it could be seen from the invoices transacted between the parties to the dispute that there was an explicit clause which was as per the provisions of Art.23 namely, i. the agreement was in writing; ii. in form with accords with practices which the parties have established between themselves; or iii. in international trade or commerce in a form which accords with a usage of which the parties are ought to have been aware and which is in widely known in such trade or commerce or regularly observed by the parties to the contract of the type involved in the particular trade or commerce.
3. Preclusion of jurisdiction under the English Law and EC law: Under the traditional English law, when the court finds itself to be the more appropriate forum it may grant an anti-suit injunction i.e. an injunction restraining a party from instituting or pursuing proceedings in another court, which is generally sought by defendants in foreign proceedings praying that the matter be decided in England where the grounds for injunction can include: unconscionable behavior, ends of justice and contractual reasons i.e. arbitration agreement.
In contrast to the English law under the Brussels Regulation the court 1st seized will determine its jurisdiction first and the courts 2nd seized shall (despite having jurisdiction over the matter on all relevant grounds) stay its own proceedings and not be permitted to issue any anti-suit injunction and will have to await the determination of jurisdiction by the court first seized. This despite the fact that the proceedings in the court first seized might be brought in bad fait and to frustrate the proceedings of the court second seized. (Based on the view of the ECJ that the states must trust each other, which seems like allowing the interest of justice in favor of an individual, as in Turner v Grovit to be overlain by the interest of the state)
The scope of jurisdiction in recognition and enforcement of judgments: A court cannot recognize or enforce a judgment without the requisite jurisdiction. The set of rules applicable would depend primarily on the country where the judgment was given. Recognition of the traditional law operates without impediments as regards judgments from many countries including many of the Middle Eastern countries, the non-common wealth countries including therein the US, Asia, and Africa. Enforcement of the common law is dependent on bringing ordinary proceedings, whereas, the statutory regimes require specific procedures i.e. Registration.
In contrast to the English law, under the EC law on recognition and enforcement contained in Chapter III of the Regulation, jurisdiction is available only in civil and commercial matters; where the judgment is given by the court of a member state, the EC law will only give recognition and enforce those judgments that are given under the Regulation. Where unlike the common law there is no special procedure for recognition and enforcement; yet the number of defenses, are limited.
Critical Analysis: One critical aspect in favour of forum nonconveniens is the noble and paramount objective namely, the interest of justice, which would have rightly served the need of cases like Gasser and Turner v Grovit had the objective of the EC law been so. In that, the requirement of maintaining comity amongst nations is given preference over doing justice to the parties, a codified structure and interpretation thereof seem to overrule the requirement of practicality and logic.
Due to cases like Gasser, there is a possibility that the reasoning of the European Court of Justice may be able to change the meaning behind the maxim pacta sent servants giving rise to instances where the terms contained in the express contracts like, jurisdiction agreement may be ignored or subverted in pursuance of sinister objectives like causing delays; frustration of commercial enterprise and cause heavy losses.
There are certain provisions in the Regulation (for instance Art.22 (4)) that run contrary to the objective of the EC law as stated hereinbefore while leaving many questions unanswered. It may also be argued that the definition of lis pendens in Art.27 is quite technical and mechanical, being hinged on the 1st seized rule implying a first come first serve basis of justice, whereas in the traditional English laws there is no requirement of a definition; can deal with most problems with the help of discretionary rules. But matters like anti-suit injunctions under the traditional rules run contrary to modern objectives like comity of nations
The Regulation excoriates the application of the domestic laws of the jurisdiction by member states under circumstances where the Regulation is applicable. Though the intention is to help parties to civil and commercial matters discern their rights and liabilities lie; but in doing so the EC law has in fact taken away much of the English Court’s discretionary power, as is evident from the outcome of the Owusu case.
Conclusion: It is submitted that it is not only the difference of attitudes or manner of approach that differentiates the traditional English law and the EC law on jurisdiction; but also the nature of these rules which as regards the EC law on jurisdiction is mandatory unlike- the traditional English law which is discretionary.
There have been instances wherein, on the basis of the traditional rules on jurisdiction, the English Courts have assumed jurisdiction in cases where it was clearly not the most appropriate court as per its two-stage test promulgated in the Spiliada case; yet for the purpose of doing justice to the parties therein it has even given legal aid to the South African citizens on the English tax payers account, which in itself goes to show the extent to which the English court can be flexible.
The objective of the traditional rules is clear i.e. achieving justice for the parties to a dispute regardless of any set parameters; but this very factor makes a party to a commercial dispute uncertain of the jurisdictions it may or may not get sued in, which contingency the Regulation endeavours to clarify for the purpose of achieving its objective of building confidence in the European commercial market.