DSM Anti-Infectives BV v SmithKline Beecham Plc
| Jurisdiction | England & Wales |
| Judge | Peter Gibson,Tuckey,Longmore L JJ. |
| Judgment Date | 10 September 2004 |
| Court | Court of Appeal (Civil Division) |
| Date | 10 September 2004 |
Court of Appeal (Civil Division).
Peter Gibson, Tuckey and Longmore L JJ.
Simon Thorley QC and Simon Salzedo (instructed by Lovells) for the respondents.
John Jarvis QC and Robert Howe (instructed by Simmons and Simmons) for the appellants.
The following cases were referred to in the judgment of Peter Gibson LJ:
Donohue v Armco [2002] CLC 440.
Harrods (Buenos Aires) Ltd, ReELR [1992] Ch 72.
Owusu v Jackson [2003] 1 CLC 246.
Travelers Casualty and Surety Co of Europe Ltd v Sun Life Assurance Co of Canada
(UK) LtdUNK [2004] EWHC 1704 (Comm).
Group Josi Reinsurance Co SA v Universal General Insurance CoECAS (Case C-412/98) [2001] CLC 893.
Forum non conveniens — Exclusive English jurisdiction clause — Anti-suit injunction — Stay of proceedings — Agreement to settle patent disputes — Agreement governed by English law and conferred exclusive jurisdiction “with respect to all disputes in connection with the agreement” on English courts — Whether US proceedings brought in breach of exclusive jurisdiction clause in settlement agreement — Whether US proceedings should be restrained — Whether English proceedings should be stayed on forum grounds — Council Regulation 44/2001, art. 2.
This was an appeal by the first defendant, SmithKline Beecham plc, from the dismissal of its application to stay the English proceedings brought by the first claimant, DSM Anti-Infectives BV, and the second claimant, DSM Anti-Infectives Sweden AB, against the first defendant and the second defendant, SmithKline Beecham Corp.
The first and second claimants (“DSM”) were respectively a Dutch company which sold ingredients for pharmaceutical products and a Swedish company in the same group which manufactured such products in Sweden. The first and second defendants (“GSK”) were respectively an English company which manufactured ingredients for pharmaceutical products and a Pennsylvanian company in the same group which manufactured and sold pharmaceutical products using ingredients including those supplied by the first defendant.
Both GSK and DSM had developed strains of a bacterium used to manufacture an antibiotic. In 1996 GSK commenced proceedings in the Netherlands alleging patent infringement by DSM in respect of GSK's strain of the bacterium. In 1997 the parties entered into an agreement to settle the proceedings. The agreement was governed by English law and conferred exclusive jurisdiction “with respect to all disputes in connection with the agreement” on the English courts. The agreement provided that GSK would not take action in any court or patent office against DSM or any third party with respect to the process developed by or for DSM, or against DSM's use of GSK's process prior to the signing of the agreement or the use by DSM of the strain developed by it.
In 2003 GSK joined DSM companies as additional defendants to US proceedings alleging the sale in the US of antibiotics derived from GSK's bacterium strain.
DSM disputed the jurisdiction of the US court. DSM also commenced English proceedings claiming that it had not been using GSK's strain but its own and that GSK's US proceedings had been brought in breach of the settlement agreement. DSM sought a declaration that the US proceedings had been brought in breach of the exclusive jurisdiction clause in the settlement agreement and an anti-suit injunction. GSK applied for a stay on forum grounds on the basis that the factual issues were already the subject of the US proceedings. The judge held that the exclusive jurisdiction clause applied to the subject matter of the dispute in the US proceedings so far as it affected DSM and that the factors relied on by GSK did not outweigh the force of the exclusive jurisdiction clause. The judge further held that he was obliged to refuse a stay of English proceedings against an English defendant by reason of art. 2 of Council Regulation 44/2001. GSK appealed.
Held, dismissing the appeal:
1. The English proceedings were to litigate disputes or a dispute “in connection with” the settlement agreement and consequently DSM was exercising a contractual right under the exclusive jurisdiction clause in bringing proceedings in England. The settlement agreement between GSK and DSM involved each side accepting obligations and amongst those accepted by GSK was an obligation not to take action against the use by DSM of its own strain. In the US proceedings GSK did so plead, and where a dispute had arisen as to whether in fact DSM had been using its own strain, as it asserted, or GSK's strain, as GSK asserted, such dispute was connected with the agreement and the parties had agreed that that dispute should be resolved in the English court. The dispute was connected with the agreement because the agreement barred GSK from objecting to the use of DSM's strain. Nothing in the agreement entitled GSK to have the issue whether DSM had been using GSK's strain rather than its own strain determined in the US in derogation of the jurisdiction clause.
2. The judge did not err in law or principle in according paramountcy to the exclusive jurisdiction clause. He had not erred in rejecting the alleged prejudice to GSK from delay as a weighty factor in the exercise of his discretion. Nor had he erred in assessing the weight to be given to the possibility of inconsistent findings. That was GSK's best point but matters of weight were for the judgment of the judge exercising his discretion.
3. It was therefore not necessary to decide the point on art. 2 of Council Regulation 44/2001.
Peter Gibson LJ:
1. This is an appeal by the First Defendant, SmithKline Beecham plc, from the order made by Lewison J on 25 April 2004 dismissing its application brought under CPR Part 11 and r. 3.1 for a stay of English proceedings brought by the First Claimant, DSM Anti-Infectives BV, and the Second Claimant, DSM Anti-Infectives Sweden AB, against the First Defendant and the Second Defendant, SmithKline Beecham Corp. The appeal is brought with the permission of the judge.
2. The First Claimant is a Dutch company which sells ingredients for pharmaceutical products. The Second Claimant is a Swedish company which manufactures such products in Sweden. I shall refer to the Claimants and to other companies in the group of companies of which they are members as “DSM”. The First Defendant is an English company which manufactures ingredients for pharmaceutical products. The Second Claimant is a Pennsylvanian company which manufactures and sells pharmaceutical products using ingredients including those supplied by the First Defendant. The Defendants are subsidiaries of GlaxoSmithKline plc, an English company. I shall refer to the Defendants and to other companies in the group of companies of which they are members as “GSK”.
3. Both GSK and DSM have developed strains of the bacterium Streptomyces Clavuligerus (“S. Clav.”). They have used the bacterium to produce clavulanic acid which in turn is used to produce the potassium salt, potassium clavulanate. That salt is combined with a penicillin, amoxicillin, to manufacture an antibiotic, co-amoxiclav, which is more effective than amoxicillin in dealing with certain infections. GSK sell co-amoxiclav under the mark AUGMENTIN. DSM sell potassium clavulanate as a bulk product to generic pharmaceutical manufacturers. Each of DSM and GSK say that they have spent much time and money developing, through successive selective mutations of the bacterium, particular strains of S. Clav. to be as productive as possible of clavulanic acid. GSK's strain development work was carried out in England and its strains are held in the United Kingdom. GSK refer to their strain, which they isolated in 1981, as “SC7”. DSM carried out their strain development work in the Netherlands, Sweden and Taiwan, where they used the services of a research company called Panlabs. DSM's strain bank is maintained in the Netherlands and clavulanic acid is produced by DSM in its plant in Sweden.
4. In 1988 GSK discovered that a competitor might have acquired a sample of SC7. They took the view that the sample was removed without authorisation by one of their own employees and sold to a Spanish company. They sued that employee and that company, and as a result of those proceedings they believed that all samples of SC7 had been destroyed. Later they learnt that SC7 had come into the hands of another competitor, a Slovenian company, LEK. They commenced proceedings against LEK and another company, Norton, which had intended to import and market in the United Kingdom co-amoxiclav manufactured by LEK.
5. On 23 October 1996 GSK's solicitors wrote to DSM, informing them of the proceedings against LEK and Norton, and saying that GSK alleged both patent infringements and misuse of confidential information in that they claimed that LEK used a strain of S. Clav. unlawfully obtained from DSM. The solicitors notified DSM that GSK would take similar action against DSM if their activities infringed GSK's rights. They reiterated that part of the action against LEK and Norton was for breach of confidential information and identified Dr Callewaert as their former employee who had removed the SC7 sample. They also referred to Dr Rowlands as another former employee who had been a leading member of GSK's strain...
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ENFORCING ENGLISH JURISDICTION CLAUSES IN BILLS OF LADING
...ILPr 73. The issue was not decided by the Court of Appeal in DSM Anti-Infectives BV v Smith Kline Beecham Plc[2004] EWCA Civ 1199; [2004] 2 CLC 900 as Peter Gibson LJ thought that a decision should await a case where the court would be minded to grant a stay on forum non conveniens grounds:......