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This article first appeared on the Practical Law Dispute Resolution blog on 21 March 2017.

Overview of the application

In Attheraces Ltd and another v Ladbrokes Betting and Gaming Ltd and others, potential proceedings concerned the alleged misuse of horseracing broadcasts (the off-tube commentaries).

The applicants sought disclosure about how certain off-tube commentaries had been produced, claiming that they did not know how they had been produced but needing to know this so that they could consider their cause of action. The applicants therefore applied under section 33(2) of the Senior Courts Act 1981 and pursuant CPR 31.16 for pre-action disclosure.

As can often happen, after the application had been issued but before the hearing, further information had been provided by the respondents. This was through correspondence and by way of evidence in response.

Focusing on the evidence only, albeit acknowledging the dispute as to the adequacy of the pre-application correspondence and whether the application was ever warranted, Marcus Smith J said it had relieved the applicants of the ignorance of the source. Accordingly, whilst the applicants may not have had the necessary information to draft a claim when the application was issued, they did now.

The provision of the information had also meant that the basis of the claims in the application to what was postulated at the hearing had changed substantially. The scope of the documents sought against the Ladbroke/Coral Group respondents (first to fifth respondents) had to be substantially modified. The scope of those documents sought against the BetFred respondents (sixth and seventh respondents) had to be wholly revisited. These modifications were dealt with in a draft order, produced by the applicants on the day.

The respondents contended that what was now being sought, by way of the draft order, was such a drastic change to the application that the application should have been refused on that ground alone. The applicants maintained that they were simply refining their application, based on the information provided by the respondents in evidence.

Marcus Smith J rejected the respondents’ contention. However, he determined that the evidence provided had either answered, or gone a long way towards answering, the basis of the application, such that the applicants had a choice at that point. The choice was either to take stock in light of the information they had, or to press on with a materially different application. The judge said that the applicants’ choice was theirs to make, but that they should bear the consequence (which ultimately they did).

The decision

The test under CPR 31.16(3) is a two-stage test: stage one, are the conditions of CPR 31.16(3)(a) to (d) met? Stage two, if so, how should the discretion be exercised?

CPR 31.16(3)(a) requires that a respondent to an application must be likely to be a party to proceedings. Similarly, CPR 31.16(3)(b) requires that an application must be likely to be a party to proceedings. The judge was satisfied that it was “likely” (meaning no more than “may well”) that both applicants would be parties and that at least one of the respondents would be.

CPR 31.16(3)(c) states that the disclosure sought must be that which would fall within the duty of standard disclosure and therefore an application for pre-action disclosure should be “crafted with great care, and should be limited to what is strictly necessary”. Unfortunately for the applicants, it was here that they began:

“… to pay the price for the absence of any clear formulation of their case against the Ladbrokes/Coral Group and the Betfred Group… a properly articulated conspiracy and passing off claim against the Respondents – even if it had gaps or blanks or square brackets – would have been enormously helpful in determining whether the documents within the classes of disclosure sought by the Applicants fell (on the balance of probabilities) within standard disclosure”.

The classes of documents sought had been so widely drawn that it would seemingly have been impossible for the respondents to have successfully argued that none of the documents fell within standard disclosure. However, the judge held that the order could have been more properly refined and improved. Whether a party would be permitted to go back to the drawing board, to reconsider the scope of the disclosure sought, depends on the circumstances. However, the judge stated that he would not have permitted it in this case, due to the likelihood of this leading to a further contested hearing.

Finally, CPR 31.16(3)(d) states that the objectives of pre-action disclosure are to:

  • Dispose fairly of the anticipated proceedings.
  • Assist the dispute to be resolved without proceedings.
  • Save costs.

This subsection has both a jurisdictional and discretionary aspect. The judge held that the applicants could not show a real prospect that any of the three objectives could be met. Whatever may have been the position when the application was made, information had been provided such that the jurisdictional stage failed.

Points to take away from the case

  • Applications can present a moveable feast; if the issuing of the application yields the necessary information, step back and consider how you will satisfy the jurisdictional point.
  • It is often useful to send the application to the respondents in draft form to try and elicit a response before the cost of issue.
  •  If the information given in response (both to the draft application and after issue) goes some way but not far enough, check what outstanding information is necessary to meet the objectives of CPR 31.16(3)(d) and amend the basis of your application in advance. Do not leave it until the day to move the goal posts.
  • In this case, the judge had no interest in trawling through the protracted correspondence to determine whether or not the information had been provided. Put the response in evidence form.
  • Widely drawn orders or requests are likely to fall foul of the conditions. Ask yourself: What do I need? Would this form part of standard disclosure? How does obtaining the document at this stage satisfy the objectives of CPR 31.16(3)(d)?
  • Think critically about your own case and whether the information sought really is necessary pre-issue, or whether it can be properly dealt with once all the cards are on the table.

We are delighted to announce that Ed Pepperall QC has been named as Birmingham Law Society’s “Barrister of the Year” at the BLS 2017 Legal Awards.

Ed received his award from journalist and author John Sergeant at the ceremony on 9th March at The ICC in Birmingham.

Other winners on the night were:

Trainee Solicitor of the Year

  • Matthew McDonald – Trowers & Hamlins LLP

Paralegal of the Year

  • Kiri Tamber – Anthony Collins Solicitors LLP

Chartered Legal Executive of the Year

  • Norman Rea – Dignity Funeral Services Ltd

Assistant/Associate Solicitor of the Year

  • Sheree Green – Anthony Collins Solicitors LLP

Corporate Social Responsibility and Pro Bono Lawyer of the Year

  • Lorna Gavin – Gowling WLG (UK) LLP

Partner of the Year

  • Rebecca Warren – Pinsent Masons LLP

Corporate Team of the Year

  • DLA Piper UK LLP

In-House Legal Team of the Year

  • Coventry City Council

Law Firm of the Year (sole practitioners up to 4 partners)

  • Fountain Solicitors

Law Firm of the Year (5-15 partners)

  • The Community Law Partnership

Law Firm of the Year (16+ partners)

  • Eversheds Sutherland (International) LLP

Lifetime Achievement Award

  • Chris Owen

Ilott (Respondent) v The Blue Cross and others (Appellants) [2017] UKSC 17

On 15 March 2017 Lord Hughes (with whom Lord Neuberger, Lady Hale, Lord Kerr, Lord Clarke, Lord Wilson and Lord Sumption agreed) handed down judgment in the case of llott, turning over the decision of the Court of Appeal and restoring the order of the District Judge from 2007. 

The full article from Lydia Pemberton can be found here.

The Court of Appeal recently handed down judgment in Excalibur Ventures v Texas Keystone Inc [2016] EWCA Civ 3436 (Comm), which is an important case on the liability of third-party litigation funders for a non-party costs order under CPR 46.2

The background

The High Court litigation had seen Excalibur [‘E’], essentially a shell company, pursue Gulf Keystone for various relief arising from a dispute about oil fields in Kurdistan. E’s solicitors were on a Conditional Fee Agreement, and received third-party funding in the region of £31.75m by the time the 60-day trial finished. The funding arrangements were quite complex and do not require repeating in order to explain the principles set out in the judgment.

After a long and complex trial, E’s claim failed in its entirety, and a crushing judgment from the trial Judge described it as a ‘speculative and opportunistic’ claim which suffered a ‘resounding, indeed catastrophic, defeat.’ The solicitors for E were criticised for their ‘aggressive and unacceptable correspondence’. E was ordered to pay the Defendants’ costs on the indemnity basis; despite E having been ordered to pay security for the Defendants’ costs, there was a shortfall of almost £5m.

The first-instance Judge found that the funders were liable for a non-party costs Order on the indemnity basis, pursuant to CPR 46.2 and s.51(3) Senior Courts Act 1981, but subject to the Arkin cap (i.e. that the funders’ liability should be limited to the sum which they had invested in the action on behalf of E). There were appeals from the various lenders on various grounds, as set out below. 

Arguments in the Court of Appeal

It was common ground between all parties that: 

  • Parties who purely fund the litigation but have no interest in its outcome should not face a costs Order, but it will be an important factor if the funder has a vested interest in the outcome; 
  • The Court has a wide discretion under CPR 46.2; and 
  • The Court can take into account whether the funder is considered to be the real party interested in the outcome of the litigation, or there is some other conduct which makes it just and reasonable to make the order.

Three of the appellant funders accepted their liability for a non-party costs order, but disputed the indemnity costs order, arguing that a standard-basis costs order was appropriate. One appellant (‘Platinum’) argued that, because it had only contributed funds for payment of security for costs, that sum should not count towards its Arkin cap (i.e. because it was simply security for costs provided in response to the opponent’s application, rather than being a positive contribution to its own party’s fighting fund). 

The judgment

The Court emphasised that funders would follow the fortunes of the party they funded. Even if the funder were not guilty of any reprehensible conduct, there was no reason to disassociate its outcome from that of its lawyers and client. Funders such as those in this case were not particularly interested in access to justice, but in securing a good return on a commercial investment, and they must face the consequences of failure with those whose cases they fund. 

The Court also criticised the ‘feeble’ due diligence carried out by the funders into the merits of E’s claim, and encouraged funders to apply greater scrutiny to the prospects of a claim as it develops (which can be properly done without straying into champerty), even if represented by top-flight lawyers. 

The argument about security for costs was also rejected. The Court’s approach was that if a funder provides security for costs, it is also gambling on a positive outcome and a commercial success for themselves; it would be wrong to excuse them of the risk of their party losing and there being any liability for costs over and above the amount of security ordered, for example when the security is assessed prospectively on the standard basis but the final costs order is on the indemnity basis. 

Summary 

The key points to take away from this judgment, and to advise any funding clients on, are as follows:

  • If a commercial funder backs a party which then loses at trial, the funders’ fortunes generally mirror those of their party, regardless of the funders’ conduct;
  • There is an obligation on funders to demand proper ongoing scrutiny of a case’s merits, and to reconsider their position if those merits drop sufficiently low;
  • The position of a commercial funder providing funds for a party’s ongoing costs and disbursements is no different to a funder simply providing funds which have been ordered as a result of an application for security for costs. Either way, there is a commercial gamble being undertaken, which brings with it an inevitable risk factor.

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Monday, 17 October 2016 00:00

Property Insight - October 2016

The older farmers reaping what they sow … and the young farmers who have earned their corn.

Equity, justice and the proportionate remedy for the next generation of farmers.

David Stockill

RECENT CASE 

Roger Moore v Stephen Moore and Till Valley Contracting Limited, Ch D, unreported, 19 August 2016 (Simon Monty QC sitting as a Deputy Judge of the Chancery Division)

This proprietary estoppel case all started with the claimant’s attempt to dissolve a farming partnership between himself, his son and a related company.  In truth, the claim resolved into a counterclaim by the son (Stephen) for his father (Roger)’s interest in the farm, and the partnership issues had nothing more than a “walk on” part.  That was all the truer since Roger, by the trial was listed had become incapacitated by reason of his Alzheimers.  

The subject farm had originally been owned by Roger’s father, who then gifted it to Roger and his brother Geoffrey.  Since, very much in contrast to Stephen, Geoffrey’s sons took no real interest in the farm, on his retirement he gave his half share of the partnership to Stephen in return for a discounted payment from the partnership of £500,000.   So that was the proprietorial position on paper which faced the Court.  But Stephen’s acquisitive claim against his father went further than that under the principles of proprietary estoppel, and was based on a lengthy history.

Stephen had worked on the farm since his childhood, at weekends and evenings and college holidays and subsequently full-time. He became a salaried partner in about 1998 (page 31) and earned £200 per week for 45/50 hours (with 100 hours during harvest time). His income rose to £590 per fortnight from which he paid £190 per month as a pension contribution. In 2003/4 he became an equity partner, sharing in the profits. From partnership, the assets in the farm were transferred to the company, the second defendant.

Did Stephen succeed in his is action to gain a greater interest in the farm?  And if so, to what extent, on what equitable principles and why is this case an advance on the Supreme Court case of Thorner v Major which was heard at first instance by Deputy High Court Judge John Randall QC and which went all the way to the Supreme Court?

In his article David Stockill reviews the recent farming cases where proprietary estoppel has been asserted, the full article can be found here.

Introduction

The Yusuf Cepnioglu concerned another case of a foreign statute giving the victim the right to sue the wrongdoer’s insurer directly without needing to first sue the insured. Unless such a right exists then the victim cannot sue the insurer directly since he is not a party to the insurance contract. Such a need usually arises where the insured has become insolvent and the third party seeks to obtain the benefit of the insurance rather than compete with other creditors for what may be limited or non-existent assets. In English law the relevant legislation is currently contained in the Third Parties (Rights Against Insurers) Act 1930 (to be replaced by the Third Parties (Rights Against Insurers) Act 2010). 

Facts

On 8th March 2014 the vessel YUSUF CEPNIOGLU (“the vessel”), operating on a liner service between Turkey and North Africa, grounded on the Greek island of Mykonos. Salvage services were rendered but the vessel was a total loss. At the time of the grounding the vessel was carrying 207 containers. The cargo was being carried pursuant to 74 bills of lading issued by the time charterers. The proper law and jurisdiction of the bills was that of Turkey. Cargo claims had been notified to both the owner and charterers of the vessel who were both Turkish companies. The charterers commenced arbitration proceedings in London against the owner pursuant to the time charter. 

The vessel’s owner was a member of the claimant P&I Association (“the Club”). The owner therefore had insurance against third party claims pursuant to its Club cover. Those terms provided for English law and London arbitration, for the Club only to be liable if the owner had paid the claims against it (“the pay to be paid” clause) and, further, that an arbitration award was a condition precedent to the Club’s liability. 

In May 2014 the defendant charterers commenced proceedings in Turkey in which they sought to attach the Club’s assets in Turkey up to a value of US$13.5m as security for a claim pursuant to the Turkish Insurance Contract Law which gave the charterers a right of direct action against the Club. The Club sought an anti-suit injunction in England in respect of these proceedings and the intended “substantive” proceedings in support of the right of direct action. This was granted at first instance and the charterers then appealed to the Court of Appeal (“CA”). 

The decision

The CA first examined the proper characterisation of the claim and decided that this had to be done by looking at whether the charterers’ right to sue the Club direct was essentially a contractual right (in which case it would be governed by English law as the proper law of the contract) or an independent right (in which case it would be governed by Turkish law). Relying on the judge’s findings of fact on Turkish law the CA agreed with the judge that the essential content of the right appeared to be reflected in the contract between the Club and the member. The factors that supported this were, for example, that under the Turkish law the loss had to be in respect of insured perils, within the policy terms, and contractual time and cover limits applied as well as the law and arbitration clause (the latter subject to a possible public order exception). The victim’s right in Turkish law was to a large extent circumscribed by these contractual provisions between the Club and its member. The other factors such as the unenforceability of the “pay to be paid” clause in Turkish law and the judge’s cautious finding that the Club “may” remain liable to the victim, even after its liability to the member had been discharged, were not enough to change this. The charterers were therefore exercising essentially a contractual right and therefore were bound to accept that their claim was governed by English law and must be arbitrated in London. 

The Turkish proceedings were in contravention of this obligation. The CA went on to hold that the Club was entitled to an anti-suit injunction. In doing so, the CA decided that the test to be applied was that set out in Aggeliki Charis Compania Maritima SA v Pagnan SpA (The Angelic Grace) [1995] 1 Lloyd’s Rep. 87, which applied by parity of reasoning, the third party time charterers being obliged to comply with the arbitration clause even though they were not a party to the arbitration agreement. Hence, an injunction would be granted to restrain the foreign proceedings, unless there was good reason not to grant it. There was no need for the Club to show vexatious or oppressive conduct as contended by the charterers and the CA refused to follow The Hari Bhum (No. 1) [2005] 1 Lloyd’s Rep. 67 instead preferring DVA v Voest Alpine (The Jay Bola) [1997] 2 Lloyd’s Rep 279. Since there was no good reason why an injunction should not be granted and no question of delay or any inequitable conduct on the part of the Club, an anti-suit injunction would be maintained as that was the only way that the charterers could be required to recognise the Club’s right to have the dispute referred to arbitration. 

Comment

Regarding the proper characterisation of the claim, the CA preferred the factors relating to the contractual provisions, which limited the victim’s right in accordance with the terms of the contract, and used these to define the essential content of the right. In doing so, the CA’s judgment effectively determined the claim since the claim would then be determined by English law, under which the “pay to be paid” rule provides a complete defence to the insurers if liability has not been discharged by the insured. This was despite the fact that no such defence appeared to exist under the Turkish law being invoked by the charterers. The contrary argument is that the victim is suing precisely because the insured has not and will not pay. Therefore, to regard the relevance of the Turkish exclusion of the “pay to be paid” clause as being of only a “limited extent” may be controversial in some circles. Some may indeed argue that these factors should define the characterisation of the right. However, this argument was rejected by the CA and the outcome in this case is defensible on the basis that the Club has entered an insurance contract governed by English law and therefore its rights should be determined in accordance with that, including the “pay to be paid” provision, thus giving priority to contractual rights over the right to direct action. The case thus confirms previous case law that where the foreign statute follows the contractual provisions then, although much will depend on the terms of the statute, English Courts are likely to characterise the claim as essentially contractual and thus enforce any English law and jurisdiction/arbitration clause.  

In addition, the CA has clarified that in such cases the relevant test for grant of an anti-suit injunction is that in The Angelic Grace and that an injunction will therefore be granted unless there is a good reason not to do so. The fact that the victim is not a party to the insurance contract which is the subject of the direct action does not mean that the test to be applied is that of whether the foreign proceedings are vexatious and/or oppressive. Therefore, in such cases, the courts will grant injunctions on the more readily provable basis that such injunctions will be granted to protect a contractual right. 

Ishfaq Ahmed

SBT Star Bulk & Tankers (Germany) GMBH & Co KG v Cosmotrade SA sub nom WEHR TRAVE, [2016] EWHC 583 (Comm), QBD (Comm) (Sir Bernard Eder) 22/03/2016

The Wehr Trave concerned the question of whether a trip time charter on an amended NYPE form with typed additional clauses (“the charter”) allowed the charterers to order the vessel m/v WEHR TRAVE (“the vessel”) on a further voyage after she had discharged her cargo. 

Facts

The charter was for “one time charter trip via good and safe ports and/or berths via East Mediterranean / Black Sea to Red Sea / Persian Gulf / India / Far East always via Gulf of Aden”. The vessel was to be redelivered at one safe port in charterers’ option Colombo/Busan range including China not north Qingdao. The vessel after delivery into the charter on dropping outward pilot at Algeciras on 16th October 2013 was given voyage orders by charterers and proceeded to the Black Sea, where she loaded cargoes at Sevastopol/Avitla, Novorossiysk and Constantza/Agigea. She then proceeded on her route, discharging at one port in the Red Sea (Jeddah), one port in the Gulf of Oman (Sohar), and three ports in the Persian Gulf (Hamriyah, Jebel Ali and Dammam). The vessel berthed at Dammam on 7 December 2013. 

On 8 December 2013, the charterers ordered the vessel to proceed to Sohar (Oman) after sailing from Dammam when the vessel was empty of cargo to load a project cargo for delivery at New Mangalore or Cochin (West Coast of India). It was common ground that such order was given before the vessel had completed discharge at Dammam. This led to a dispute between owners and charterers as to whether charterers were contractually entitled to give the vessel the order to load at Sohar for discharge in India under the charter i.e. whether this was a legitimate or illegitimate order. The owners alleged that after discharge at Dammam the vessel should have been ordered to proceed to the charter redelivery place as “one time charter trip” had been completed. 

Decision

The judge observed that it was important to bear in the mind that the present charter was a time charter and that in such cases the defining characteristic of the charter is that the vessel is under the directions and orders of the charterers as regards her employment for the charter period. What this means is that shipowners place the vessel at the disposal of the charterers for a period of time in return for the payment of hire and subject to the charter terms such as geographical, period, trading limits and other constraints. 

In addition, the judge stated that the trip time charter may be drafted so as to define the “trip” using a number of different permutations ranging from one loading and discharging port to a number of combinations and sequences of these. As a result, the fact that the charter here was for “one” time charter trip was not of much, if any, assistance. Instead, ultimately, the scope of any “trip time charter” would depend upon the particular terms agreed between the parties and the charterers’ entitlement to give directions and orders may be restricted by whatever may be agreed between the parties with regard, for example, to period, trading limits, geographical route and even (perhaps) number and designation of loading and discharging ports or ranges. However, any such restriction would have to be specifically agreed and would require clear words.

Here, construing the specific charter, the charterers were not (as a matter of language) restricted to loading the vessel at a single port. The charter in the present case specified a delivery port/range and a redelivery port/range. By and within that range, it specified a route. On that route the vessel was to trade “between good safe port and/or good safe ports and good safe berth and/or good safe berths and good safe anchorage and/or good safe anchorages, always afloat, always within Institute Warranty Limits”. Thus, the charterers were, in principle, entitled to call at such ports as they wished provided that the calls were within the trading limits and the route was not inconsistent with the contractual route, which was a voyage from Algeciras to the Colombo/Busan range via the East Mediterranean and/or the Black Sea and/or the Red Sea and/or the Persian Gulf and/or India and/or the Far East (always via the Gulf of Aden and always ending in the Colombo/Busan range). 

Sohar was not inconsistent with the contractual route and was a safe port within IWL and not an excluded loading place under the charter. As a result, the charterers were entitled to order the vessel to proceed to Sohar and load a cargo there. The words “via” and “to” did not restrict the charterers’ general entitlement to give orders and directions with regard to loading and discharging provided, of course, that the calls were within the trading limits and the route was not inconsistent with the contractual route. The charterers were, upon paying hire, entitled to call upon the vessel to load and discharge at any port or ports within trading limits and on the contractual route subject to any express agreement to the contrary. 

Comment

Those who are familiar with time charters will be aware that they can be divided into two main categories as discussed in the judgment. Term time charters agree the charter period in advance which would usually allow more than one voyage to be completed in the agreed time (this may be the subject of variation under the terms of the charter such as the final voyage clause). Trip time charters on the other hand define the charter period by a trip within either a geographical range or via specified ports, although they may also be constrained further by a maximum stated duration. Thus, though for a voyage or voyages trip time charters are in a time charter form. Trip time charters have become more popular since they can avoid the “hideous complexities of demurrage” (Lloyd J, Care Shipping Corp v Latin American Shipping Corp (The Cebu) [1983] QB 1005) but also give the charterers the ability, subject to contract terms, to give orders as to the employment of the vessel. However, as the judge in The Wehr Trave emphasised, the word “trip” can be unclear and therefore the Courts will pay close attention to the words used to see what was meant by the parties. Unlike bills of lading, charterparties are not subject to any statutory regulation and hence the scope and meaning of what is included is up to the parties to decide. As a result, much will depend on the terms of the contract. Here the Court construed the charter to mean that so long as the trip was along the defined contractual route and in accordance with the other contractual terms, the charterers were entitled to order the empty vessel which had already discharged cargo from one voyage under the charter to call at another loading port and perform another trip before being redelivered to the shipowners at the agreed redelivery range. 

The effect of choosing the correct words is therefore crucial. In many cases the disagreement will stem from changes in market freight rates and whether one party or the other perceives it to be in its advantage to have the charter at an end.

Ishfaq Ahmed

Introduction

In a recent obiter discussion, the Court of Appeal has addressed the law regarding clauses which purport to preclude contractual variation other than in writing. The enforceability of such clauses is an important point of principle, and there were two substantially inconsistent Court of Appeal decisions on the subject, which their Lordships felt the need to address. Given the historic inconsistency, the subject may well fall for Supreme Court consideration in due course. For now, however, Lord Justice Beatson’s analysis (with which Moore-Bick and Underhill LJJ agreed, with both also providing additional commentary) provides a useful analysis of the debate in this area and advocates a principled position. Their Lordships held that, based on the fundamental principle of freedom of contract, an “anti-oral variation” clause in one contract would not in principle prevent the parties from making a new contract varying the first contract by an oral agreement or by conduct. Indeed, the parties can choose to vary the anti-oral variation clause just as much as they can choose to vary another clause in the contract. Put another way, the Court decided that such a clause would not ordinarily be enforceable.

Factual Background 

The dispute concerned a long term exclusive supply agreement whereby the Appellant (“TRW Lucas”) agreed to purchase from the First Respondent (“Globe”) components for steering systems. There were six grounds of appeal and the appeal was allowed on the first ground. That was a fact specific question of construction with which we are not concerned. The Court dealt briefly with the second to fifth grounds.

The sixth ground is of general interest and our point of focus. There were two respondents in the appeal. The Second Respondent (“Porto”) was a subsidiary of Globe incorporated for the supply of electric motors to TRW Lucas under the agreement between TRW Lucas and Globe. The judge found that Porto became a party to the agreement by way of a variation thereto. The sixth ground of appeal was that there had been no variation by conduct (or implied novation) to this effect because (a) the conduct relied on was not unequivocal, and (b) (and most significantly for present purposes), an Article 6.3 of the Agreement precluded variation by parol. It provided:

“Entire Agreement; Amendment: This Agreement, which includes the Appendices hereto, is the only agreement between the Parties relating to the subject matter hereof. It can only be amended by a written document which (i) specifically refers to the provision of this Agreement to be amended and (ii) is signed by both Parties.”

Had it been necessary to decide the point, the Court of Appeal would have found that the argument failed. We now consider why.

The Decision  

The Appellant argued that the requirement that any amendment must be in writing and signed by both parties meant that it was not open to the parties to amend the agreement orally. The Appellant relied on the unreported decision of the Court of Appeal in United Bank Ltd v Asif (11 February 2000), that a contract containing an anti-oral variation clause can only be amended by a written document complying with that clause. It further argued that there were reasons as a matter of principle and policy that such a clause should be upheld. It was also contended that it was easier to manufacture an allegation of an oral agreement than a written one.

The Court took the view that, as the later Court of Appeal decision in World Online Telecom Ltd v I-Way Ltd [2002] EWCA Civ. 413 is substantially inconsistent with the United Bank case, it was necessary to address the topic and decide between the two approaches.

In assessing the Appellant’s arguments, Beatson LJ broke his analysis into five components: (i) principle and policy; (ii) authority; (iii) questions of proof; (iv) precedent; and (v) whether the judge’s conclusion was on the facts justified.

We are primarily concerned with the first two components. On the third, the Court of Appeal simply took the view that in order for an oral variation to be valid when preceded by an anti-oral variation clause, the court would have to find that the evidence established that such a variation was actually concluded: see at [109]. As to the fourth point, the Court of Appeal recognised that it was not bound to follow United Bankdue to its inconsistency with World Online Telecom (see at [111]). It also appeared that the Court in World Online Telecom acted in ignorance of United Bank. The fifth component was fact specific, and again we are not concerned with it.

Principle and policy 

The Appellant argued that anti-oral variation clauses promote certainty and avoid false or frivolous claims of an oral agreement. It was further argued, by analogy with the position in Parliament, that as the law of contract is based on consent, if Parliament can stipulate for formality despite the potential injustices and hard cases that can result, the parties too should be able to adopt such a regime.  Hard cases could then be dealt with the by the doctrine of estoppel.

The problem with this approach – recognised by Beatson LJ at [100] – was that in the absence of common law or statutory restrictions, it follows that if the basis of contract is consent, then the parties will always have the freedom to agree whatever they want. So just as they can agree to an anti-oral variation clause, they can agree not to be bound by it.

Authority

Both United Bank and World Online Telecom were appeals from decisions about summary judgment. In neither case are the facts especially relevant. In the former, Thorpe LJ, with whom Mantell LJ agreed, upheld Wright J’s affirmation of a Master’s summary judgment decision. The question of enforceability of an anti-oral variation clause arose and Thorpe and Mantell LJJ simply agreed with the view of Sedley LJ (who had initially refused permission to appeal on the papers) that Wright J was ‘incontestably right in concluding (a) that no oral variation of the written terms could have any legal effect…’. No further detail was given.

In World Online Telecom, Sedley LJ took a different approach. He was then of the view that the question of whether parties could override a clause in an agreement in writing excluding any unwritten variations of the contract was unsettled in English law. He explained (at [10]) in that case that ‘… the parties have made their own law by contracting, and can in principle unmake or remake it’. As a result of the Court of Appeal’s decision determining that the case required full trial, the Commercial Court (Steel J) held that, notwithstanding the anti-oral variation clause, the conditions in the contract in World Online Telecom had been varied by oral agreement: [2004] EWHC 244 (Comm).

The view expressed in World Online Telecom that the parties could waive compliance with an anti-oral variation clause finds support in Chitty on Contracts, 32nd Ed., §22-045, fn. 196, and Beatson LJ cited a number of other cases (at [106]-[107], including that of Gloster LJ in Energy Venture Partners Ltd v Malabou Oil & Gas Ltd [2013] EWHC 2118 (Comm)) where, although not determining the issue, the courts had recognised that in principle an oral variation can be effective notwithstanding such a clause. 

Beatson LJ thus concluded (at [107]) that ‘an oral agreement or the conduct of the parties to a contract containing [an anti-oral variation clause] … may give rise to a separate and independent contract which, in substance, has the effect of varying the written contract’. Whether the parties should be able to avoid the effect of their previous decision in this way is a slightly different matter, but Beatson LJ’s conclusion is derived from the weightier of the authority.

Aligning the position in the authorities with his views on principle and policy, Beatson LJ concluded that ‘in principle a contract containing a clause that any variation of it be in writing can be varied by an oral agreement or conduct.’

Underhill and Moore-Bick LJJ

Their Lordships agreed with Beatson LJ, although Underhill LJ had some reservations. His Lordship took the view ([at 116]) that it was entirely legitimate that the parties to a formal written agreement should wish to insist that any subsequent variation should be agreed in writing as protection against subsequent ill-founded allegations of variation. However, he struggled to see a ‘doctrinally satisfying way’ of achieving that result, and so accepted the reasons of Beatson LJ. Underhill LJ did, however, draw attention to the important point that an anti-oral variation clause may still serve as evidence to the effect that a subsequent informal variation lacks contractual intent.

Moore-Bick LJ agreed with Beatson LJ and focused on the importance of party autonomy (at [119]). He also accepted Underhill LJ’s reservations but likewise found it difficult to find a principled basis upon which to support a view that parties can tie their hands with an anti-oral variation clause.

Comments and Conclusions 

As noted by Moore-Bick LJ (at [118]), it was a shame that the one point of general public importance in the case was the one which it was unnecessary for the Court to decide. It may be that, had the issue actually fallen to be determined, the Court of Appeal would have provided more detailed guidance. Nonetheless, the decision is welcome in providing clarity in this area and is conceptually sound. If parties are at liberty to agree whatever they like (subject to entrenched common law or statutory restrictions) then that liberty is not eradicated at the point of agreement. It is a continuing liberty. Should the same parties wish to vary the initial agreement and enter into a new contract, then their liberty to do so is retained. Thus, where there is a term in the agreement which purports to preclude the parties form varying that agreement other than in writing, the parties are still at liberty to vary that particular term (and the agreement itself) whether by conduct or otherwise. If one takes the Parliament analogy, Parliament can do whatever it wants, save bind its successors. That is the basis of continuing parliamentary supremacy. Likewise, the parties to a contract retain autonomy to agree whatever they want notwithstanding a previous agreement to the contrary.

Given the comments on this subject in the Court of Appeal are obiter, it may be some time before the issue arises again at appellate level, although it would benefit from detailed consideration by the Supreme Court. For the moment however, one can conclude that in accordance with the doctrine of freedom of contract, a clause in an agreement which provides that any variation must be in writing will not be treated with rigidity. Just as the parties consent to bind, so they consent to unbind. 

William Hooper

1. Costs management, and in particular costs budgeting has for several years been part of the civil litigation landscape.  Following Lord Justice Jackson’s Review of Civil Litigation Costs: Final Report(December 2009) (“the Jackson Report”), CPR 3 was amended as of April 2013 to include a new Section II on costs management.  The amendments were based largely on the recommendations made by Lord Justice Jackson.  The CPR have subsequently been through a number of further minor amendments on costs budgeting.

2. The Jackson report addressed costs budgeting in Chapter 40.  At Paragraph 1.4, p400, it stated as follows:

“1.4 The essence of costs management. The essential elements of costs management are the following:

(i) The parties prepare and exchange litigation budgets or (as the case proceeds) amended budgets.

(ii) The court states the extent to which those budgets are approved.

(iii) So far as possible, the court manages the case so that it proceeds within the approved budgets.

(iv) At the end of the litigation, the recoverable costs of the winning party are assessed in accordance with the approved budget.”

3. In Paragraph 1.5, p401, two  of the issues for consideration recorded were as follows:

“(iii) To what extent should the last approved budget be binding, alternatively influential, upon the final assessment of costs?

(iv) In so far as the last approved budget is binding, should it operate as an upper limit upon recoverable costs or should it operate as a form of assessment in advance?”

4. It is noteworthy that these issues were not resolved within the Jackson Report itself.  Presumably, this was something which Lord Justice Jackson considered it more appropriate to leave to those drafting the amendments to the CPR.  Interestingly, his recommendation at Paragraph 8.1, p419, in that regard was less strict than the rules in the CPR as they now stand: “Rules should set out a standard costs management procedure, which judges would have a discretion to adopt if and when they see fit, either of their own motion or upon application by one of the parties.”

5. CPR 3.18 now provides as follows:

“Assessing costs on the standard basis where a costs management order has been made

3.18  In any case where a costs management order has been made, when assessing costs on the standard basis, the court will—

(a) have regard to the receiving party’s last approved or agreed budget for each phase of the proceedings; and

(b) not depart from such approved or agreed budget unless satisfied that there is good reason to do so. (Attention is drawn to rules 44.3(2)(a) and 44.3(5), which concern proportionality of costs.)”

6. Two points are immediately apparent from CPR 3.18.  First, it does not expressly address what if any different approach is to be taken between summary assessment and detailed assessment.  Second, it does not expressly state what the effect of the budget actually is:

a. Does it merely act as a ceiling on recoverable costs, with a full blown assessment (summary or detailed) to follow in exactly the same way as would have happened prior to these amendments to the CPR?  If this is correct, the reference to departure from the budget in CPR 3.18(b) could be a reference to seeking costs in excess of the budget, either generally or for a particular stage.  This analysis will be referred to as “the Ceiling Analysis” in this article.

b. Alternatively, does the cost budget fix recoverable costs, thereby removing the need for any assessment, or at least relegating the importance of the assessment?  If this is correct, the reference to departure from the budget in CPR 3.18(b) could be a reference to seeking costs less than or greater than the budget, either generally or for a particular stage.  A receiving party would be obliged by the indemnity principle to seek costs less than budgeted if he had in the event over-budgeted, and thus this could constitute a good reason to depart from the budget. This analysis will be referred to as “the Fix Analysis” in this article.

7. The preponderance of opinion amongst practitioners in the early days of costs budgeting appears to have been that the Ceiling Analysis was the correct explanation of CPR 3.18.  There is some anecdotal evidence that judges sometimes responded to detailed submissions about costs at a costs and case management conference ("CCMC") along the lines “I am only budgeting the costs today, not assessing them; assessment is for another day”.  In those early days, the submissions that were made at a CCMC in relation to budgets were often not of the same level of forensic detail that would accompany an assessment (especially a detailed assessment) of costs.

8. The Court of Appeal gave some early guidance in Henry v News Group Newspapers Ltd [2013] EWCA Civ 19, [2013] 2 Costs LR 334.  This was a decision on the earlier Defamation Proceedings Costs Management Scheme which was in slightly different terms, but nevertheless the following statements of principle from the judgment of Moore-Bick LJ are instructive:

“…the approved costs budget is intended to provide the framework for a detailed assessment and that the court should not normally allow costs in an amount which exceeds what has been budgeted for in each section… there may be good reasons for departing from the budget and allowing a greater sum… On the other hand, costs budgeting is not intended to derogate from the principle that the court will allow only such costs as have been reasonably incurred and are proportionate to what is at stake; it is intended to identify the amount within which the proceedings should be capable of being conducted and within which the parties must strive to remain. Thus, if the costs incurred in respect of any stage fall short of the budget, to award no more than has been incurred does not involve a departure from the budget; it simply means that the budget was more generous than was necessary. Budgets are intended to provide a form of control rather than a licence to conduct litigation in an unnecessarily expensive way. Equally, however, it may turn out for one reason or another that the proper conduct of the proceedings is more expensive than originally expected.” (§16)

“The primary function of the budget is to ensure that the costs incurred are not only reasonable but proportionate to what is at stake in the proceedings. If, as is the intention of the rule, budgets are approved by the court and revised at regular intervals, the receiving party is unlikely to persuade the court that costs incurred in excess of the budget are reasonable and proportionate to what is at stake.” (§19, in the context of the then impending coming into force of Section II of CPR 3).

9. Moore-Bick LJ gave further observations on costs budgeting on 18 April 2013 shortly after Henry inTroy Foods v Manton [2013] EWCA Civ 615, [2013] 4 Costs LR 546  at §8 (emphasis supplied):

“The defendant’s concern is that, on a detailed assessment, costs judges are likely to treat the approval of a budget, or any relevant part of it, as ipso facto establishing that the costs incurred in respect of the matter generally, or that particular element of it, are reasonable if they fall within the approved budget. In Henry v News Group Newspapers [2013] EWCA Civ 19 at paragraph 16 I expressed the view that an approved budget was not to be taken as a licence to conduct litigation in an unnecessarily expensive way. It follows that I do not accept that costs judges should or will treat the court’s approval of a budget as demonstrating, without further consideration, that the costs incurred by the receiving party are reasonable or proportionate simply because they fall within the scope of the approved budget.Nonetheless, one of the principal aims of costs budgeting is to control the parties’ expenditure, and that will not be effective if judges do not apply the correct principles.”

10. It may be worth noting that only one party attended before Moore-Bick LJ in Troy Foods, and the hearing was simply one for permission to appeal.  Strictly speaking this limits the precedent value of the decision, though it is nevertheless the considered judgment of a senior Lord Justice of Appeal.  It appears that the appeal itself was never heard.  

11. These early statements of principle support the Ceiling Analysis.  Interestingly, a month after Troy Foods  on 13 May 2013 in Slick Seating Systems v Adams [2013] 4 Costs LR 576 HHJ Simon Brown QC sitting in the Birmingham Mercantile Court considered that the Fix Analysis was the correct approach. He did not quote Troy Foods and it may not have been cited to him or even available in the public domain at that stage.  At §9 HHJ Simon Brown QC appeared to suggest that detailed assessment had become otiose in circumstances where the sum claimed in the final costs schedule was below what had previously been budgeted, and that on a summary assessment he would simply award the sum claimed which was within budget.

12. A number of more recent decisions have cast doubt on Moore-Bick LJ’s support of the Ceiling Analysis and arguably support the Fix Analysis.

13. In Simpson v MGN Ltd [2015] EWHC 126 (QB), [2015] 1 Costs LR 139  Warby J had to consider some different and discrete issues relating to amending costs budgets, and gave the following guidance at §8 (without, it seems, having any case law cited to him):

“It is clear that if costs management is to work conclusions reached upon reviewing costs budgets must be adhered to, and not second-guessed at a later stage. The wording of CPR 3.18(a) focuses attention on budgets for phases of the litigation. It is clear from CPR 3.18(b) that if a figure has been agreed or approved for a particular phase of proceedings the amount recoverable by the receiving party in respect of that phase will be capped at that figure, unless there is good reason to depart upwards. (If the receiving party has incurred costs less than budgeted there will be good reason to depart downwards.)”

14. With respect, the word “fixed” in this context might have more appropriately reflected Warby J’s approach compared to “capped”.  His subsequent observation suggests that he was of the view that the Fix Analysis is correct, because “good reason” would be required to depart from a budgeted sum either upwards or downwards.

15. The decision of the Court of Appeal in Sarpd Oil International Ltd v Addax Energy SA [2016] EWCA Civ 120, [2016] 2 Costs LO 227 is on the face of it a decision about security for costs.  However, in setting out views about the relevance of an approved budget in relation to an application for security for costs, the Court of Appeal stated as follows in its judgment at paragraphs 50 to 52:

“50. … There are two reasons for this. First, all the parties appreciated, or should have appreciated, that the first CMC was the appropriate occasion on which issues between them regarding the quantum of costs shown in their respective costs budgets should be debated. That was so both in relation to the estimated costs elements in the budgets, in respect of which a costs management order might be made under CPR 3.15(2)(b) and pursuant to para 7.4 of PD3E to record the court’s approval of those elements, and in relation to the incurred costs elements in the budgets, in respect of which it would be open to the court to make comments under para 7.4 of PD3E. Moreover, CPR 3.17 makes it clear that costs budgets are to be important instruments for all case management decisions, so parties must appreciate that if they wish to take issue with another’s costs budget they should do so at the first CMC, when there is to be debate about the costs budgets. In this case the first CMC, and the process leading up to it, afforded each party a fair opportunity to make any submissions they might wish on each other’s costs budgets.

51. Sarpd chose not to dispute the reasonableness and proportionality of the sums set out in Addax’s and Glencore’s costs budgets when it had the opportunity to do so. There has been no relevant change of circumstances between the date of the CMC when Blair J made his order and the time for consideration of Addax’s application for security for costs. On this application it would be contrary to the overriding objective to allow Sarpd to try to re-open costs issues which it had already had a fair opportunity to address. It would not be just to permit it to do that and it would add disproportionate cost in dealing with the case if a court had to go behind the settled costs budgets in a case like this. To allow such course would add unnecessarily to expense, rather than save it (see CPR 1.1(2)(b)); would be likely to add to the time and effort required to argue and determine a security for costs application and so would contravene the requirement to ensure that cases are dealt with expeditiously and fairly (see CPR 1.1(2)(d)); and would also involve allocating an inappropriate share of the court’s resources in having to re-visit an issue already dealt with by the court (see CPR 1.1(2)(e)). When we pressed Mr Nolan as to how the course he proposed could be regarded as compatible with the overriding objective he had no good answer.

52. Secondly, for reasons explained above, Addax’s costs budget and Glencore’s costs budget, as “approved” in and appended to Blair J’s order, will be a strong guide as to the likely costs order to be made after trial, if Addax is successful, both in relation to the incurred costs elements and in relation to the estimated costs elements. It is therefore appropriate that the costs budgets as so “approved” should be used as the relevant reference points for considering the amount which should be ordered for security for costs.”

16. These paragraphs repay careful reading.  They suggest that the time to take issue with the other party’s costs is at the budgeting stage, not the assessing stage, and that a failure to take a point at a CCMC combined with no material change of circumstance come the assessment may mean that the paying party is precluded from taking that point on assessment.  It should be remembered that the issue in Sarpd was a security for costs application, made at a relatively early stage in proceedings (though after costs budgets had been approved).  To the extent that any principle might be extracted from Sarpd about the approach to assessment at the end of proceedings, the decision is arguably obiter because that was not the issue before the Court of Appeal:

17. Nevertheless, the broad statements of principle set out by the Court of Appeal clearly support the Fix Analysis.  They are difficult to reconcile with Moore-Bick LJ’s approach in Troy Foods, which appears not to have been cited.  Moreover, some of the provisions in 3E PD (emphasis supplied) are difficult to reconcile with the assessment in advance approach which appears to be mandated by Sarpd:

“7.3…The court’s approval will relate only to the total figures for each phase of the proceedings, although in the course of its review the court may have regard to the constitute elements of each total figure.  When reviewing budgets, the court will not undertake a detailed assessment in advance, but rather will consider whether the budgeted costs fall within the range of reasonable and proportionate costs.”

“7.10 The making of a costs management order under rule 3.15 concerns the totals allowed for each phase of the budget.  It is not the role of the court in the cost management hearing to fix or approve the hourly rates claimed in the budget.  The underlying detail in the budget for each phase used by the party to calculate the totals claimed is provided for reference purposes only to assist the court in fixing a budget.”

18. That said, there are examples in the cases of judges reviewing and adjusting hourly rates at the CCMC – see for example Group Seven Ltd v Notable Services LLP [2016] EWHC 620 (Ch).

19. More significantly for practitioners, if the Fix Analysis is correct then neither practitioners nor the Court will be able to avoid difficult costs questions having to be resolved at CCMCs by putting off until assessment on the basis that the Court is only budgeting not assessing.  On the contrary, the Court is under this approach conducting a form of assessment in advance, without knowing how the litigation will unfold.  A 1 hour CCMC is likely to be woefully inadequate in terms of listing time to conduct a full review of the costs budget as seems to be contemplated, if parties are obliged to make all the points they would want to make on an assessment, and will be precluded from raising on assessment if not raised at the stage of approving costs budgets. CCMCs are not heard by specialist costs judges, and if they involve a form of assessment of costs in advance, this puts the judges hearing CCMCs in a difficult position.

20. There is some anecdotal evidence that some judges may be uncomfortable with the practical implications and effects of the Fix Analysis, and are including a so called “Sarpd carve out” provision in orders made at CCMCs.  This is along lines such as “The approval of the parties’ costs budgets is without prejudice to any points that may be made on assessment of costs”.  It may be questioned whether such a direction is truly compatible with Section II of CPR 3, and in particular CPR 3.18.

21. Some of the difficulties which arise in practice were alluded to by Flaux J in Wright v Rowland(unreported, 17 June 2016), where he recognised the following points:

a.On “one view” of the CPR, if the Court approved the costs budgets there would be no detailed assessment after trial provided the costs sought by the receiving party were within budget.

b.Where there was a substantial dispute between the parties at the CCMC over a particular item (in that case whether the use of two junior counsel was reasonable and proportionate), it was difficult for the Court to decide that issue in advance at an early CCMC.

c.The Court could approve a compromise figure somewhere between the parties’ rival figures, but this would not be sensible.

d.The Court could simply not approve the budget, which Flaux J considered would keep everything open for detailed assessment unencumbered by any costs budgeting, but that would not help the other side make decisions about the litigation.

e.In the circumstances, the approach would be to approve some elements of the budget but decline to approve the figures relating to trial preparation, trial, ADR and contingency.  This would allow the seeking of a detailed assessment  in relation to the unapproved costs if that party was successful at trial.

22. Flaux J’s approach is, it is respectfully submitted, more consistent with the wording of Section II of CPR 3 and CPR 3.18 than the Sarpd carve out technique.  To the extent that costs are not the subject of any sanctioned budget, it appears that this leaves everything open for argument at a detailed assessment in due course, consistently with CPR 3.  On the other hand, the Sarpd carve out technique is not only difficult to reconcile with CPR 3.18, but raises more fundamental questions about the purpose of the costs budgeting exercise (which itself is a costly and time consuming exercise).  If the intention is that costs will fall to be assessed in the old pre-costs budgeting way , it might be asked in practice whether there is any difference in not approving budgets and approving budgets subject to a Sarpd carve out.  The Sarpdcarve out only partially helps the other side make decisions about the litigation (one of Flaux J’s concerns in Wright), given that everything would seemingly still be open for argument on assessment. However, the approach of partial approval itself might be thought to be inconsistent with the spirit of costs budgeting, even if permissible within the letter of the rules.

23. It is likely that further intervention by the Court of Appeal or, ideally, by way of amendment to Section II of CPR 3 will be necessary in order fully to resolve the difficulties that practitioners are now left facing in relation to costs budgeting.  The importance of resolving these difficulties cannot be underestimated given the need to provide clients and the Court with as much certainty and protection regarding costs as is reasonably possible throughout the course of litigation.

Ravi Aswani

This blog post first appeared on Practical Law Arbitration Blog on 8 July 2016. 

http://arbitrationblog.practicallaw.com/bremaining-optimistic-impact-on-london-arbitration-following-brexit/

This blog considers the impact of Brexit on London arbitration and, in particular, the effect of losing many EU Regulations that currently form the core of England’s conflicts, and choice, of law positions in three key areas:

Choice of law

Section 46 of the English Arbitration Act 1996 (AA 1996) governs the applicable substantive law. The tribunal is required to decide the dispute in accordance with the parties’ chosen law or, if the parties so agree, in accordance with such other considerations as are agreed by them or determined by the tribunal. If, or to the extent that, there is no such choice or agreement, the tribunal applies the law determined by the conflict of laws rules which it considers applicable.

As a matter of practice, parties will often expressly choose English law when agreeing to London arbitration. Where the parties are silent, the tribunal will often deem the choice of the English seat as an implicit choice of English law. As such, it is unlikely that the tribunal will, in the usual course of events, actually come to consider the choice of law provisions applicable under English law, which are currently governed by the Rome I Regulation on the Law Applicable to Contractual Obligations (Rome I) and the Rome II Regulation on the Law Applicable to Non-Contractual Obligations (Rome II).

However, if Rome I no longer applies post-Brexit, then it is possible that, unless any further regime is put in place, the tribunal will be more than likely to apply the English law as it stood prior to Rome I and Rome II. This will result in the following regimes:

  • In relation to contractual claims, the tribunal will apply the Contracts (Applicable Law) Act 1990 (which had incorporated the Rome Convention, subject to two reservations, prior to it becoming a Regulation). Thus, the position in contract law will remain similar to the current position.
  • In relation to tort claims, the tribunal will apply the Private International Law (Miscellaneous Provisions Act) 1995, where the analysis will focus on the country in which the events constituting the tort occurred (under section 11 of the 1995 Act), rather than on the location of the damage under Article 4 of Rome II. Whilst the tortious position could therefore be different, this is potentially a more sensible approach, as it ensures that the law of the state which has the closest factual connection with the tort governs the matter.

In our view, the difference to the choice of law position will therefore be minimal; where there is change it is to be welcomed.

Anti-suit injunctions

Currently anti-suit injunctions cannot be granted against litigants who bring a claim before the courts of another EU member state in breach of an exclusive English jurisdiction clause (Turner v Grovit) or an arbitration clause (West Tankers). Upon Brexit, the main options for resolving jurisdictional questions between the UK and EU countries are as follows:

  • The UK signs up to the Brussels (Recast) Regulation in similar terms to Denmark in 2005 (when they signed up to the Brussels Regulation). In this case, the new provisions, including the expansive recital 12, would apply. The broad approach taken by the Advocate General in Gazprom OAO V Lithuania may be adopted by the Court of Justice of the European Union (CJEU) in the future, such that anti-suit injunctions in support of arbitration are held to be outside the Brussels (Recast) Regulation.
  • The Lugano Convention governs as it does for a European Free Trade Association (EFTA) state (for example, Iceland, Norway, Switzerland). This is unaffected by the Brussels (Recast) Regulation due to Article 73(1) and thus does not have the expanded recital 12 noted above. An interesting issue in this eventuality is whether or not the CJEU’s decisions would be followed. If not, the English courts may be able to take a purposive approach of the Convention’s terms in light of the Brussels (Recast) Regulation and Recital 12, and uphold anti-suit injunctions in support of arbitration.
  • Technically, the UK remains a party to the Brussels Convention, so in theory we could revert to that residual framework. However, if we do not agree to the Brussels (Recast) Regulation, it is unlikely we will agree to this convention; the Lugano Convention is a more obvious option.
  • A new treaty is signed by the UK with the EU, which leaves open anti-suit injunctions in support of arbitration; whether there is the political will for this is unclear. There is also the possibility of unilateral agreements on recognition and enforcement with individual EU states.
  •  The UK does not enter any new agreement allocating jurisdiction with the EU or its members. This would result in the English court simply applying English law as they currently do to non-EU states (where that relationship is not currently governed by the Brussels (Recast) Regulation under, for example, Article 33) with the main result being that anti-suit injunctions in support of arbitration would most definitely be an option.

If the English court were, once again, able to issue anti-suit injunctions in support of arbitration (and scupper, for example, the Italian torpedo), it is likely to increase the popularity of England as the seat and venue for arbitration in contrast to its European neighbours.

Enforcement of awards

Enforcement should be unaffected because the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (New York Convention), which is a unique international instrument, has been ratified by all of the EU states.

However, the interesting point is to contrast this with English judicial judgments. These will either require a treaty (similar to the possibilities discussed above) to ensure reciprocal enforcement or they will depend on foreign domestic rules. Given the current political climate, it is unclear whether other European nations will agree to any such treaty; therefore, arbitration may be viewed as a safer option than court proceedings.

Conclusion

In our view, the impact of Brexit on arbitration practice is likely to minimal. To the extent that it is felt, it is likely to be positive because:

  • Section 46 of the AA 1996 will be unaffected and to the extent that tribunals have to revert to English national law (i) there will be little change to the choice of law rules in contract, and (ii) reverting to the 1995 Act and the location of the damage for tortious claims is, potentially, to be welcomed.
  • There is a possibility that the English court will be able to issue anti-suit injunctions in support of arbitration in circumstances where their European neighbours cannot. This would give England a competitive advantage over its main local rivals, such as Paris and Geneva.
  • There should be no issues of enforcement. This is governed by the New York Convention and is unaffected by EU rules, unlike court judgments, which will need to be dealt with in due course.

Whether the wider economic circumstances have any significant long term impact on the choice of London as a seat remains to be seen, but, with London’s historical positives, there are good reasons to remain optimistic.