Monthly Archives: January 2019

Jurisdiction after a no deal Brexit

Time for some more speculation about the future which awaits us after 29 March.  The topic this time is jurisdiction.

As the readers of this blog will know, the rules of civil jurisdiction across the EU are currently governed by the Brussels Recast regulation.  The basic framework is:

  1. A defendant domiciled in a Member State can be sued in the court of its domicile and also in various other EU courts under certain specified gateways (e.g. in competition claims, the place where the cartel was concluded – see CDC).
  2. There are strong lis pendens provisions. In general, if the same issue is litigated in more than one Member State, the later proceedings must be stayed.
  3. There is protection for choice of forum contracts in favour of a court of a Member State. The courts of the chosen Member State will accept jurisdiction even if the defendant is not domiciled in that (or indeed any) Member State; and all other courts must stay proceedings in deference to the courts of the chosen Member State.

The proposed Withdrawal Agreement provides that the provisions of Brussels Recast will continue to apply to proceedings instituted during the transitional period.  But, as with most things, if there is no Withdrawal Agreement then things will get more interesting.

No deal Brexit: The law in England

The government’s intention in the event of no deal is that Brussels Recast will continue to apply to cases begun in England before Brexit, but otherwise it will be repealed.  A draft statutory instrument to that broad effect was published in December.

It is worth briefly pausing on this point to note that it is not obvious that the proposed statutory instrument will be lawful.  Under the EU Withdrawal Act 2018, the SI can only be made if it is required to remedy or mitigate a ‘deficiency’ in retained EU law.  The government has proceeded on the basis that Brussels Recast in a necessarily reciprocal arrangement and that the UK could not retain it if the EU does not do so too.  That may be open to debate.

However, assuming that the proposed SI is not challenged, the practical consequence will be that the English common law rules will apply instead of Brussels Recast to all cases commenced in England after exit day.  Whether that is a good thing rather depends on your perspective.

The English rules are certainly more flexible than the Brussels Recast rules.  In theory, there will be some cases which could be litigated in England under the English jurisdictional gateways which you could not litigate here under Brussels Recast.  For example, an English court could allow proceedings to be litigated in England even if there is a jurisdiction clause in favour of an EU Member State.  Other examples were given in Naina Patel and Andrew Scott’s previous blog on this topic.

On the other hand most of the English gateways are discretionary.  This gives rise to much more uncertainty, and in practice it may be somewhat optimistic to think that there are going to be lots of opportunities to bring new claims in England that could not have been brought under Brussels Recast.

No deal Brexit: The law in the EU

It may turn out that the more difficult problems will arise in proceedings in the EU-27.

It is worth starting with the obvious point that Brussels Recast will continue to apply, within the EU, to cases where the Defendant is domiciled in an EU Member State.  So, to take a simple example, an English company could still sue a German company in Germany.  That will give rise to various tactical possibilities for claimants wanting to sue an EU defendant.

  1. They might be able to sue in England, under English rules.
  2. They could sue in the EU. If within one of the Brussels Recast gateways, the EU court would (probably) be obliged to accept jurisdiction.
  3. Note that they could sue in the EU even if there is a jurisdiction clause in favour of England. Brussels Recast gives particular weight to such agreements but only if they are in favour of the courts of a Member State.  We therefore face the prospect of EU Member States being obliged by the Brussels Recast regulation to take jurisdiction over disputes even if there is a contractual agreement in favour of English courts.

Brussels Recast will also still apply, within the EU, to cases where there is a jurisdiction agreement in favour of an EU Member State, regardless of the domicile of the parties.  So for example: a German claimant could still sue an English defendant in the chosen EU court.  This gives rise to similar tactical possibilities as are set out above.

But Brussels Recast will not apply within the EU to cases where the Defendant is domiciled in England and there is no EU jurisdiction agreement.  In this scenario, the national rules of the Member States will apply.  For example: if a German company sues an English company in Germany then, in the absence of any jurisdiction agreement, German jurisdiction rules will apply.

There are therefore various complex means by which jurisdiction may be established in the EU in cases with an English connection.  To make matters more complex, all of this must be understood in light of the fact that the Brussels Recast lis pendens rules do not apply in relation to pending proceedings in third states.  Article 33 of Brussels Recast provides only that Member States may, in certain circumstances, stay proceedings to await the resolution of pending proceedings in a third state.  What this means in practice is that we face the prospect of the same parties being tied up in litigating the same issues in the UK and in the EU.

As to how quickly these changes might happen, the European Commission has recently (18th January 2019) published a Notice to Stakeholders which states that, in the event of a no-deal Brexit, Brussels Recast will continue to apply to cases involving a UK-domiciled defendant which were pending before EU courts on the withdrawal date.  The legal basis for that assertion is not explained, but even if it is true it will affect only a small number of cases.  The Commission has not expressed a view on other scenarios which appear rather more likely, such as whether Brussels Recast would apply to proceedings commenced in the EU post-Brexit but where there were pending proceedings in England pre-Brexit; or whether it would apply to jurisdiction agreements in favour of England entered into pre-Brexit.  The broad expectation appears to be that the UK will immediately cease to be treated as part of the Brussels Recast regime.

 

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Subsidiarity liability: Biogaran

I wrote a blog a few months ago on the circumstances in which a subsidiary can be held liable for the infringing conduct of its parent.  That is a somewhat special interest subject which might be said to have received more than its fair share of attention among English judges and lawyers. However, I cannot resist a short update to point out that the issue has recently received attention from the EU General Court.

The context was a clutch of appeals relating to the Commission’s decision on ‘pay-for-delay’ settlements relating to patents owned by the French pharmaceutical company Servier. One of the addressees of the decision was Biogaran, a 100% Servier subsidiary.  One of Biogaran’s grounds of appeal – which was rejected – was that the Commission had wrongly held it liable for an infringement carried out by its parent.

The judgment is not as clear as one might have hoped, and it is also not yet available in English. However, two points are tolerably clear.

The first point is that the General Court considered that a subsidiary may be liable for an infringement even if does not itself have the knowledge that is ordinarily required to find an infringement: see [223]-[225].  That said, it appears that Biogaran did have at least some knowledge, so the precise limits of the court’s analysis are open to debate.

The second point relates to implementation.  Some parts of the Court’s judgment may be read as suggesting that a subsidiary may be liable even if it has played no role in the implementation of the infringement.  Other parts may be read as meaning that the subsidiary must play role in implementation but that it can be relatively minor: at [225] the Court refers to implementation “even in a subordinate, accessory or passive manner.”

So Biogaran is unlikely to be the final word on this issue.  It does, however, tilt the balance more firmly in favour of subsidiary liability than some English judges might be comfortable with.

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