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Brexit: What now for English litigation? – Part two

Posted on: 18 March 2021

Following on from the article published on 11 March 2021, Hill Dickinson‘s Shipping team considers two further, ancillary issues arising from Brexit. This article will consider the potential return of  ‘the Italian torpedo’ and other issues surrounding related actions, as well as whether there will be any effect on choice of law.

a) Lis pendens (related actions), anti-suit injunctions and the return of ‘the Italian torpedo’

A potential consequence of the UK’s departure from the EU is the material increase in the risk of parallel proceedings. Under the Brussels I Recast, any court other than a court with exclusive jurisdiction (Article 31(1)) or, where this did not apply, other than the court first seised (Article 29(1)) was required to stay proceedings in favour of such a court, where proceedings involved the same or related subject matter and the same parties, until the relevant court ruled on its jurisdiction.

However, from 1 January 2021, this will no longer apply on a blanket basis. As above, Regulation 93 of the Withdrawal Agreement has, again, left some scope for the Brussels I Recast to apply to cases commenced in the UK courts prior to 31 December 2021. Where a court in a member state bound by the Brussels I Recast is also subsequently seised of proceedings involving the same cause of action and between the same parties, the UK court may after exit day decline jurisdiction if, and only if, it considers that it would be unjust not to do so. As such, the protection for parties falling within Regulation 93 is not absolute, but strong.

When it comes to the Hague Convention, Articles 5(1) and 6(1) state that a court of a contracting state designated under an EJA must hear the dispute, while all other courts must suspend or dismiss proceedings until the court with exclusive jurisdiction makes a determination on its jurisdiction. However, the Convention has no default provisions mirroring Article 29 of the Brussels I Recast.

Consequently, in the circumstances where an agreement does not fall within the ambit of Article 3(1) of the Hague Convention, the risk of parallel proceedings is substantially increased. This may also be further compounded by the uncertainty surrounding the date where the Hague Convention becomes ‘effective’, as touched upon in our previous article. s1(2) of the Private International Law (Implementation of Agreements) Act 2020, which incorporates the Hague Convention into national law, came into force on 1 January 2021, but the Hague Convention itself was initially acceded to in 2015. As such, there are differing opinions on whether the Convention will be effective for EJAs entered into before 1 January 2021. The EU Commission believes that it will not, although its opinion is not definitive on the subject. In any event, to avoid uncertainty, it may be prudent for businesses to re-agree their High Court jurisdiction clauses.

The fear of parallel proceedings is even further amplified where a matter falls outside the Hague Convention. In circumstances where a case is hastily commenced in a foreign court, the party defending the case abroad may have no alternative other than to challenge jurisdiction under the foreign national law. In the same vein, if a case were quickly commenced in the UK and one of the parties wished to pursue the case abroad, it would be open to the defendant to challenge jurisdiction under the Spiliada Maritime Corp -v- Cansulex Ltd [1986] 3 All ER 843 ‘forum non conveniens’ grounds.

Without Brussels I Recast-type protection, this may bring about the return of ‘the Italian torpedo’, whereby parties sought to tactically commence litigation in whichever state they felt best supported their case, forcing the other party to dispute jurisdiction in their court, or try to rush through a judgment in their desired court, consuming time and costs all the while.

However, there may be a saving grace. Whereas the UK’s departure from the EU could present the risk of parallel proceedings, it may also bring with it the return of the anti-suit injunction (ASI), previously considered irreconcilable with the Brussels I Recast by Allianz SpA (formerly Riunione Adriatica Di Sicurta SpA) -v- West Tankers Inc (The Front Comor) [2009] 1 Lloyd’s Rep 413. Now, however, the ASI could make a return, seeking to prevent parties bring vexatious or oppressive proceedings in a court that is not the natural ‘forum’ for the dispute (Star Reefers Pool Inc -v- JFC Group Co Ltd [2012] EWCA Civ 14). Injunctions are, however, known to be costly procedures and require an applicant to overcome high thresholds in order for them to be granted, therefore the ASI is not without its own pitfalls.

Notably, Star Reefers was decided outside of the scope of the Brussels I Recast and other EU legislation, meaning that it may not be reconcilable with the Hague Convention. That being said, no cases have yet been heard on this subject, therefore it cannot be said with certainty whether they will be permitted under its regime.

Given the formulation of Articles 5 and 6 of the Hague Convention, particularly the requirement for any court other than the court chosen in the EJA to stay or dismiss proceedings while the chosen court determines its jurisdiction, it is hard to see how an ASI would be permitted in these circumstances, as these rules mirror Article 25 of the Brussels I Recast. But, the case may be different where there is no jurisdiction clause in play, or where the clause does not fit within the ambits of Articles 1(a) and 3(a) of the Hague Convention.

b) Choice of applicable law – the Rome Regulations

In brief, Rome I, Rome II and the Rome Convention are all given the force of law under English law through the Law Applicable to Contractual Obligations and Non-Contractual Obligations (Amendment etc) (UK Exit) Regulations 2019 (SI 2019/834) (as amended by the Jurisdiction, Judgments and Applicable Law (Amendment) (EU Exit) Regulations (2020) (SI 2020/1574)).

These amendments ensure the continued operation of the above listed legislation in domestic law from the end of the transition period. They do not change the substance of the rules, but do delete certain provisions which will no longer be relevant, for example those referring to a member state’s requirement to notify the European Commission of certain matters. As such, parties will likely not need to devote as much attention to choice of law clauses as they will to matters governing the contract’s jurisdiction.

Conclusion

Overall, it is still too early to ascertain the impact of Brexit. It is likely that some aspects of the UK commercial legal landscape will remain unaffected. For example, it is difficult to see how London arbitration will be negatively impacted, particularly with leaps being made towards virtual hearings in light of COVID-19.

Similarly, choice of laws agreements will likely continue to work in the same way.

The position in respect of jurisdiction and enforcement is less clear. With the removal of the Brussels I Recast, questions of jurisdiction, recognition and enforcement, and parallel proceedings will, almost undoubtedly arise, and answers will likely only come out of those issues being litigated. Unfortunately, contracts of carriage, general average, and limitation of liability for maritime claims may be left up to the whims of national laws, therefore we may have to wait and see how these cases come to be handled once a future trend is established.

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