REUTERS | Murad Sezer

Don’t forget: the Recast Brussels Regulation can apply to non-EU defendants

It is easy to fall into the trap of thinking that the Brussels jurisdiction regime applies to EU domiciled defendants and the common law rules apply to everyone else.

That categorisation didn’t always work under the 2001 Brussels Regulation. It is, however, an even more dangerous starting point under the Recast Brussels Regulation, as in a number of additional circumstances non-EU defendants are caught within its provisions.

The good news is that if the claim does come within the Recast Brussels Regulation, there is no need to spend time, effort and money obtaining permission to serve outside of the jurisdiction. You just need to tick the correct box on form N510 and go ahead; of course, there may still be hoops to jump through in actually effecting service, depending on where you need to serve.

Jurisdiction agreements

The most significant example in a commercial context is jurisdiction agreements. The English court has jurisdiction under article 25 of the Recast Brussels Regulation if the parties have agreed to give jurisdiction to it, regardless of the domicile of the parties. This is in contrast to the 2001 Brussels Regulation where one of the parties had to be EU domiciled.

For example, if a US company and a Hong Kong company enter into an agreement containing an English jurisdiction clause, whether the clause is exclusive or non-exclusive, the English courts have jurisdiction pursuant to article 25. There is no need to obtain permission to serve outside of the jurisdiction under the common law rules.

Exclusive jurisdiction

Another example is article 24 of the Recast Brussels Regulation. This gives exclusive jurisdiction to the courts of a particular member state based on the subject matter of the dispute. Again, this is regardless of the domicile of the parties.

There was some doubt under the 2001 Brussels Regulation over whether “regardless of domicile” meant what it said (it probably did, as the case which said otherwise was decided without all relevant authorities being taken into account), but the position is now clear under the Recast Brussels Regulation: defendants domiciled in non-EU countries are caught by article 24.

The most significant provision in a commercial context is article 24(2). Broadly, this provides that where proceedings have as their object the validity of a company’s constitution or the decisions of its organs, the EU member state of the company’s seat will have exclusive jurisdiction over those proceedings.

A recent example of this in operation is the Court of Appeal decision in Koza Limited and another v Akcil and others. Koza Limited, an English company, was served with notices by its Turkish parent purporting to requisition a general meeting to pass resolutions to replace its directors with trustees appointed by the Turkish courts. The board of the parent was itself run by court appointed trustees, pending investigations into alleged financing of terrorism. Koza Limited and one of its directors commenced English proceedings, seeking relief on two grounds. Firstly on the basis that the resolutions could not be properly moved as a matter of English company law, as they could not be passed without the consent of that director and his brother. Secondly on the basis that the court should not recognise any authority of the trustees to cause the parent to serve the notices, as the appointment of the trustees was alleged to be unlawful under Turkish law, was on an interim basis and was in breach of natural justice and Article 6 of the European Convention on Human Rights.

It was accepted that the first claim, based on English company law, was within article 24(2), but the defendants argued that the second claim, relating to authority, was not. The court rejected that argument. The question was whether the proceedings as a whole were principally concerned with the validity of the English company’s decisions; they were. A claim will not come under article 24(2) if there is a mere link to a decision of a company which is ancillary to the heart of a contractual or other dispute. But where, as here, the validity of the decisions of the organs of the company is at the heart of the claim, it does not matter that other issues are also raised, nor does it matter who the defendants are.

The English court therefore had jurisdiction over the Turkish defendants under the Recast Brussels Regulation and no permission to serve outside of the jurisdiction was required.

Employees, consumers, branches

As for other examples, non-EU employers and businesses facing consumer claims can also now come within the Recast Brussels Regulation.

So a non-EU employer can be sued in the member state where the employee habitually carries out his or her work, and a consumer claim against a non-EU business can be brought in the member state where the consumer is domiciled in some circumstances, including where the business directs its activities to that country.

And don’t forget, where an employer, business (in respect of consumer claims) or insurer is not EU domiciled but the dispute arises out of the operations of a branch, agency or establishment in a member state, it will (as under the 2001 Brussels Regulation) be deemed to be domiciled in that member state.

Wide meaning of domicile

Finally, a reminder that a company incorporated in a non-EU country may in fact be domiciled in an EU member state if any of the tests for domicile is met, and therefore come within the Recast Brussels Regulation for all purposes. So in Delos Megacore Limited v Omega Investments Limited and another a defendant incorporated in the Marshall Islands was held to be domiciled in Greece, as that’s where its central administration took place (all of its directors were resident in Greece and all company meetings were held there). Permission to serve outside of the jurisdiction under the common law rules was therefore set aside.

So, remember

Drawing these threads together, the message is, give careful thought at the outset to whether a non-EU defendant comes within the Recast Brussels Regulation before heading down the common law route. It could save you considerable time, effort and money.

Herbert Smith Freehills Anna Pertoldi

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