Download file as PDF - Holman Fenwick Willan

DisputeResolutionDecember2013DISPUTE RESOLUTIONBULLETINShould settlement agreements befinal? - the ‘Alexandros T’If a claimant comprehensively settles Englishproceedings, should he be allowed to defeat thatsettlement by starting proceedings elsewherein the EU and invoking the 2001 BrusselsRegulation? This was essentially the questionbefore the Supreme Court in the ‘Alexandros T’(6 November 2013).The case arose from the tragic loss 300 miles offPort Elizabeth of the capesize bulker “AlexandrosT” and three quarters of her crew in May 2006.The owners, Starlight Shipping, claimed againsttheir London insurers. They rejected liability,prompting Starlight to commence proceedings inthe English High Court in 2006. The proceedingswere bitterly contested, but were eventuallystayed following the conclusion of settlementagreements under which “any and all claims”under the policies were fully and finally settled.The agreements were governed by English lawand subject to exclusive English High Courtjurisdiction.Then, in 2011, Starlight instituted proceedingsagainst the insurers in Greece, claiming someUS$150 million in losses. This sent a shock wavethrough the global insurance market, since it wasclear that Starlight were bent on undoing thesettlement agreements.In the Greek proceedings, Starlight relied onallegations of skullduggery by the insurers,asserting that they had fabricated evidence andbribed witnesses. Starlight were particularlyaggrieved at what they saw as the insurers’deliberate failure to pay promptly under thepolicies. Some of their claims in Greece werebased on this alleged failure (which, importantly, isnot actionable under English law).The insurers responded by reviving the 2006English proceedings and issuing furtherproceedings, seeking to hold Starlight to thesettlement agreements. They successfullyobtained judgment in the English High Court.

Starlight counterattacked. In the Courtof Appeal, they referred to Article27 of the 2001 Brussels Regulationwhich provides that only the court“first seised” (i.e. the court whereproceedings were started first) hadjurisdiction. They argued that theEnglish proceedings were “the samecause of action and between the sameparties” as the Greek proceedings andsince the Greek court was first seised,the English court was bound to stayits proceedings. The Court of Appealissued a judgment in Starlight’s favour.The implications were seismic. If theinsurers were denied recourse tothe English court, their only optionwould be to request the Greek courtto enforce the English law settlementagreements, to adjudicate the insurers’claims for Starlight’s breaches of boththe release from “any and all claims”and the jurisdiction clause in thesettlement agreements, and claim foran indemnity against Starlight.The insurers appealed to the SupremeCourt. Starlight now pursued a furtherargument, that the Greek and Englishproceedings were “related actions”under Article 28 of the Regulation. Ifthey were correct, the court which wasnot first seised would have a discretionto stay its proceedings.The Supreme Court reversed the Courtof Appeal judgment. It held that theinsurers’ claims for: (i) damages forbreach of the jurisdiction agreement; (ii)damages for breach of the release inthe settlement agreements, and (iii) anindemnity against the consequences ofStarlight bringing foreign proceedingsdid not have the same cause or object,and were not “the same cause ofaction”, as the claims brought in theGreek courts. As a result, the Englishcourt was not obliged to stay any ofthose claims under Article 27.This judgment can be seen as a victory for commonsense: what was at stake was no less than the authorityof the English courts to police settlement agreementsexpressly subject to English law and exclusiveEnglish jurisdiction.NICK ROBERSONHowever, if the insurers had notabandoned their separate claim for adeclaration that they were not liable inthe Greek proceedings, the SupremeCourt would have been obliged toorder a mandatory stay of that claimunder Article 27, since it was a mirrorimage of, and the same cause ofaction as, the claims in Greece.The insurers’ claim for a declarationthat the claims in the Greek court fellwithin the release (and had thereforebeen settled) was also problematic.By a majority, the Supreme Courtdecided that a stay would not haveto be granted, but since two judgesdisagreed, this issue was referred tothe European Court. The insurers’argument that Starlight were too lateto invoke reliance on Article 27 in theCourt of Appeal when they had notdone so at first instance was alsoreferred to the European Court.Starlight’s argument based on Article28 was rejected: some parts of the2006 proceedings had been stayedand some parts had not, but in bothinstances, the English court was firstseised, so Article 28 did not apply.Even if the English court had not beenfirst seised, the Supreme Court wasnot prepared to exercise its discretionto impose a stay in circumstanceswhere the parties had expressly agreedto refer disputes under the settlementagreements to the exclusive jurisdictionof the English court.In conclusion, whilst on the face of it,this judgment could be construed asa ‘policy decision’, the Supreme Courtwas assiduous in justifying its decisionsby reference to highly technicalarguments under European law. Indoing so, it walked a legal tightrope,drawing a fine distinction betweenthe damages and indemnity claims(which fell outside Article 27) and theostensibly all-but-identical claimsfor declarations (which were caughtby Article 27, or at least required adetermination from the Europeancourt).Above all, this can be seen as a victoryfor common sense: what was at stakewas no less than the authority of theEnglish courts to police settlementagreements expressly subject toEnglish law and exclusive Englishjurisdiction. If Starlight’s arguments hadsucceeded, the insurers would have02 Dispute Resolution Bulletin

een forced to ask Starlight’s homecourt to enforce those agreements,which Starlight had breached bycommencing the Greek proceedings.The judgment also reinforces thewider principle that settlements oughtto bring finality to proceedings. Thisis plainly in the interests of legal andbusiness certainty and therefore oughtto be welcomed by the commercialcommunity at large.For more information, please contactNick Roberson, Senior Associate, on+44 (0)20 7264 8507, ornick.roberson@hfw.com, or your usualcontact at HFW.Of jurisdiction clausesand standard terms: theimportance of clarityAny person who has recoiled fromrestaurant staff presenting a mealwith a cheery but solitary “Enjoy!”will find much of interest in a recentdecision of the English CommercialCourt. BNP Paribas SA v AnchorageCapital Europe LLP (11 October 2013)considered whether a verb (in this case“submit” rather than “enjoy”) was usedin a transitive or intransitive sense.Whilst this may seem like a trivialissue of grammatical accuracy, thedistinction highlighted the importanceof being clear in drafting jurisdictionclauses. The case is also a reminderof the need for parties to agreewhich standard terms apply to theircontractual relationship.The parties were a French bank(BNPP), acting from its desk inLondon, entering into trades with theLondon and New York offices of aninvestment manager (Anchorage) whoin turn acted as agent for undisclosedprincipals in Luxembourg. There wasplenty of opportunity for confusion inthe absence of clearly agreed terms ofbusiness between these parties.When a dispute arose, the two sidesrapidly adopted opposing positions asto whether the courts of either NewYork or London were appropriate tohear the matter. These positions wereno doubt based on each party’s viewson the likelihood of a satisfactoryoutcome in the respective courts.Lack of clarity over the applicableterms of the contract meant thatthe first issue for consideration waswhether the English court should havejurisdiction over the dispute. Muchof the judgment was concerned withquestions of whether BNPP’s writtenWhen a dispute arose, the two sides rapidly adoptedopposing positions as to whether the courts of eitherNew York or London were appropriate to hear thematter. These positions were no doubt based oneach party’s views on the likelihood of a satisfactoryoutcome in the respective courts.ROBERT BLUNDELLterms and conditions were adequatelytransmitted to the other parties suchthat they had both seen and agreedto them.It was held that BNPP’s written termsand conditions did apply, although onlyby virtue of these terms having beenacknowledged by an in-house lawyerof the New York investment manager- even though the acknowledgementwas provided over a year before therelevant dispute, in the context ofanother trade entirely. This tenuouslink was found to be sufficient in theabsence of any other more likely termsof business.This may seem a surprising outcome:trading desks are well accustomedto using systems such as BloombergInstant Message and to recording alltelephone conversations, yet thesesafeguards did not prevent a trademade on an assumption that termsand conditions had already beenagreed. It highlights the need to ensurethat in trading situations, the applicableterms are clearly and frequentlyreferred to.Once the applicable terms wereestablished, the way in which theywere drafted meant that it remainedunclear whether the English courtswere indeed appropriate to hear thedispute. The terms stated:“This Agreement shall be governedby, and construed in accordancewith, English Law and you irrevocablysubmit to the jurisdiction of the Englishcourts in respect of any matter arisingout of this Agreement, or our servicesto or Transactions with you under thisAgreement.” [our emphasis]BNPP applied for an “anti-suit”injunction to stop Anchorage frombringing proceedings in the NewYork courts on the basis that suchproceedings would be in breach of thisjurisdiction clause.Dispute Resolution Bulletin 03

They claimed that this clause wasexclusive because it should beconstrued transitively: Anchorage wasagreeing that it would submit ‘anyclaims’ to the English courts.Anchorage claimed that the word‘submit’ should be read intransitively:rather than submitting something, theywere just submitting themselves. This,they contended, meant that they wereonly under a duty to acquiesce to theEnglish courts, and as such there wasnothing prohibiting the courts of NewYork from taking control of the matter.The Court acknowledged that theclause was less than clear, in particularnoting that as it only applied toAnchorage (“you irrevocably submit”) itcould never be regarded as completelyexclusive since there was no equivalentpromise by BNPP.The Court solved the dilemma bylooking at the intention behind theclause. Once the jurisdiction of theEnglish court was decided upon, itwould make no sense then to interpretthe clause as permitting Anchorage tobring a claim in New York in respectof essentially the same matters asconsidered here. To do so would havecreated a “procedural nightmare.” Theanti-suit injunction was granted toBNPP.There are some helpful lessons to drawfrom this decision: parties should takecare with their choice of words and tryto keep them simple. Avoid words withtwo different meanings; try to avoidpassive forms of sentences. Bear inmind the risks associated with makingjurisdiction clauses applicable onlyto one party. Most importantly, makesure that all parties are aware of theapplicable terms.For more information, please contactRobert Blundell, Partner, on+44 (0)20 7264 8027, orrobert.blundell@hfw.com, or your usualcontact at HFW.Conferences and EventsLitigation in West AfricaHFW London5 February 2014Presenting: Xavier McDonald andStanislas LequetteAPRAG Melbourne 2014Melbourne28–29 March 2014Presenting: Nick LongleyAttending: Damian Honey andChris LockwoodFor more information about eitherof these events, please contactevents@hfw.comCorrigendumPlease note there is a typographicalerror in the article on Part 36 in theOctober 2013 edition of DisputeResolution. The first sentence of thesection headed “Example” should read“A claimant makes a Part 36 offer of£350,000 inclusive of interest whichthe defendant does not accept.”HFW extends Season’sGreetings to all of our readerswith our best wishes for 2014.HOLMAN FENWICK WILLAN LLPFriary Court, 65 Crutched FriarsLondon EC3N 2AEUnited KingdomT: +44 (0)20 7264 8000F: +44 (0)20 7264 8888Lawyers for international commercehfw.com© 2013 Holman Fenwick Willan LLP. All rights reservedWhilst every care has been taken to ensure the accuracy of this information at the time of publication, the information is intended as guidance only. It should not be considered as legal advice.Holman Fenwick Willan LLP is the Data Controller for any data that it holds about you. To correct your personal details or change your mailing preferences please contact Craig Martinon +44 (0)20 7264 8109 or email craig.martin@hfw.com