Anton Durbeck GmbH v Den Norske Bank ASA

LORD PHILLIPS, MR: This is an appeal by a German company ("the claimants") from the judgment of Mr Nigel Teare QC, sitting as an additional judge of the Queen's Bench Division, dated 13 June 2002. The judge held that the court had no jurisdiction to entertain the claim which the claimants seek to bring against a Norwegian company ("the defendants").

The appeal raises two issues of general importance on which the judge gave permission to appeal. The first is whether the provisions of Article 5(5) of the 1988 Lugano Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters ("the Convention") confer jurisdiction on the English court. The second is whether, if the English court has jurisdiction under Article 5(5), it has jurisdiction to stay the proceedings under the doctrine known in the jurisprudence of private international law as "forum non conveniens". The judge gave a negative answer to the first question. We have to decide whether he was right to do so. Had he not done so, he indicated he would have stayed the proceedings on the ground that Panama and not England was the convenient forum.

The claimants would wish to challenge his jurisdiction to stay the proceedings if they were properly founded under the Convention. They accept, however, that binding authority precludes them from doing so in this court. If they win on the first point, they accept that they must lose on the second, but will seek permission to appeal to the House of Lords.

I wish at the outset to pay tribute to the admirable clarity of the judgment below. I could not improve upon, and will gratefully incorporate, some of the early passages of the judgment.

The claim

The claim which the claimants seek to bring against the defendants is an action in tort based on the line of authorities, ending with the Myrto [1977] 1 Lloyd's Rep 243. It is alleged that the defendants, who were mortgagees of the vessel TROPICAL REEFER, wrongly interfered with the claimants' contracts for the carriage of a cargo of bananas by arresting the vessel in Panama in or about July 2001. The defendants contend that the principle set out in the Myrto conflicts with the principle that a secured creditor is entitled to enforce his security without regard to the effects on third parties. On that account the Myrto is not to be followed. They rely on Edwin Hill v First National Plc [1989] 1 WLR 225 and The Nazezhda Krupskaya [1997] 2 Lloyd's Rep 35. As the judge observed, the merits of this dispute do not need to be considered at this stage.

The facts

By a loan agreement dated 1 December 1997, the defendants, who are a Norwegian bank with a branch in London, agreed to provide a loan of US$6 million to three borrowing companies for the purchase or refinancing of three vessels, SPRING REEFER, BLUE REEFER and TROPICAL REEFER. The security for the loan included mortgages on each vessel. The ultimate beneficial owners of the vessels and the managers of the vessels were Cuban. The loan was entered into by, and administered from, the London branch of the defendants. The loan agreement was governed by English law. The mortgages and the deeds of covenant which regulated them were subject to the law of Cyprus.

Between 10 and 16 July 2001 a cargo or bananas was loaded on board TROPICAL REEFER in Guayaquil and Puerto Bolivar, Ecuador, for shipment to Europe. The bananas were to be delivered to the claimants who purchased them for US$1,192,013.

On 24 July 2001 TROPICAL REEFER was arrested in Panama in an action in rem against the vessel commenced by the defendants on the instructions of their London branch, having received approval from head office in Oslo. The defendants claim that over US$2 million is outstanding on the loan.

On 10 December 2001 the claimants considered that the cargo of bananas was a constructive total loss and on 12 September 2001 it was discharged overboard at sea. On 16 October 2001 the vessel was sold by order of the Panamanian court. On 22 November 2001 the claimants commenced proceedings in rem in Panama against the proceeds of sale claiming damages for breach of the contract of carriage.

On 19 December 2001 the defendants applied in Panama to commence an action for a declaration that they were not liable to the claimants. On 20 December 2001 the claimants issued the claim form in the present action in this court and served it on the London branch of the defendants. On 20 March 2001 the Panamanian court gave permission to the defendants to bring their claim for a declaration of non-liability.

The Convention

The Convention is incorporated into the domestic law of the United Kingdom by section 3(A)(1) of the Civil Jurisdiction and Judgments Act 1982, as amended ("the 1982 Act"). The following provisions of the Convention are relevant:

"Section 1 —General Provisions.

Article 2

Subject to the provisions of this Convention, persons domiciled in a Contracting State shall, whatever their nationality, be sued in the courts of that State.

Article 3

Persons domiciled in a Contracting State may be sued in the courts of another Contracting State only by virtue of the rules set out in Sections 2 to 6 of this Title.

……

Section 2 —Special Jurisdiction

Article 5

A person domiciled in a Contracting State may, in another Contracting State, be sued:

1 in matters relating to a contract, in the courts for the place of performance of the obligation in question; in matters relating to individual contracts of employment, this place is that where the employee habitually carries out his work, or if the employee does not habitually carry out his work in any one country, this place shall be the place of business through which he was engaged;

2 in matters relating to maintenance, in the courts for the place where the maintenance creditor is domiciled or habitually resident or, if the matter is ancillary to proceedings concerning the status of a person, in the court which, according to its own law, has jurisdiction to entertain those proceedings, unless that jurisdiction is based solely on the nationality of one of the parties;

3 in matters relating to tort, delict or quasi delict, in the courts for the place where the harmful event occurred;

4 as regards a civil claim for damages or restitution which is based on an act giving rise to criminal proceedings, in the court seised of those proceedings, to the extent that that court has jurisdiction under its own law to entertain civil proceedings;

5 as regards a dispute arising out of the operations of a branch, agency or other establishment, in the courts for the place in which the branch, agency or other establishment is situated."

The approach to the interpretation of Article 5 of the Convention

Section 3(B)(2) of the 1982 Act provides that the Report on the Convention by Mr P Jenard and Mr G Möller shall be given such weight as is appropriate when interpreting the Convention. The material provisions of Article 5 of the Convention are, as is most of the Convention, in the same terms as those of the earlier Brussels Convention. They fall to be interpreted in the same manner. Thus, decisions of the European Court of Justice on Article 5 of the Brussels Convention apply, and reference may be made to the report of Mr Jenard on the Brussels Convention (see the observations of Lord Hope of Craighead in Agnew v Lansforsakringsbolagens [2000] 2 WLR 497 at pp 516–7).

Jenard and Möller set out a number of fundamental principles that apply to the two Conventions. The third of these begins with the statement that a defendant's domicile is the point on which the rules on jurisdiction hinge. The fourth principle states that the provisions of Article 5 relate to "proceedings which can be considered as having a particularly close link with the court before which the proceedings are brought". It describes the provisions of Article 5 as special in that both Conventions directly specify which court has jurisdiction.

Jenard and Möller have a specific commentary on Article 5(5) to which I shall revert when I outline the submissions made by Mr Parsons on behalf of the defendants.

In his report on the Brussels Convention Jenard remarks of Article 5 that adoption of the special rule of jurisdiction is justified by the fact that there must be a close connection factor between the dispute and the court with jurisdiction to resolve it. This proposition is echoed by an observation of the European Court in Martin Peters Bauunternehmung GmbH v Zuid Nederlandse Aannemers Vereniging ( case 34/82) [1983] 987 at 1001. In Kleinwort Benson Limited v Glasgow City Council [1999] 1 AC 153 at page 164, Lord Goff of Chieveley cited the same case in support of the proposition that:

"…it is clearly recognised that article 5 is in derogation from the basic principle of domicile in article 2….and as a result the provisions of article 5 are to be construed restrictively (see Kalfelis v Bankhaus Schroder, Munchmeyer, Hengst and Co ( Case 189/87) [1088] ECR 5565, 5585, para 19)."

The judge's findings in relation to Article 5(3)

In...