The basic rule of the Brussels Regulation (44/2001/EC) is that a defendant domiciled in an EU member state must be sued there, subject only to exceptions set out in the Regulation itself. However, a recent High Court judgment has found in favour of a more liberal interpretation of the Regulation, which is known as giving "reflexive effect".
A recent High Court judgment has found in favour of a more liberal interpretation of the Brussels Regulation (44/2001/EC) (the Regulation) (Ferrexpo AG v Gilson Investment Ltd and others [2012] EWHC 721 (Comm)). That liberal interpretation is known as giving "reflexive effect".
The basic rule of the Regulation is that a defendant domiciled in an EU member state must be sued there, subject only to exceptions set out in the Regulation itself (Articles 1 and 2). Unfortunately, taken at face value, these exceptions are quite limited, since they all hinge on some kind of link to another member state. For example:
Article 22 confers "exclusive jurisdiction" on the courts of a member state in which (among other things) real property is located, a company has its seat, or a public register is kept, provided the proceedings have as their "object" rights in rem in that property, the validity of decisions of that company's organs, or the validity of entries in those registers, and so on.
Article 23 allows parties to decide the jurisdiction in which their disputes should be tried, provided that the jurisdiction is within the EU and at least one of the parties is domiciled in a member state.
Article 27 requires courts to stay proceedings where the same cause of action is already being litigated elsewhere in the EU. (Article 28 is a variation on this, allowing the court to exercise a discretion to stay proceedings where related, but not identical, proceedings are underway elsewhere in the EU.)
However, some commentators in England and abroad have proposed that the wording of at least some of the exceptions should be read "reflexively", so that they are understood to refer to courts outside, as well as inside, the EU.
The rationale for this liberal approach is obvious: no English court wants to pass judgment on the validity or otherwise of entries in a public register in Mexico, for example. But until now, there has been limited authority in support of the liberal view: chiefly, Catalyst Investment Group Ltd v Lewisohn [2009] EWHC 1964 (www.practicallaw.com/8-500-3061).
Other English court decisions have favoured a more literal reading or sat on the fence (for example, Royal Sun Alliance v Rolls Royce [2010] EWHC 1869). There are also dissenting voices in academia and an unhelpful decision from the Court of Appeal in Samengo - Turner v J & H Marsh & MacLennan (Services) Ltd [2007] EWCA Civ 723.
In Ferrexpo, Smith J has lent valuable support to the reflexive approach. The case concerned the ownership of shares in a Ukrainian mining company, and, ultimately, the validity of resolutions of a Ukrainian company and entries on public registers there, so the question was whether Article 22 was engaged rather than the more usual Article 23. Since similar proceedings were already underway in the Ukraine, it was arguable that Article 27 was engaged too, or failing that, Article 28.
Smith J chose to read these provisions reflexively, and decided that they were engaged in this case. On that basis, and because he saw the English proceedings as "abusive", the court decided to stay proceedings. Smith J also invoked the court's power to "stay the whole or part of any proceedings or judgment either generally or until a specific date or event" under Civil Procedure Rule (CPR) 3.1(2)(f), finding this to be a case where "rare and compelling circumstances" justified a stay in any event.
A key problem with the reflexive approach is that it contradicts the plain meaning of the Regulation, which is not written in ambiguous or complicated language, as well as the literal approach favoured by the European Court of Justice (ECJ) in the leading case of Owusu v Jackson (C-281/02) (see box "Owusu").
There is also some confusion, even among those authorities that favour a liberal approach, as to which Articles in the Regulation can be read reflexively, and which cannot. Smith J saw all the Articles referred to in Ferrexpo as capable of being interpreted reflexively, but, according to Barling J in Catalyst, Articles 27 and 28 must be read restrictively (that is, be taken at face value).
If that is the case, a court "seised" of a dispute involving a defendant domiciled in a member state can never decline jurisdiction purely on the basis that parallel proceedings are already underway in courts outside the EU. The logic here is that judgments from outside the EU do not pose a serious problem, even where they conflict with judgments resulting from parallel proceedings within the EU, because unlike the latter, they cannot be enforced using the straightforward procedure set out in Chapter III of the Regulation. But while that may well be the case in some circumstances, the risk of inconsistent judgments could certainly be damaging in others.
To complicate matters further, "reflexive theory" (as Smith J calls it) can apparently take different forms. At paragraph 125 of his judgment, he identifies three distinct strains:
The most rigid reflexive theory would require the court to apply provisions of the Regulation by analogy, as though non-member states were member states.
The most flexible reflexive theory would give the court discretion as to whether or not to accept jurisdiction in cases involving issues covered by (at least the relevant parts of) Article 22, exclusive jurisdiction agreements, lis alibi pendens (that is, a dispute pending elsewhere), and related actions.
The third theory (which is the one that Smith J opted for in Ferrexpo) would allow the court to exercise powers available under the doctrines of national law in cases where, had there been a similar connection with a member state, the court would have had to decline jurisdiction.
Whether the superior courts, including the ECJ, will ultimately embrace reflexive theory remains to be seen. In the meantime, many litigators will welcome Smith J's decision as helpful in promoting a flexible approach to EU jurisdiction rules that are generally seen as too rigid. (They will remain so even after the Regulation is reformed in a few years' time, if the current draft of the revised Regulation is broadly adhered to (for more information, see News brief "Brussels Regulation: the Commission's proposals for reform", www.practicallaw.com/0-504-5668).)
Giles Hutt is a professional support lawyer in the litigation team at Hogan Lovells.
In Owusu v Jackson (C-281/02), the European Court of Justice held that a court on which jurisdiction is conferred by Article 2 of the Brussels Regulation (44/2001/EC) cannot decline jurisdiction on the ground that the court of a non-member state would be a more appropriate forum, even if the jurisdiction of no other member state was in issue, or the proceedings involved no factors connecting the situation with another member state (see News brief "Regulating jurisdiction: English courts' discretion is curtailed", www.practicallaw.com/2-200-6688).