Conflict of laws - Challenge to jurisdiction

WMS Gaming Inc v B Plus Giocolegale Ltd: Queen's Bench Division, Commercial Court (Mr Justice Simon): 13 October 2011

Article 27 of Council Regulation (EC) 44/2001 provides, so far as material: (1) 'Where proceedings involving the same cause of action and between the same parties are brought in the courts of different member states, any court other than the court first seised shall of its own motion stay its proceedings until such time as the jurisdiction of the court first seised is established' and

(2) 'Where the jurisdiction of the court first seised is established, any court other than the court first seised shall decline jurisdiction in favour of that court'. Article 28 of Council Regulation (EC) 44/2011 provides, so far as material: (1) 'Where related actions are pending in the courts of different member states, any court other than the court first seised may stay its proceedings'; (2) 'Where these actions are pending at first instance, any court other than the court first seised may also, on the application of one of the parties, decline jurisdiction if the court first seised has jurisdiction over the action in question and the law permits the consolidation thereof'; and (3) 'For the purposes of this article, actions are deemed to be related where they are so closely connected that it is expedient to hear and determine them together to avoid the risk of irreconcilable judgments resulting from separate proceedings.'

In November 2009, the claimant company entered into a contract with the defendant company pursuant to which it agreed to supply 250 gaming machines to the defendant for payment of $2m (the supply contract). Discoveries subsequently made by the claimant during the course of due diligence enquiries into the business of the defendant (the allegations) gave rise to serious concerns about dealing with the defendant.

Accordingly, the claimant terminated the supply contract in March 2010 in purported exercise of one of its standard terms. The allegations were contested by the defendant, which denied that the claimant was entitled to act as it did. Furthermore, the claimant took the decision in February/March 2010 to end negotiations which were taking place with the defendant in relation to a potential future supply of gaming machines for the Italian market (the European Negotiations).

The claimant subsequently brought proceedings in February 2011 in relation to the supply contract (the supply contract claim) and the European Negotiations (the negotiation claim), seeking declarations that it was entitled to act as it did and that it had no liability to the defendant. The defendant subsequently issued applications, inter alia, in relation to the negotiation claim seeking orders from the court declining jurisdiction under articles 27 and 28 of Council Regulation (EC) 44/2011 (the regulation) or alternatively a stay under article 28 of the regulation.

The basis of the application was that at the time that the supply contract claim and negotiation claim (the English action) were issued, the defendant had already brought proceedings before the Italian court in Rome claiming in respect of losses arising out of the breakdown in the negotiations for a contract to supply the Italian market (the Italian proceedings).

The Italian proceedings upon which the defendant relied had been issued in April 2010. The defendant had commenced proceedings against a company affiliated to the claimant (WMS Spain) in Rome. Initially, the claim was for breach of the supply contract and for damages under article 1337 of the Italian Civil Code for WMS Spain's unjustified interruption of the European Negotiations (the article 1337 claim). The defendant subsequently waived its claim in the Italian court for breach of the supply contract.

The principal issues which fell to be determined were whether the court should stay its proceedings and/or decline jurisdiction under article 27 or 28 of the regulation. The claimant argued, inter alia, that the Italian proceedings did not constitute an action against itself. Consideration was given to C-129/92 Owens Bank Ltd v Bracco [1994] QB 509.

The court ruled: The court was not bound to stay the English action either indefinitely or until the jurisdiction of the Rome court was 'established'. It had been acknowledged by the defendant that the Rome court had not accepted jurisdiction in relation to the Article 1337 claim and accordingly, the terms of article 27.2 of the regulation were not engaged. In any event, having considered whether the negotiation claim in the English action and the article 1337 claim were or involved the 'same cause of action', it was held that neither the 'cause' nor the 'object'; were the same.

In addition, it was unrealistic to treat the claimant and WMS Spain as the same parties as they were plainly not indissociable and indivisible and a judgment against one would not have the force of res judicata against the other (see [30] - [31], [38] - [40] of the judgment). Berkeley Administration Inc v McClelland [1995] IL Pr 201 considered.

The court's discretion either to decline jurisdiction in respect of the negotiation claim or to stay that claim pending the outcome of the Italian proceedings would not be exercised. The relevant actions pending in the courts of England and Wales and Italy were not related actions. The negotiation claim in the former and the article 1337 claim in the latter were similar: the names of the parties were alike and there was an overlap in the subject matter of the dispute.

However, on analysis, they were not related in the sense described in article 28. There was a 'connection', but there was little risk of inconsistent judgments and such risk was not sufficiently great to make the actions related for the purposes of article 28. In any event, the application of the three factors set out in Owens Bank Ltd v Bracco militated strongly against allowing the present application (see [46], [53] - [54] and [58] of the judgment). Research in Motion UK Ltd v Visto Corpn [2008] 2 All ER (Comm) 560 applied; Owens Bank Ltd v Bracco (No 2): C-129/92 [1994] 1 All ER 336 considered.

The application would be refused and the court would hear the parties on the form of directions which should be made in the light of the judgment (see [59] of the judgment).

Stephen Houseman (instructed by Holman Fenwick Willan LLP) for the claimant/pt 11 respondent; Richard Brent and Alexia Knight (instructed by Orrick, Herrington & Sutcliffe (Europe) LLP) for the defendant/pt 11 applicant.