The Commercial Court (Jacobs J) has dismissed applications to dispute the English Court’s jurisdiction in respect of claims for damages and declarations of non-liability in respect of proceedings brought by the Defendants in Luxembourg claiming damages in excess of €68 million. The decision illustrates the English Court’s commercially-minded approach to the construction of exclusive jurisdiction clauses and to the provisions of the Brussels I Recast Regulation that confer priority on courts seised under those clauses.
The Claimant (“MGIF2”) and the Defendants were parties to a shareholders agreement (the “SHA”) in respect of a Luxembourg company (“MEVSH1”). The SHA provided that the English Court had exclusive jurisdiction over “any proceedings, suit or action arising out of or in connection with [the SHA]”. MEVSH1 encountered financial difficulty and its secured lenders enforced a share pledge, thereby divesting MEVSH1 of its principal assets and causing its insolvency.
The Defendants brought proceedings in the Luxembourg Court, including against MGIF2 and an affiliated company, FSS, which was also party to the SHA. The central allegation against MGIF2 and FSS was that they had collaborated with the secured lenders in a wrongful enforcement of the share pledge, and on that basis, damages in excess of €68 million were claimed against them. In response, they disputed the Luxembourg Court’s jurisdiction and maintained that the claims against them were liable to be struck out.
MGIF2 commenced the above proceedings in the English Court, seeking: (i) damages for the Defendants’ breach of the English exclusive jurisdiction clause in the SHA by their commencement and pursuit of the Luxembourg proceedings; (ii) a declaration that the Luxembourg proceedings, insofar as brought against MGIF2 and FSS fell within the scope of that jurisdiction clause; and (iii) a declaration of non-liability in respect of the allegations in Luxembourg.
The Defendants challenged the English Court’s jurisdiction. Their primary ground of challenge was the contention that the Luxembourg proceedings did not fall within the jurisdiction clause in the SHA, in particular because no breach of the SHA was alleged in the Luxembourg proceedings and no claim under it was being pursued there. The Defendants also contended that the English Court should stay its proceedings under Article 31.1 of the Brussels I Recast Regulation, or Article 30 of that Regulation, or on case management grounds.
Jacobs J dismissed the Defendants’ jurisdiction challenge.
As regards the Defendants’ primary ground of challenge, Jacobs J concluded that MGIF2 had the better of the argument that the jurisdiction clause in the SHA applied to the claims in Luxembourg. In doing so, the Judge summarised the applicable principles regarding jurisdiction clauses and their enforcement, including the well-known Fiona Trust presumption, (-). He observed as follows (at ) regarding broadly-drawn jurisdiction clauses such as that in issue in the present case:
“… Such wording will ordinarily extend not simply to claims which are contractual and allege breach of express or implied terms of the contract, but also to non-contractual disputes, provided that there is a sufficient connection with the contract. That connection may be established even if no claim based on the contract is pleaded. The reason for this is that rational businessmen would not expect the clause to be capable of circumvention by simply omitting to plead a pleadable claim. That was a point which was made by Marcus Smith, J at paragraph  of his decision in Microsoft Mobile Oy (Ltd) v Sony Europe Ltd  EWHC 374 (Ch).
Jacobs J concluded that MGIF2 had the better of the argument, in summary because: (i) the parties were all parties to the SHA; (ii) MGIF2 was sued in Luxembourg in its capacity as shareholder in MEVSH1 and its alleged conduct as such; (iii) that alleged conduct gave rise to pleadable claims under the SHA; (iv) the claims as pleaded were in any event intimately connected to the SHA; and (v) that was particularly so where the damages claimed were in respect of alleged loss of rights and benefits under the SHA (-).
As regards the Defendants’ secondary ground of challenge, Jacobs J concluded that in circumstances where the English Court had exclusive jurisdiction pursuant to the clause in the SHA and Article 25 of the Brussels I Recast Regulation, neither Articles 31.1 nor 30 were applicable (-). The Judge concluded there was no basis for a discretionary stay on case management grounds bearing in mind the parties’ contractual bargain for English jurisdiction (-).
Andrew Scott (instructed by Jones Day) acted for MGIF2.
The judgment is available here.