Reference from Irish Supreme Court to ECJ: Same Proceedings Pending in a non European State
I am grateful to Michelle Smith de Bruin BL for preparing the following report on a recent reference from the Irish Supreme Court to the European Court of Justice.
On 30 January 2009, the Irish Supreme Court decided in Goshawk Dedicated Limited and Kite Dedicated Limited formerly known as Goshawk Dedicated (No. 2) Ltd, and Cavell Management Services Ltd, and Cavell Managing Agency Ltd v. Life Receivables Ireland Limited ( IESC 7) to refer to the European Court of Justice the question of whether the Brussels I Regulation has mandatory application in circumstances where there are pre-existing proceedings between the same parties in a non-Member State.
The defendant was incorporated in Ireland and had its principal place of business in Ireland. The plaintiffs were companies incorporated in England and had their principal places of business in London. In June 2005 the defendant purchased a partnership interest in a Delaware partnership known as Life Receivables II LLP in which the defendant and Life Receivables Holdings are the only partners but in which the defendant would appear to be the only partner with a financial stake. The partnership is, in turn, a beneficiary of Life Receivables Trust whose commercial value derives from trust property, being life insurance policies purchased in the early years of this decade together with a contingent cost insurance issued by Goshawk in respect of those policies. The defendant, as plaintiff in the U.S. proceedings, alleged that it was induced into buying into the partnership as a result of misrepresentation on the part of the defendants in the U.S. proceedings. The defendant has commenced proceedings in Georgia, U.S.A., against the plaintiffs and a number of others who were involved in a series of transactions which were at the heart of the dispute between the parties.
Briefly, the complaint in those proceedings alleges securities fraud, common law fraud, negligent misrepresentation and conspiracy to commit fraud in connection with a transaction valued at a figure in excess of U.S.$14 million. The primary jurisdiction invoked is in respect of the securities fraud pursuant to United States law, and a supplemental jurisdiction is alleged of the common law claims, again pursuant to United States law, on the grounds that the same facts and circumstances give rise to all claims. Apart from the securities claims, one of the major allegations made is that Goshawk, relying on material furnished through or by an actuarial company located in Atlanta, Georgia, American Viatical Services, made representations appearing on the face of the life policies, to persons including Life Receivables, the defendant in the Irish proceedings. It is also alleged that Cavell, acting through one of its principals, devised a run off scheme to commute Goshawk’s obligations to, inter alia, Life Receivables. It is alleged that at certain times that principal, acting on behalf of both Goshawk and Cavell, made material misrepresentations and omissions.
The proceedings commenced by the defendant in Georgia, U.S.A., on the 29th June, 2007, were first in time. The plaintiffs commenced the Irish proceedings which seek declarations that the plaintiffs did not make the misrepresentations, together with other similar relief, on the 6th September 2007. The Irish proceedings are a mirror image of the Georgia proceedings, except that none of the additional co-defendants in Georgia are parties in the Irish proceedings. On the 5th September, 2007, the plaintiffs in the Irish proceedings moved, in the U.S. District Court, by motion, to dismiss the defendant’s complaint, on the basis that that court lacks “subject matter jurisdiction” over the defendants because the transactions in issue in the case are “predominantly foreign” and lack the necessary domestic conduct or effects to permit the application by that court of American securities laws. The defendant in these proceedings resisted that motion, and a ruling by the US District Court was awaited, at the time of the appeal to the Irish Supreme Court.
Judgments of Irish Courts
The High Court considered the doctrine of forum non conveniens and lis pendens (including the decision in Owusu) and held that, under the Brussels I Regulation, as and between Member States, a strict application of the doctrine of lis pendens applies. Courts of one jurisdiction are precluded from exercising jurisdiction over a dispute until the courts of a jurisdiction first seised with that dispute have dealt with the question of whether that court first seised has jurisdiction. The Supreme Court agreed with this.
Another issue was whether the recognition afforded to both the doctrine of lis pendens and the appropriateness of affording recognition, in accordance with private international law of the relevant Member State, to third party state judgments, is sufficient to warrant a departure from what seems to be the clear mandatory language of Article 2, as interpreted by the European Court of Justice Owusu.
The High Court concluded that there was no basis for staying the proceedings. There is nothing wrong with negative declaratory proceedings. The Court held that a court in Ireland retains and must exercise the mandatory jurisdiction conferred on it by Article 2, notwithstanding the fact that there may be proceedings in a non-Member State.
Approximately eleven grounds of appeal were made to the Irish Supreme Court. The Supreme Court ultimately decided to refer two questions to the ECJ. The exact form and wording is still to be finalised, but the two principal issues are:
(i) If a defendant is sued in its country of domicile, is it inconsistent with Regulation 44/2001 for the court of a Member State to decline jurisdiction or to stay proceedings on the basis that proceedings between the same parties and involving the same cause of action are already pending in the courts of a non-Member State and therefore first in time?
(ii) What criteria is to be applied by a Member State in coming to a decision whether to stay pending proceedings in a Member State, depending on the response to the first, primary, question to be posed.
Given the recent opinion in West Tankers it appears that, even in the face of conflicting actions, adherence to the mandatory nature of the regulation is paramount.
I have the feeling that the ECJ’s final decision in West Tankers may well be determinative in Goshawk also.
The lis pendens provisions of the Brussels I Regulation are mostly about protecting the jurisdiction of other EU courts. Gasser and West Tankers are too, but Goshawk is not. My preliminary feeling here is that the court can fall back onto its national lis pendens doctrine here.
Well, Owusu also wasn’t about protecting the jurisdiction of other EU courts and yet it did end up in the same vein as Gasser or Turner. My personal guess is that Goshawk is gonna come out the same, however unpleasant, way as Owusu did. Anyway, I agree that better time for predictions will be once West Tankers judgment is handed down.
Much of the reasoning in Owusu dealt with the idea that forum non conveniens is hostile to the Brussels Convention. See also the remarks made in the Schlosser report that the UK and Ireland would not use that doctrine, which as a concept of law was more or less unknown in the other member states anyway.
The doctrine of lis pendens is neither hostile to the Regulation nor unknown in the other member states. Also note that on the continent, forum non conveniens and lis pendens are pretty much regarded as two separate concepts. Most continental jurisdictions will (sometimes on a discretionary basis) refuse jurisdiction if litigation is pending elsewhere, but don’t have any other form of discretion to decline jurisdiction. The Regulation has a clear rule on lis pendens in other member states and does not deal at all with lis pendens outside of the EU. I see this as an indication that the draftsmen wanted to leave this issue to the member states rather than to harmonise, not as an indication that jurisdiction must be accepted at all costs.
As such, this comes down to the confines set in Kongress Agentur Hagen. In Owusu, it was held that a stay on forum non conveniens grounds was inconsistent with the Convention and therefore did not meet the test described in Kongress Agentur Hagen. Goshawk will show whether or not the a local lis pendens doctrine in a situation where the lis pendens provision of the Regulation does not apply will meet that test.
The basis of Owusu (following Group Jossi) was that the “international” element required to engage the Brussels I Regulation was supplied even if the link was with a third state. As such, where Owusu (domiciled in England) sued Jackson (domiciled in England) [thus ideally internal] triggered the Regulation as the cause of action arose [accident took place] in Jamaica. The ECJ referring to the relevant Chapter in the Peter Schlosser Report concluded that the international element was not limited to Member States. If the approach in Owusu is thus taken to its logical conclusion, one may predict the same outcome in Goshawk. However, what exactly is meant by the “international element”? It is not defined in the Regulation. Would lis pendens in a third state amount to an international element? If the logic of art 27 or 28 is applied reflexively, it seems it would. Droz, supports this position. [as cited in the Irish High Court’s decision]. Otherwise, parties not typically subject to the Regulation (but for the fact that one of the defendants is domiciled in a Member State) would be subject to the rigorous of the Regulation. It must be at least permitted for such unwilling litigants to make use of the mechanisms available in the regime. If not, the result would be grimly unfair.
Also, as in Owusu, merely because the cause of action occurred in a third state should not be regarded as supplying the international element identified in the Schlosser Report. In fact the examples given in the Report reflect and envisage connections with other Member States and not third states. Therefore, “international element” is misconceived. It must be re-phrased the “European element”.
In any case, if the ECJ is to place formalism over pragmatism and logic over consequence (as it did in Owusu and other subsequent cases) Goshawk would be decided no different to Owusu.