UK Supreme Court rejects the application of The Brussels Regulation (2001) to join multiple defendants into one set of English proceedings

03 November 2015

Steven Baker

Bird & Bird & First for Disputes

"Cigarettes attract smokers, smugglers and thieves". So begins the judgment of Lord Mance in BAT Denmark A/S and others v Kazemier Tansport BV (and others) [2015] UKSC 65 handed down last Wednesday, 28 October 2015. It is also apparent that cigarettes attract litigation, in this particular instance regarding the liability of two separate sub-contractors who 'lost' one container load of cigarettes in a hi-jacking in Belgium and the other while parked overnight near Copenhagen. The issue before the court was whether the consignors, BAT, could bring a claim against the sub-contractors in the English courts. 

Both defendants were based in Holland and were engaged by the same contractor, Exel (who in turn had contracted with BAT). Exel played no part in the proceedings but the contract between it and BAT contained an English jurisdiction clause. The movement of the cigarettes was governed by the Convention on the Contract for the International Carriage of Goods by Road 1956 (CMR). BAT wanted to sue the sub-contractors in the English courts because English law treats various duties and taxes in relation to the goods more favourably than other jurisdictions. The sub-contractors disputed the English jurisdiction clause because it had not been copied into the relevant consignment note between themselves and Exel. 

Whilst the judgment considers the CMR in great detail this note looks at the issue of whether the previous Brussels Regulation (44/2001) (The Regulation) (and by analogy The Recast Brussels Regulation) allowed jurisdiction to be established over the defendants or did the CMR prevail?

The CMR, ratified by more than 55 states, many of which are outside the EU, provides its own jurisdiction regime in clauses 31, 34 and 36. One of the many arguments put forward by BAT was that The Regulation should prevail over the jurisdiction scheme set out in the CMR thereby entitling BAT to sue the sub-contractors in the English courts. However the Supreme Court disagreed overturning the judgment of the Court of Appeal and upholding the first instance judgment of Cooke J.

The main judgment, given by Lord Mance, considered the treatment of agreements signed prior to the TFEU (the Treaties for the Establishment of the European Union), of which the CMR is one of many. Article 351 states that any rights or obligations arising prior to the TFEU shall not be affected by it unless the agreements are not compatible with the TFEU. Article 71 of The Regulation echoes this stating that The Regulation "shall not prevent a court of a member state, which is a party to a convention on a particular matter, from assuming jurisdiction in accordance with that convention…" Lord Mance held that the CMR's jurisdictional regime was "deliberate and comprehensive". It contained a "tailored balance" which did not impinge on EU law and which contained no gaps to be filled by it. Consequently, on analysis of the effect of the CMR, the English jurisdiction clause had not been successfully incorporated into the consignment notes. This meant that the CMR applied to BAT's claim against the sub-contractors and that neither could be sued in the English courts. Instead BAT will have to claim against Exel in the English courts and pursue the sub-contractors elsewhere.

Although the Supreme Court did recognise the commercial practicality of allowing BAT to sue Exel and the sub-contractors in one court, it held that the wording of the CMR did not allow this on the particular facts. However, the case is a useful reminder that although The Regulation, (and now The Recast Brussels Regulation), will be the starting point for jurisdictional issues between contracting parties from EU member states, the jurisdictional regimes in Conventions such as the CMR or the Warsaw Convention 1929 (relating to international carriage by air), which pre-date the TFEU, will take precedence over The Regulation as long as their principles do not impinge on EU law.