Compulsory Joinder and jurisdiction clause effects

(C-436/16, Georgios Leventis, Nikolaos Vafeias v Malcon Navigation Co. Ltd, Brave Bulk Transport Ltd)

 

A request for a preliminary ruling from the Greek Supreme Court [Areios Pagos] does not happen quite often; in fact, it is a rarity, and, particularly in the field of judicial cooperation in civil matters, rather a unicum. Hence, reason enough to report on the judgment which led to the request lodged on the 4^th of August 2016, asking the CJEU to interpret Article 23 Brussels I Regulation. The purpose of this post is to allow a glance to non-Greek speakers, and refrains from any further analysis of the ruling.

Supreme Court 468/2016, unreported

FACTS

Malcon Navigation Co. is the owner of a vessel, which was chartered by Brave Bulk Transport Ltd, a company registered in Malta, legally represented by Georgios Leventis, however actually owned and administered by Nikolaos Vafeias. Some months later, Brave Bulk Transport Ltd sub-chartered the vessel to the Ministry of Commerce of Iraq, in violation of the agreed conditions. As a result, the vessel was given back to Malcon Navigation Co. with 5 months delay. The latter triggered Malcon Navigation Co. to initiate arbitration proceedings in London, requesting that Brave Bulk Transport Ltd be condemned to pay the amount of nearly 1,5 million Euros [it is not clear from the decision when the arbitration agreement was concluded].

In the meantime, negotiations started in August 2007, following which partial payments were effected by Brave Bulk Transport Ltd. In November 14, 2007, a second agreement was signed between the parties, by virtue of which Malcon Navigation Co. agreed to postpone arbitral proceedings for six months, so that Brave Bulk Transport Ltd. Receives payment by the State of Iraq, in order to reimburse Malcon Navigation Co. In spite of the settlement concluded with the Iraqi government, Brave Bulk Transport Ltd. terminated the contract with Malcon Navigation Co., stating the country’s ostensible refusal to settle the case as the reason for termination. Malcon Navigation Co. became aware of the settlement some months later, i.e. November 2008.

Immediately afterwards arbitration proceedings were reopened on the initiative of Malcon Navigation Co.; an award was rendered end September 2009, ordering Brave Bulk Transport Ltd. to pay the amount of almost half a million Euros plus interests. However, enforcement efforts remained fruitless, resulting in the initiation of court proceedings of Malcon Navigation Co. against the remaining parties, both residents of Piraeus. Strangely enough though, the claimant filed proceedings against the Maltese company too, despite the unfortunate turn of events in terms of execution.

The Piraeus First Instance Court dismissed the action in regards to Brave Bulk Transport Ltd., on the grounds of a jurisdiction agreement in favor of English courts, which formed part of the second agreement, dated from November 14, 2007. On the other side, relief was partially granted against the remaining defendants. Both sides attacked the decision for their own reasons. The Piraeus CoA dismissed the appeal of Mr. Leventis and Mr. Vafeias, which challenged the first instance court judgment to dismiss the lack of international jurisdiction defense raised by the appellants. At the same time it dismissed the claimant’s appeal against Brave Bulk Transport Ltd., whereas allowing the appeal against Mr. Leventis and Mr. Vafeias.

The matter ended up to the Supreme Court on the initiative of the losing parties against both companies.

THE RULING

The Supreme Court started with an extensive analysis of Article 23 Brussels I Regulation, citing domestic scholarship and the pertinent rulings of the CJEU [cases 201/1982 (Gerling), C-71/1983 (Tilly Russ), and C-352/2013 (Cartel Damage Claims)]. It then connected Article 23 with Article 6.1 Brussels I Regulation, stressing out the joinder of parties issue. Pursuant to the Court’s view, the ratio of Article 6.1, i.e. the avoidance of irreconcilable judgments, is not to be found under Article 23. This vacuum, i.e. the lack of any reference to a party’s right to invoke the jurisdiction agreement in favor or against other parties involved in litigation, contravenes with the predictability principle, embedded in recital 11 of the Regulation.

The risk of contradiction is increased in disputes when the party concluding the choice of court agreement is jointly and severally liable with the remaining defendants. Such is the case at hand, regulated under Articles 71 (liability of a legal entity) & 926 (joint liability) Greek Civil Code. Hence, an extension of the agreement’s scope in personam seems to gain traction, in order to avoid the multiplicity of competent courts for disputes emanating from the same legal and factual cause of action, thus safeguarding legal certainty on the whole within the European area of law.

For the reasons above, the Supreme Court decided to stay proceedings, and referred the following question to the CJEU: Does the jurisdiction clause which has been agreed pursuant to Article 23(1) of Regulation (EC) No 44/2001 1 between companies and in the present case is included in the privately-executed agreement of 14 November 2007 between the first and second respondents, Article 10 of which provides that ‘the present agreement shall be governed by English law, it shall be subject to English jurisdiction and any dispute arising from or in connection with it shall be subject to the exclusive jurisdiction of the High Court of England and Wales’, also encompass, as regards acts and omissions of the organs of the second respondent, who represent it and give rise to liability on its part pursuant to Article 71 of the Greek Civil Code, the persons responsible who acted in the performance of their duties and are liable under that article, in conjunction with Article 926 of the Greek Civil Code, jointly and severally with the company, a legal person?

COMMENTS

The referral of the Supreme Court per se is very promising, because it signals its intention to engage in a previously inexistent discourse with the CJEU. In anticipation of the European Court’s ruling, and the opinion of the Advocate General before that, it suffices to say that the general view on the matter does not seem to support the position of the Supreme Court. For instance, Prof. Magnus states in his analysis under Art. 23 Brussels I Regulation that “where a claimant sues several defendants in same proceedings, a jurisdiction agreement can only be invoked by and against the defendant with whom the jurisdiction agreement has been concluded” [Magnus/Mankowski, Brussels I Regulation (2^nd ed. 2012) art. 23 note 158]. However, as mentioned in the beginning, this post serves solely as a quick glance to the Supreme Court’s reasoning, whereas its author reserves his right to return on the matter, once the CJEU publishes its ruling.