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THE BRUSSELS I REGULATION AND ARBITRATION

Published online by Cambridge University Press:  05 September 2014

Trevor C Hartley
Trevor C Hartley*
Affiliation:
Professor of Law Emeritus, London School of Economics, [email protected].
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Abstract

This article considers the effect of the Brussels I Regulation on the arbitration process in EU Member States. The Regulation says that it does not apply to arbitration, but it is unclear exactly what is excluded by this provision. The article first considers this question; it then discusses asset-freezing orders and antisuit injunctions in aid of arbitration and the granting of damages for bringing court proceedings before a court which, in the eyes of the court asked to grant the damages, ought not to hear the case. It finally discusses conflicts between judgments and arbitration awards.

Keywords

antisuit injunctionsarbitrationasset-freezing ordersBrussels I Regulationconflicts between judgments and awardsdamages for wrongful litigation
Type
Articles
Information
International & Comparative Law Quarterly , Volume 63 , Issue 4 , October 2014 , pp. 843 - 866
Copyright
Copyright © British Institute of International and Comparative Law 2014 

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References

1 The relevant text at the time of writing is Council Regulation (EC) No 44/2001 of 22 December 2000, OJ 2001 L 12, 1 (henceforth ‘Brussels 2000’), which was adopted in 2000 and will continue to be applicable until replaced by Regulation (EU) No 1215/2012 of 12 December 2012, OJ 2012 L 351, 1 (‘Brussels 2012’, also known as ‘Brussels I (recast)’). Brussels 2012 applies from 10 January 2015, the date on which it replaces Brussels 2000.

2 Art 1(2)(d) in both Brussels 2000 and Brussels 2012.

3 The original version of the Brussels Convention was negotiated and concluded by the original six EU (EEC) Member States in 1968: Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters of 27 September 1968. The original text may be found in JO 1972, L 299, 32 (the English version is in OJ 1978, L 304, 77). It came into force for the original Contracting States on 1 February 1973. The United Kingdom became a Party when it joined the EU (EEC) and it came into force in the United Kingdom on 1 January 1987. It was amended a number of times and was replaced by Brussels 2000 when the latter became applicable on 1 March 2002.

4 This is because the various versions of the Convention and Regulation are regarded as being, in effect, different formulations of the same instrument. For this reason, it is provided that ‘continuity’ between them must be ensured: Brussels 2000, Recital 19; Brussels 2012, Recital 34. See also German Graphics Graphische Maschinen, Case C-292/08, [2009] ECR I-8421, para 27 of the judgment; Realchemie Nederland v Bayer CropScience, Case C-406/09, [2011] ECR I-9773, para 38 of the judgment (Grand Chamber).

5 OJ 1979, C 59, 1.

6 This follows from the fact that ‘judgment’ is defined in all the instruments as ‘any judgment given by a court or tribunal of a Member State’: Brussels Convention, art 25; Brussels 2000, art 32; Brussels 2012, art 2(a).

7 OJ 1979, C 59, 1 at 13.

8 OJ 1979, C 59, 71.

9 ibid at 92–93 (paras 61–65).

10 This includes present, past and future arbitration proceedings.

11 ibid para 61.

12 Paras 63–65.

13 Para 63.

14 Disputes concerning title to land would constitute an example: see art 16(1) of the Convention (art 22(1) of Brussels 2000; art 24(1) of Brussels 2012).

15 Para 64.

16 Para 65.

17 ibid.

18 This is stated in the last sentence in para 64 and the first sentence of para 65.

19 Case C-190/89, [1991] ECR I-3855. According to Advocate General Damon, this was the first time an English court had made a reference to the CJEU on the interpretation of the Brussels Convention.

20 Article 21 of the Convention. Equivalent provisions are to be found in Brussels 2000 (art 27) and Brussels 2012 (art 29).

21 Once the jurisdiction of the court first seised is established, the other court must decline jurisdiction.

22 Paras 19 and 21 of the judgment. Reference was made to the Schlosser Report.

23 Para 26 of the judgment.

24 The ‘objet’ of proceedings is the principal claim or remedy sought. This might be an order for the payment of damages, a declaration of non-liability or an order for the appointment of an arbitrator. It is to be distinguished from a preliminary, or incidental, question, which is another issue which must be decided in order to decide the principal claim.

25 According to the Schlosser Report (above), the question whether an arbitration agreement is valid is itself outside the scope of the Convention. If this is correct—which it certainly is under Brussels 2012—the English proceedings would not have been covered even if their objet had been the validity of the arbitration agreement—for example, if the claim had simply been for a declaration on the point.

26 The order of the Court of Appeal was made on 26 January 1989, but was not received by the CJEU until 31 May 1989. The judgment of the CJEU was delivered on 25 July 1991.

27 Hobhouse J said that, as a result, Marc Rich would be bound by the judgment of the Genoa court both under the Brussels Convention and under the ‘ordinary principles of private international law internationally accepted.’

28 Marc Rich & Co. AG v Società Italiana Impianti pA (No 2) [1992] 1 Lloyd's Rep 624 (CA).

29 For a later case which clearly was decided under Brussels 2000, see National Navigation Co. v Endesa Generacion SA (The Wadi Sudr) [2009] EWCA Civ 1397; [2010] 2 All ER (Comm) 1243; [2010] 1 Lloyd's Rep 193 (CA).

30 Cases 9 and 10/77, [1977] ECR 1517.

31 For general comments on section 32, see per Rix LJ in Ust-Kamenogorsk Hydropower Plant JSC v AES Ust-Kamenogorsk Hydropower Plant LLP [2011] EWCA Civ 647 (paras 149–151); [2012] 1 WLR 920 at 971–972. The judgment of the Court of Appeal was affirmed by the Supreme Court without detailed consideration of section 32: [2013] UKSC 35; [2013] 1 WLR 1889.

32 Section 32(4)(a) of the Act (as amended).

33 Section 32(1)(c). Section 32(3) provides that, in deciding whether to recognize a foreign judgment, a court in the United Kingdom is not bound by a ruling of the foreign court as to any of the matters mentioned in section 32(1) or 32(2). This means that it is not bound by a ruling of the foreign court as to whether there was submission.

34 This provision is also subject to the Brussels I Regulation: Civil Jurisdiction and Judgments Act, section 33(2) (as amended).

35 Case C-391/95, [1998] ECR I-7091.

36 This is an order, granted (under Dutch law) in summary (‘kort geding’) proceedings, requiring the defendant to pay the claimant part or all of the sum claimed, pending a final decision on the substance. If the final decision goes against the claimant, he must repay the money.

37 Para 33 of the judgment.

38 The equivalent provision under Brussels 2012 is art 35.

39 Para 47 of the judgment in Van Uden. Although this was said in the context of an interim-payment order, the reasoning behind it would apply equally to an asset-freezing order. This is confirmed by Recital 33 of Brussels 2012; see also Banco Nacional de Comercio Exterior SNC v Empresa de Telecommunicaciones de Cuba SA [2007] EWCA Civ 662; [2007] 2 All ER (Comm) 1093; [2007] 2 Lloyd's Rep 484.

40 Case C-159/02, [2004] ECR I-3565.

41 The Spanish claim was for damages for the employee's ‘unjustified departure’ from the Spanish office and for his bringing a ‘baseless’ claim in England.

42 The CJEU said that a determination as to whether the Spanish proceedings were abusive was for the Spanish court, not the English court, to make: para 28 of the judgment.

43 ibid para 25.

44 ibid 26.

45 ibid 27.

46 This seems to follow from the judgment of the CJEU in Turner v Grovit, in which it was stated (in para 27 of the judgment) that an antisuit injunction would be ‘incompatible with the system of the Convention’. However, in West Tankers, the CJEU put the matter slightly differently. It said (in para 29 of the judgment) that an antisuit injunction would be contrary to a ‘general principle which emerges from the case-law of the Court on the Brussels Convention’. This could be regarded as an indication of a change in the court's thinking. Perhaps the CJEU will decide in the future that there is a general principle of EU law that Member States must respect the sovereignty of other Member States. If accepted, this principle might preclude antisuit injunctions even outside the scope of the Brussels I Regulation. It should be said that ‘general principles’ are a recognized source of EU law and have been applied in many situations. For a general discussion, see TC Hartley, The Foundations of European Union Law (8th edn, OUP 2014) ch 5.

47 Allianz and Generali Assicurazioni Generali v West Tankers, Case C-185/07, [2009] ECR I-663 (Grand Chamber).

48 This right was based on art 1916 of the Italian Civil Code. There are similar provisions in other legal systems.

49 para 23 of the judgment.

50 In the style adopted by the CJEU, ‘Court’ with a capital ‘C’ always refers to the CJEU.

51 This shows that the same question can fall within the scope of the Regulation in one set of proceedings (those in Syracuse) and fall outside its scope in another (those in London).

52 See, for example, A Briggs, ‘Fear and Loathing in Syracuse and Luxembourg’ [2009] LMCLQ 161; Peel, WE, ‘Arbitration and Anti-Suit Injunctions in the European Union’ (2009) 125 LQR 365Google Scholar.

53 For subsequent proceedings before the English courts, see West Tankers v Allianz [2012] EWCA Civ 27; [2012] 2 All ER (Comm) 113; [2012] 1 Lloyd's Rep 398; West Tankers v Allianz (4 April 2012) [2012] EWHC 854 (Comm); [2012] 2 All ER (Comm) 395; [2012] 2 Lloyd's Rep 103. The issues raised in these proceedings will be considered below.

54 The exact nature of these proceedings is not clear from the order for reference.

55 The grounds of refusal are not clear from the order for reference, but it is likely that they were based on art V(2)(a) or V(2)(b) of the New York Convention.

56 Gazprom v Lithuania, Case C-536/13 (CJEU, not yet decided). The order for reference was accepted by the CJEU on 27 November 2013.

57 Para 27 of the judgment, set out above.

58 OJ 1979, C 59, 1.

59 OJ 1979, C 59, 1 at 13. For Brussels 2012, see Recital 12, para 4.

60 Brussels 2012, art 81.

61 Such a provision was proposed by the Commission. The United Kingdom originally tried to obtain a similar result by proposing that the provision excluding arbitration from the scope of the Regulation should be amended to state that it covered court proceedings in respect of which the parties had made an arbitration agreement within art II of the New York Convention, its being implicit in the proposal that the courts of each Member State could decide this question for themselves. If adopted, this would have meant that, in a case such as West Tankers, the English courts would not have been obliged to recognize any judgment given by the Italian courts; nor (it seems) would they have been precluded from granting an antisuit injunction, since the proceedings against which the injunction would have been directed would have been outside the scope of the Regulation. However, the proposal did not receive widespread support.

62 This provision is retained in Brussels 2012: see Brussels 2012, art 71(1).

63 New York Convention, art II(3).

64 ibid, art III.

65 Art 267(b) of the Treaty on the Functioning of the European Union (TFEU) gives the CJEU jurisdiction, on a reference from a court of a Member State, to interpret acts of an EU institution. In Haegeman v Belgium, Case 181/73, [1974] ECR 449, the CJEU held that an international agreement concluded by the Union (then the Community) with one or more non-member States constitutes an act of an EU institution for this purpose. In this way, the CJEU obtained jurisdiction to interpret such agreements. In SPI, Cases 267–9/81, [1983] ECR 801, the CJEU extended its jurisdiction to cover the original GATT, even though the original GATT had not been concluded by the Union (Community). It did this on the ground that the subject matter of the original GATT, tariffs and trade, had since become a matter of exclusive Union (Community) competence. However, this reasoning cannot apply to the New York Convention because arbitration is not an area of exclusive Union competence. If arbitration had been brought within the scope of the Brussels I Regulation—for example, by providing that a judgment of a court of a Member State on the validity or applicability of an arbitration agreement was subject to recognition under the Regulation—that would have weakened the case for saying that the CJEU has no jurisdiction to interpret the New York Convention. It might also have opened the way for the Union to claim treaty-making power in the area: see eg the Lugano Convention case, Opinion 1/03, [2006] ECR I-1145.

66 Recognition must be ‘manifestly contrary to public policy in the Member State in which recognition is sought’: Brussels 2000, art 34(1); or ‘manifestly contrary to public policy (ordre public) in the Member State addressed’: Brussels 2012, art 45(1)(a).

67 Krombach v Bamberski, Case C-7/98, [2000] ECR I-1935; Gambazzi v DaimlerChrysler Canada Inc., Case C-394/07, [2009] ECR I-2563.

68 These rules could also be regarded as being derived from the New York Convention.

69 These are the words of art II(3) of the New York Convention.

70 This is the question whether an arbitration agreement applies to a given dispute. This can involve deciding whether the dispute comes within the scope of the agreement; it can also involve deciding whether an agreement is binding on third parties, as occurred in the West Tankers case.

71 This will include the New York Convention, as interpreted under its law.

72 The reference to jurisdiction under national law is concerned with the situation in which the jurisdictional rules of the Regulation are inapplicable because the defendant is not domiciled in a Member State. In such a situation, the court would take jurisdiction under its national rules of jurisdiction. Nevertheless, its judgment must still be recognized and enforced under the Regulation. Although the jurisdictional rules of the Regulation are (generally speaking) dependent on domicile, the rules on the recognition and enforcement of judgments are not.

73 Schlosser Report, OJ 1979, C 59, 71, para 64.

74 Brussels 2012, Recital 12, para 2. This was also accepted under Brussels 2000.

75 It is not known whether the Italian court ever awarded damages against West Tankers or indeed whether it held that it had jurisdiction.

76 West Tankers v Allianz (4 April 2012) [2012] EWHC 854 (Comm); [2012] 2 All ER (Comm) 395; [2012] 2 Lloyd's Rep 103. According to Westlaw, this judgment was upheld by the Court of Appeal but no details are available. See further Mantovani v Carapelli SpA [1980] 1 Lloyd's Rep 375 (CA); CMA CGM SA v Hyundai MIPO Dockyard Co. Ltd [2008] EWHC 2791 (Comm); [2009] 1 All ER (Comm) 568; [2009] 1 Lloyd's Rep 213.

77 At paras 55–56.

78 It is true that the purpose of a penalty is to punish someone for doing something, while the purpose of damages is to compensate another person because he did do it; nevertheless, their effect is the same: they deter the person concerned from doing it. This is the important point: the EU rule against antisuit injunctions is a rule with a particular purpose—to stop the courts of one Member State interfering with the activities of the courts of another Member State. For this reason, what matters is the effect of the order, not its legal nature. Result-oriented rules are common in EU law; they are also found in English law—for example, in the law governing asset-freezing orders.

79 Brussels 2012, Recital 12, para 3, first sentence. The same is almost certainly true under Brussels 2000.

80 It is assumed that the judgment is not outside the scope of the Regulation. As we have seen, a judgment on the validity or applicability of an arbitration agreement is not subject to recognition under the Regulation, regardless of whether it was decided as a principal issue or as an incidental question.

81 A judgment from another Member State must be recognized without any special procedure being required: Brussels 2000, art 33(1); Brussels 2012, art 36(1). Any attempt to delay recognition until after an award had been made would be contrary to the Regulation.

82 However, the Regulation would not require recognition of the award, even if it was incorporated into a judgment. Such a judgment would be outside the scope of the Regulation: Brussels 2012, Recital 12, para 4; Schlosser Report, para 66.

83 We assume that grounds for non-recognition do not exist under either instrument.

84 Brussels 2000, art 34(4); Brussels 2012, art 45(1)(d).

85 This would apply even if the award was not given in a Member State of the European Union, provided it was subject to recognition under the New York Convention.

86 New York Convention, art I(1). It also applies to awards not considered as domestic awards in the State where recognition is sought: ibid.

87 Brussels 2000, art 34(3); Brussels 2012, art 45(1)(c).

88 Case 145/86, [1988] ECR 645.

89 In West Tankers v Allianz [2012] EWCA Civ 27; [2012] 2 All ER (Comm) 113; [2012] 1 Lloyd's Rep 398 it was held that an English arbitration award could be converted into a judgment under section 66(2) of the Arbitration Act 1996 so that the party in question (West Tankers) could benefit from art 34(3) of Brussels 2000. This was so even though the award was purely declaratory.