Border trouble

Litigating claims arising from the same facts in different countries is best avoided. Within the EU rules exist to avoid different decisions being made on the same facts. Sometimes, these do not work neatly and jurisdictional uncertainty can ensue.

Sir Martin Sorrell, chief executive of the WPP Marketing and Communications group, recently hit the headlines over a libel claim that settled. Separately, a jurisdiction race occurred in a contractual dispute between one of the parties, Mr Benatti and WPP Holdings Italy Srl (WPP Italy).

In the Court of Appeal decision, Benatti v WPP Holdings Italy Srl [2007] EWCA Civ 263, Buxton LJ castigated as 'deplorable' the fact that an expensive and time-consuming jurisdictional battle could have been 'spawned' by the European legislation designed to provide operational clarity.

As a result of this decision on the application of Article 30 of Council Regulation 44/2001 (the Judgments Regulation), some aspects of the contractual claims could be pursued here, others in the Italian courts.

Benatti involved a terminated consultancy agreement between Mr Benatti, the former head of WPP's Italian operations, and WPP Italy. Their contract contained a jurisdiction clause exclusively in favour of English courts. Thus WPP Italy sued Benatti in England for beach of fiduciary duty and contract. But Benatti started a case in Verona, seeking a declaration of his non-liability to WPP Italy, and relief against two other WPP Group companies which were later joined in the English proceedings.

The Benatti/WPP case involved a terminated consultancy agreement between Mr Benatti, the former head of WPP's Italian operations, and WPP Italy. Their contract contained a jurisdiction clause exclusively in favour of English courts. Following this clause, WPP Italy sued Mr Benatti in England for beach of fiduciary duty and contract. But Mr Benatti started a case in Verona, seeking a declaration of his non-liability to WPP Italy. He also sought relief against two other WPP Group companies. The English proceedings initially involved only WPP Italy as claimant, the other WPP companies being added later, after the start of the Italian proceedings.

Following the initial rejection of Mr Benatti's challenge to the jurisdiction of the English court, the Court of Appeal had to decide which court had jurisdiction under the Judgments Regulation in respect of which claims. Several issues arose; the issue considered here is dual proceedings.

Avoiding conflict

Articles 27 to 30 of the Judgments Regulation prescribe a method to prevent conflicting decisions being given by the courts of different member states. Central to this is the concept of 'seisin', (the formal invocation of the court process) covered in Article 30 (see box).

Article 27 is aimed at preventing the same claim between the same parties being determined in different EU jurisdictions. Where two or more countries' courts are involved, it must be established which court with jurisdiction over the claim was 'seised' first. Once that is resolved, the second court is required to decline jurisdiction in favour of the first 'seised' court.

Limb one of Article 30 applies to English cases, as an English claim form must be issued by the court before service. Limb two relates to Italian procedure in that the claim document must first be submitted to a service authority before being lodged at court. Mr Benatti's Italian proceedings were not accompanied by a certified English translation for service on the non-Italian parties, as required under the EU Service Regulation (Regulation 1348/2000).

The English court was first 'seised' in respect of the claim involving WPP Italy as the English proceedings were started first in time. WPP said that the omission of a translation precluded the Italian court being first 'seised' in respect of Mr Benatti's claim against the other WPP companies. They could not be effectively served without a translation, so the Italian court was not 'seised' until that was rectified.

Toulson LJ rejected this as an incorrect interpretation of Article 30 of the Judgments Regulation. He said: 'it does not matter whether the service of the writ by [the Italian service authority] was valid service on [the WPP parent company] under the Service Regulation.' The Master of the Rolls added: 'Article 30 is concerned with seisin and not service. If the draftsman had intended to provide that seisin depended upon actual service he could readily have done so.' That this meant that substantially similar claims would continue in two jurisdictions was unfortunate, but unavoidable.

Preventative steps

• Draftsmen should ensure that jurisdiction clauses in contracts cover all entities likely to be involved in proceedings if the relationship breaks down. The Contracts (Rights of Third Parties) Act 1999 might be used (as mentioned in Benatti, though the Court of Appeal left the point open). Alternatively, the parties to the agreement could be extended - Mr Benatti's contract was with WPP Italy, but his services under it could be requested by any other WPP company, making it possible that any such company could be joined to proceedings.
• Compliance with all procedural requirements for service of proceedings stops technical arguments being raised (which did not affect this result, but could others).
• Another possibility is for the Judgments Regulation to require EU courts to stay proceedings (whether first or second in time) where an Article 23 agreement exists conferring exclusive jurisdiction on another court. This approach is not supported by the reasoning of the European Court of Justice in Case C-116/02 Gasser [2003] ECR I-14693, and would require alteration to the Judgments Regulation. There are counter-arguments: for instance, it may provoke disputes as to whether there is a valid Article 23 agreement. Giving supremacy to prior agreements should help to prevent EU forum shopping.