Banco Nacional de Comercio Exterior SNC v Empresa de Telecomunicaciones de Cuba SA
| Jurisdiction | England & Wales |
| Judge | Lord Justice Tuckey |
| Judgment Date | 04 July 2007 |
| Neutral Citation | [2007] EWCA Civ 662 |
| Docket Number | Case No: A3/2007/0248(A)—A3/2007/0248 2006 Folio No. 2006 1097 |
| Court | Court of Appeal (Civil Division) |
| Date | 04 July 2007 |
[2007] EWCA Civ 662
the Lord Chief Justice of England & Wales
Lord Justice Tuckey and
Lord Justice Jacob
Case No: A3/2007/0248(A)—A3/2007/0248
A3/2007/0919 – A3/2007/0175
2006 Folio No. 2006 1097
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM QUEEN'S BENCH DIVISION-COMMERCIAL
MR JUSTICE DAVID STEEL
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Mark Cran Q.C. and Mr Andrew Thomas (instructed by Messrs Travers Smith) for the Applicant
Mr Jeffery Onions Q.C. (instructed by Messrs Freshfields Bruckhaus for the Respondent
Mr Graham Read Q.C. and Miss Diya Sen Gupta (instructed by Legal Business Services BT) for the Intervener
Hearing dates: 12 & 13 June 2007
This is the judgment of the court.
The questions which arise on this appeal are whether the High Court had jurisdiction to grant a worldwide freezing order following registration of a judgment under Council Regulation (EC) 44/2001 (the Regulation) in this case and whether the order should have contained the usual undertaking that “if the court later finds that this order has caused [anyone other than the respondent] loss, and decides that such person should be compensated for that loss, the applicant will comply with any order the court may make”.
These questions arise out of a dispute between Banco Nacional De Comercio Exterior S.N.C. (BNC), a state owned Mexican bank and Empresa De Telecommunicaciones De Cuba S.A. (ETC), the state controlled Cuban telecommunications company. On 11 February 2000 ETC entered into an escrow agreement with BNC under which it secured the repayment of loans provided by BNC to the National Bank of Cuba. ETC was to do this from the proceeds of its worldwide telecom operations. The escrow agreement was governed by Italian law and subject to the exclusive jurisdiction of a competent court in Turin.
As a result of political differences which had arisen between the governments of Cuba and Mexico, on 30 April 2002 the Cuban government issued a decree which proclaimed that the facilities and guarantees provided by ETC as collateral for the obligations undertaken by the National Bank of Cuba with BNC should be “deemed legally null and void”. ETC contended that it could no longer comply with the escrow agreement and failed to do so. Proceedings followed in the shape of an ICC Arbitration and a claim by BNC against ETC in Turin. Following an award in the arbitration in which ETC's reliance on the decree as force majeure was rejected, BNC obtained judgment in Turin against ETC on 18 November 2005 for $167m. plus interest and costs. This judgment stands and is not at present subject to any stay although it is subject to appeal.
BNC took steps to enforce the judgment in Italy but over £100m. is outstanding and BNC have sought to enforce it in other countries to which the Regulation applies. The enforcement proceedings in this country started on 29 September 2006 when Irwin J. on BNC's without notice applications ordered that the Turin judgment should be registered as a judgment of the High Court pursuant to the Regulation and granted a domestic freezing order against ETC. The freezing order was directed at amounts which would become payable to ETC on 30 September for use of its network under roaming agreements with UK mobile telecom companies. The order specifically referred to debts due or becoming due from 4 such companies. The schedule of undertakings contained the usual provision for paying third parties' costs of finding out whether they held any of ETC's assets, but the judge was persuaded to omit any undertaking about third party losses caused by complying with the order on the ground that this was a post judgment freezing order.
ETC appealed the order for registration, as they were entitled to do, and the appeal has still to be heard by the commercial court for reasons which it is unnecessary to explain.
On 18 October 2006 pursuant to the disclosure obligation in the freezing order ETC's solicitors wrote to say that its assets in England and Wales included about $1m. owed by fixed line operators, BT and Vectone, and about €1m owed under roaming agreements. It claimed however to have assigned the amounts due under the latter agreements on 19 September 2006 to another Cuban state controlled company, GTC. By this time BNC had taken enforcement proceedings in France, Luxemburg, Belgium, Germany and Spain with a view to attaching debts due to ETC under roaming and fixed line agreements made with telecom companies in those countries. A number of those companies had also been told that the debts had been assigned to GTC.
These developments prompted BNC to apply for a worldwide freezing order on the basis that ETC was attempting to dissipate its worldwide assets to avoid enforcement of the judgment. David Steel J. made such an order on BNC's without notice application on 23 October. It was in the usual terms and applied to both domestic and worldwide assets. BT and Vectone were added to the debtors identified in the order which also referred to debts purportedly assigned to GTC. This order however did contain the standard undertaking in respect of third party losses which had been omitted from the earlier order.
Shortly after the worldwide order was made BNC discovered that ETC had threatened its roaming partners that if they did not pay
GTC it would suspend its roaming services to them. Vectone was told that as a result of BNC sequestering ETC's assets in the UK it would immediately suspend its international telephone traffic services. Although it appears that ETC did not fully carry out all its threats, the affected third parties have said that they will look to BNC for compensation for any losses which they have suffered as a result of complying with the freezing orders. The first threats of such action led BNC to apply to vary the undertaking in the worldwide order on 27 October to bring it into line with the terms of the domestic order but Langley J. refused this application.
BNC's next attempt to do this was heard by David Steel J. at the same time as he heard ETC's application to discharge the worldwide order. This hearing took place on 17, 20 and 21 November 2006. At this hearing ETC accepted that the domestic freezing order should continue but submitted that the court had no jurisdiction to make the worldwide order which should not in any event have been granted because there was no risk of dissipation and as a matter of discretion. In his reserved judgment [2006] EWHC 19 (Comm) handed down on 24 January 2007 the judge held that he had jurisdiction to make the worldwide order, that there was a risk of dissipation and that this injunction should be continued as a matter of discretion. Lord Justice Rix granted ETC permission to appeal on the issue of jurisdiction. It does not now challenge the finding about risk of dissipation.
The judge refused to amend the worldwide order to delete the undertaking about third party loss and Lord Justice Chadwick adjourned BNC's application for permission to appeal that part of the judgment, with appeal to follow if permission granted.
BT, as we have explained, is one of the third parties affected by the freezing orders. On 17 April 2007 David Steel J. heard its application to vary the domestic order to enlarge the undertaking to match that in the worldwide order. However, whilst he recognised the discrepancy between the two orders both of which applied to BT, the judge refused the application principally on the ground that this court would inevitably have to consider the scope of the undertaking and by giving BT permission to appeal his decision it could intervene in BNC's appeal. That is what it has done. We have heard all three appeals together.
After this short introduction to the background to the dispute and the procedural history we can turn to the questions raised by the appeal. Both require reference to the Regulation, which replaced the Brussels and Lugano Conventions on jurisdiction and enforcement of judgments and was designed to produce “highly predictable” rules of jurisdiction and “free movement” of judgments between member states of the European Union.
Chapter II deals with jurisdiction. Article 22 (5) provides that in proceedings concerned with the enforcement of judgments, the courts of the Member State in which the judgment has been or is to be enforced shall have exclusive jurisdiction.
Article 31 says that:
Application may be made to the courts of a Member State for such provisional, including protective, measures as may be available under the law of that State, even if, under this Regulation, the courts of another Member State have jurisdiction as to the substance of the matter.
Chapter III deals with recognition and enforcement of judgments. By Article 38 a judgment shall be enforced in another Member State once it has been declared enforceable there. In England and Wales this means once it has been registered for enforcement here. Article 39 (2) provides that the local jurisdiction shall be determined by reference to the place of enforcement.
The formalities for registration are contained in Articles 53 to 56 and CPR 74 (1) (b) and (2) (e). The court is required to register the judgment immediately on completion of the formalities (Article 41). It is only then that the party against whom enforcement is sought can object. This he may do by appeal to the High Court (Article 43 (1) and 43 (2)) within...
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