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Changes to the rules on service out of jurisdiction: Positives and pitfalls

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A quietly-introduced amendment to the Civil Procedure Rules on service out of jurisdiction, intended to deal with some of the effects of Brexit, is likely to have far-reaching consequences.
 
As a general principle, a claimant seeking to bring a claim against a defendant that is not in the same jurisdiction must have permission from the court to serve the claim form and particulars of claim out of the jurisdiction. 

Before Brexit, there were a number of important exceptions where permission was not needed. These exceptions covered circumstances where:
  • Regulations (EC) No 1393/2007 (the Service of Documents Regulation) and (EU) 1215/2012 (Recast Brussels Regulation) applied,  i.e., where the defendant was domiciled in an EU Member State;

  • The Convention on jurisdiction and the recognition and enforcement of judgements in civil and commercial matters 2007 (Lugano Convention) applied, i.e., where the defendant was domiciled in a Lugano Convention member state, which included all EU Member States, Switzerland, Iceland and Norway; or

  • The Hague Convention on the Choice of Court Agreements 2005 applied, i.e., where there was a contract with a qualifying jurisdiction clause and the defendant was domiciled in a Hague Convention signatory, which includes all EU Member States, Mexico, Montenegro and Singapore.

At the end of the Brexit transition period on 31 December 2020, the Recast Brussels Regulation and the Lugano Convention ceased to apply, and those exceptions to the permission rule fell away. 

Claimants will therefore generally need to apply for the court's permission to serve out of jurisdiction on defendants in the EU, Switzerland, Iceland or Norway. 

The Hague Convention exception still applies, however, as the UK was able to accede to the Hague Convention in its own right as of 1 January 2021. 

The Hague Convention requires the court designated in an exclusive jurisdiction agreement to hear the case and generally prevents courts of other contracting states from hearing parallel proceedings.

However, the Hague Convention only applies in circumstances where there is claim arising out of a commercial contract containing an exclusive jurisdiction clause.

Unless the contract and clause falls within these narrow bounds, an application for permission to serve out of jurisdiction will still have to be made.

However, a subtle but crucial amendment to the CPR as of 6 April 2021 allows claimants to serve out of jurisdiction in circumstances where there is a non-exclusive jurisdiction clause in a disputed contract.

This change can be found in the new rule 6.33(2B)(b), which provides that:

"The claimant may serve the claim form on the defendant outside the United Kingdom where, for each claim made against the defendant to be served and included in the claim form … a contract contains a term to the effect that the court shall have jurisdiction to determine that claim."

Rule 6.33 (2B)(b) therefore provides a surprisingly broad exception to the requirement for permission for service out in contractual disputes, specifically:
  • There is no geographical restriction – provided there is a contract with an English jurisdiction clause, the claim form can be served on a defendant based anywhere in the world;

  • There is no requirement that the jurisdiction clause is exclusive – this rule should therefore apply where there is a non-exclusive jurisdiction clause or an asymmetric (one-way) jurisdiction clause; and

  • There is no restriction on the type of contract, as with the Hague Convention, which applies only to commercial contracts and excludes, for example, consumer contracts.

Good news for claimants?

An advantage of this rule change is where a claimant brings a contractual claim against a foreign defendant containing a non-exclusive jurisdiction clause, the onus is no longer on the claimant to demonstrate that the English courts have jurisdiction to hear the claim.

Before the rule change, a claimant would need to apply for permission to serve out and submit evidence in support. Because such applications are made without notice to the defendant, the claimant is under a duty of full and frank disclosure.

The rule change flips the burden of persuading the court that it should decline jurisdiction onto the defendant, once it has been served with the claim.

The upshot of this is that claimants bringing contractual claims under non-exclusive jurisdiction clauses can now serve such claims more quickly than under the previous regime, and potentially at lower cost. 

Defendants in these circumstances will also no longer be able to rely on lack of full and frank disclosure as a reason for setting aside a grant of permission.

An inconvenient forum

Although the rule change involves clear benefits for claimants, defendants will not be without ammunition in disputing the jurisdiction of the courts of England and Wales.

Because the English court will not need to scrutinise whether England is the proper forum prior to a claim being issued on the basis of a non-exclusive jurisdiction clause, this will likely lead to an increase in forum non conveniens arguments by defendants after being served with the claim.

The common law doctrine of forum non conveniens allows a court to decline to accept jurisdiction in a civil action (even though the forum or venue is proper and the court has jurisdiction over the case and the parties) where an appropriate and more convenient alternative forum exists in which to try the action.

The appropriate forum is the one in which the case may most suitably be tried in the interests of all the parties and the ends of justice. In circumstances where jurisdiction is based on a non-exclusive jurisdiction clause, the defendant may argue that England is not the proper forum to hear the claim.

The English court will consider what factors point towards the other forum, including, but not limited to, factors relating to convenience or expense, such as the availability of witnesses and evidence.

Other factors are the law governing the matter and the places where the parties reside or carry on business. Even if there is some other available forum that appears more appropriate, justice may nevertheless require a stay to be refused if, for example, the claimant would not obtain justice in the foreign jurisdiction.

Before Brexit, forum non conveniens arguments could not be used by EU Member State defendants where the English court had jurisdiction under the Recast Brussels Regulation or Lugano Convention.

Because of the automatic allocation of jurisdiction under those instruments, the English court could not decline such jurisdiction on the basis that a court of another state was a more appropriate forum.

Article 25 of the Recast Brussels Regulation provided that a Member State court had jurisdiction where it has been so selected in a jurisdiction agreement (whether exclusive or non-exclusive) between the parties (regardless of where they are domiciled).

Where a non-exclusive jurisdiction clause applied, the English court could not decline jurisdiction provided that it was first seised.

Those rules no longer apply, which means that, unless the dispute concerns a contract containing an exclusive jurisdiction clause falling under the Hague Convention, defendants in EU or Lugano Convention member states can now argue that there is a different jurisdiction that would be more appropriate to hear the claimant's claim.

This also increases the prospects of parallel proceedings. As well as advancing forum non conveniens arguments to a claim in the English court, the defendant to such proceedings could also begin a counterclaim in the jurisdiction of a Member State, which would no longer be obliged to decline such proceedings.

The spectre of anti-suit injunctions

An anti-suit injunction is a permanent injunction that blocks a party from issuing or, as is more common, continuing with court proceedings in a foreign state.  

Before Brexit, because of the automatic allocation of jurisdiction under Recast Brussels, anti-suit injunctions were not available in respect of proceedings in other Member States.

Now that the UK has left the EU, Member State courts can issue anti-suit injunctions against claimants who are preparing to issue, or have issued, a claim in the English court.

For example, if a party in a Member State knows that it will be sued in the English courts pursuant to a non-exclusive jurisdiction clause, instead of waiting to be served and subsequently contesting the jurisdiction in the English court, it may seek an anti-suit injunction in the relevant Member State to block proceedings in England (an injunction itself is not binding on the English court, but the granting of an anti-suit injunction is likely to impact its decision on jurisdiction).

Conclusions

A claimant relying on a non-exclusive jurisdiction clause in a contractual dispute has the ability to commence proceedings against defendants more easily following the CPR rule change.

However, owing to the fact that the Recast Brussels Regulation no longer applies, a claimant also needs to assess the potential risk of losing a forum non conveniens argument that could be advanced by a Member State defendant, in addition to the risk of parallel proceedings arising in a Member State jurisdiction.

Jurisdiction contests will likely be more unpredictable and complex, and significantly more expensive, than before Brexit.

This article was authored by Nathan Capone and Julia Dodds, dispute resolution directors at Fieldfisher.
 

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