You are busy people. There is too much information. To try to help you identify the issues that are most important to you, we present a round-up of ten of the most significant cases and events in 2011, including Supreme Court decisions on contractual interpretation, the removal of expert witness immunity and the status of arbitrators, together with the coming into force of the Bribery Act 2010 and the new ICC Rules.
This is followed by a preview of ten cases and events to watch out for in 2012, including appeals to the Supreme Court in the Prudential and West Tankers cases on legal professional privilege for accountants and the enforcement of declaratory awards respectively, the Court of Appeal ruling on costs in the Trafigura case and the progress of ADR reform in the EU and UK.
Top Ten of 2011
(click on links below to move straight to the relevant article)
Rainy Sky: Supreme Court restates role of business common sense in contractual interpretation
Jones v Kaney: Supreme Court ends expert witness immunity
Jivraj: Supreme Court finds that arbitrators are not employees
Jurisdiction Regulation: ECJ knocks out “ultra-vires torpedo”
Bribery Act 2010 in force
New ICC rules in force
Anti-suit injunctions: Court of Appeal finds no arbitration necessary
Expert determination: Court of Appeal holds that courts may rule on jurisdiction of expert
Lord Justice Jackson: reform Bill delayed
Defamation reform: draft Bill and Consultation published
Top Ten of 2012
(click on links below to move straight to the relevant article)
Motto v Trafigura: costs, interest and ATE insurance
Prudential: legal professional privilege and legal advice from accountants
West Tankers and African Fertilisers: enforcement of declaratory awards
Rubin v Eurofinance: enforceability of Chapter 11 proceedings in England and Wales
Barclays Private Clients: claiming losses from alleged mortgage fraud
Deutsche Bank v Sebastian Holdings: dispute arising from collapse of the financial markets in 2008
The European Freezing Order
Brussels I Regulation reform
ADR reform
EU contract law reform
Top Ten of 2011
Contractual interpretation: Supreme Court restates role of business common sense
In Rainy Sky S.A. & Ors v Kookmin Bank, the Supreme Court held that where language used in a contract has more than one potential meaning, it is generally appropriate to adopt the construction that is most consistent with business common sense. Read more
Expert witness immunity removed
The Supreme Court in Jones v Kaney has abolished the principle of expert witness immunity from suit in relation to evidence given in civil proceedings. The ruling is significant for those who undertake work as expert witnesses, who may now be sued by their clients for breaches of duty committed in the course of all work that they undertake. Previously, the immunity protected experts in relation to work undertaken in proximity to court hearings. The practical impact of the decision remains to be seen. It is certainly likely to lead to upward pressure on professional indemnity premiums for expert witness work. Whether it will lead to a surge in satellite litigation when disappointed litigants turn to their former experts to recoup losses is a matter of speculation. Read more
Jivraj overturned – arbitrators are not employees
The Supreme Court has unanimously allowed the appeal in Jivraj v Hashwani, finding that arbitrators are not employees within the meaning of UK anti-discrimination legislation. Accordingly, an arbitration clause requiring arbitrators to be chosen from a particular religious community is neither discriminatory nor void. This decision is also important in international commercial arbitrations where parties make specific provision for arbitrators’ nationality. The Supreme Court has confirmed that this practice may continue. Read more
Jurisdiction Regulation: knock-out blow to the ultra vires torpedo
In an important judgment on the Jurisdiction Regulation, the ECJ ruled on the attempt by a party to avoid the effect of a jurisdiction clause in a contract by claiming that their decision to enter into the contract was in breach of their constitution and therefore invalid. The ECJ held the party could not do so because Article 22(2) of the Regulation, which provides that the courts of the Member State in which a company has its seat have exclusive jurisdiction over proceedings that have as their object the validity of the constitution of companies and the decisions of its organs, does not apply to the type of contractual dispute being considered in this case. Accordingly, the courts specified in the jurisdiction clause had jurisdiction to hear the dispute, rather than the courts that would have had exclusive jurisdiction under Article 22(2). Read more
Bribery Act in force from 1 July 2011
On 30 March 2011, the Ministry of Justice published its guidance for corporates on putting in place “adequate procedures” to prevent bribery, as required under the Bribery Act 2010. This follows a consultation in 2010 and the Government’s announcement that the implementation of the Act would be delayed until three months after the Guidance was published to give corporates time to consider its implications and take any further steps required to design and implement compliance programmes. Accordingly, the Bribery Act 2010 came into force on 1 July 2011 and a court clerk from East London has become the first person to be charged under the new Act. The clerk was charged with contravening section 2 of the Bribery Act 2010 for "requesting and receiving a bribe intending to improperly perform his functions" while working at Redbridge Magistrates’ Court in Ilford. Read more on the charges
New ICC rules in force from 1 January 2012
On 1 January 2012, following a three-year review exercise, a new version of the Arbitration and ADR Rules of the International Chamber of Commerce came into force. Unless parties expressly provided for the 1998 ICC Rules in their agreement, the 2012 Rules will apply to any ICC arbitration commenced after 1 January 2012, regardless of the fact that parties were not aware of them at the time they agreed to ICC arbitration. Many of the changes are cosmetic or just amount to a codification of current practice of the ICC Court of Arbitration and Secretariat since 1998. Others are more innovative and bring in new procedural mechanisms and principles including case management techniques focused on time and costs. Read more
Anti-suit injunctions: no arbitration proceedings necessary
The Court of Appeal has held that the court has jurisdiction to grant a final anti-suit injunction restraining a party from commencing or continuing foreign court proceedings in breach of an arbitration agreement, even where there is no actual, proposed or intended arbitration. In doing so, the court took a pragmatic approach that might otherwise have required the claimant to commence arbitration proceedings for the sole purpose of protecting the parties’ agreement to arbitrate. Read more
Expert determination
Expert determination clauses are commonplace in commercial agreements, being of particular use in technical or financial disputes where the parties require a swift evaluation to be carried out. The process of expert determination is generally quick, informal, and significantly cheaper than alternative methods of dispute resolution, although parties should be aware that courts have little control over the activities of such experts and, unless explicitly set out in the agreement, there is generally no opportunity for parties to appeal an expert’s decision. However, a recent case has highlighted that an expert determination clause will not always prevent a court intervening in the dispute at an early stage where the jurisdiction of the expert is in question. In that case the Court of Appeal held that it is in the interests of justice for the courts to determine whether an expert has jurisdiction to hear a dispute under an expert determination clause. The court said that it is “neither just nor convenient” to defer that decision until after the expert has decided whether he has jurisdiction. Read more
Jackson reform Bill delayed
A Bill making CFA success fees and ATE premiums irrecoverable from an opponent, permitting contingency fees and increasing sanctions in Part 36 offers was presented to Parliament on 21 June 2011. The second reading took place on 29 June, an unusually short period between first and second readings, causing yet more controversy in relation to Jackson LJ’s recommendations for the reform of civil litigation costs. The Bill is currently in the House of Lords and, whilst implementation was originally expected in October 2012, the Government has now announced that the reforms will be delayed until April 2013. Read more
Draft Defamation Bill - a journalist’s dream?
Following Lord Lester’s hotly debated draft Defamation Bill in summer 2010, the Government published its draft Defamation Bill and launched a public consultation on the Bill. The draft Bill largely follows Lord Lester's draft and includes his proposals to make it much harder for companies to sue. It also codifies and attempts to simplify complex aspects of the common law of defamation developed by case law over many years. If enacted this will not necessarily reduce the uncertainty as the courts are unlikely to resist arguments that the same common law should be considered when interpreting the statute. The consultation closed in June and a response is still awaited from the Government. Read more
Top Ten of 2012
Costs, interest and ATE premiums
Following the settlement of a personal injury group litigation action on behalf of the residents of the Ivory Coast, the Claimant’s solicitors, who were working on a CFA, issued a costs bill of £105m, which included a £9m ATE insurance premium. The case has already produced numerous costs judgments, including the upholding by the Court of Appeal of the proportionality test in Home Office v Lownds. The Court of Appeal has yet more to decide in 2012, including the appropriate application of interest on costs and the proper calculation of ATE insurance premiums. These decisions will provide valuable case law, not only in relation to CFAs, but for costs law in general.
Legal professional privilege and legal advice from accountants
In October 2010, the Court of Appeal confirmed that legal advice privilege does not extend to cover advice about law (e.g. tax law) given by accountants. Prudential has appealed the decision to the Supreme Court and both the Institute of Chartered Accounts and the Law Society have been given leave to intervene in the appeal. The appeal is due to be heard in November 2012. Read more on Court of Appeal judgment.
Enforcement of declaratory awards
The Court of Appeal has just confirmed in West Tankers Inc v Allianz SPA that declaratory awards, and especially those taking the form of a negative declaration of liability, can be enforced in the same manner as a judgment and judgment entered in terms of that award pursuant to section 66(1-2) of the Arbitration Act 1996. This decision endorses the approach adopted by the Commercial Court at first instance in this case and in the African Fertilizers case.
While the courts are willing to establish the primacy of contractual arbitration over irreconcilable court proceedings, thereby granting to a successful party the “material benefit” of an award, it creates the problem of two contrary judgments on the same matter, a situation likely to contravene the objectives of the Brussels Regulation when both judgments emanate from the courts of Member States of the EU. There is little doubt that the question of whether a judgment entered in the form of an award falls within the scope of the Brussels I Regulation will need to be answered at some point. While the Court of Appeal did not have the opportunity to answer this question in West Tankers, it might well do so in its judgment on African Fertilizers expected later this year. Read more
Enforcement of Chapter 11 bankruptcy proceedings in England and Wales
Following the Chapter 11 Bankruptcy of a US entity set up by some of the defendants, the trustees in bankruptcy issued a number of fraud and related claims against the defendants. Although the defendants were not US citizens and did not submit to the bankruptcy court's jurisdiction, the US court decided it had jurisdiction and granted summary judgment against them, which the trustees then sought to enforce in England. Under normal English jurisdiction rules, the defendants would have been entitled to contest the judgment on the basis that the US lacked personal jurisdiction over them. However, the Court of Appeal found that the judgment was a judgment in and for the purposes of the collective enforcement regime of the bankruptcy proceedings and was therefore governed by the jurisdiction rules relating to bankruptcy, not by the ordinary jurisdiction rules preventing enforcement of judgments where the defendants were not subject to the jurisdiction of the foreign court. As such, it should receive "worldwide recognition". This case has the practical effect of subjecting any person who has assets in England and Wales to the jurisdiction of all bankruptcy courts worldwide. The Supreme Court will hear the appeal in May. Read the Court of Appeal judgment.
Mortgage fraud
In one of the first big cases of its kind to reach trial, Barclays is suing mortgage brokers, valuers, solicitors and guarantors in a combination of fraud and professional negligence claims over an alleged mortgage fraud the bank claims cost it nearly £13 million. The case will be heard in June.
Dispute arising from the collapse of the financial markets
The dispute arises out of a complex series of agreements relating to equities and foreign exchange trading concluded between Deutsche Bank AG and Sebastian Holdings Inc. between 2006 and early 2008. When the global financial crisis hit in October 2008, Deutsche requested more collateral from Sebastian Holdings, which refused the request and the dispute escalated from there. Deutsche is seeking nearly $300million in the English proceedings and Sebastian Holdings is counterclaiming in the New York Supreme Court. The parties have already clashed in the English courts on various jurisdictional issues and the financial world will be watching the substantive hearing of this case, listed for October, with great interest.
The European Freezing Order
On 25 July 2011, the European Commission adopted a proposal for a Regulation creating a European Account Preservation Order to facilitate cross-border debt recovery in civil and commercial matters. The EAPO will establish a new and self-standing European procedure for the preservation of bank accounts, which will enable a creditor to prevent the transfer or withdrawal of his debtor's assets in any bank account located in the EU. The EAPO can be used as an alternative to procedures existing under national law and it is likely to impose new requirements on the court’s infrastructure and materially change the way banks deal with freezing orders. At present, the UK has decided not to opt into the proposed Regulation creating the EAPO, due to concerns that the proposed Regulation lacked adequate safeguards for defendants, but it intends to participate fully in the negotiations with the hope that sufficient changes will be made to enable the UK to opt-in post-adoption. Read proposed Regulation; Read Ministerial opt-out statement.
Brussels I Regulation reform
In the coming year, we are likely to see the EU lifting the veil on its long-awaited reform of the Brussels I Regulation on jurisdiction and recognition of judgments. The most significant aspect of the proposed reforms is the abolition of the “exequatur” procedure, which, if adopted, will allow for the automatic recognition and enforcement of judgments between Member States, thereby reducing cost and administrative burden for those seeking enforcement. The draft amended Regulation also purports to keep arbitration excluded from its scope, but provides a solution to avoid inefficient parallel court proceedings by requiring a court seised of a dispute to stay the proceedings where the question of arbitral jurisdiction is before either the courts of the seat or an arbitral tribunal. The UK has opted into the negotiations on the proposal for reform, which is currently passing through the European Parliament and the Council under the ordinary legislative procedure. Final approval is expected to be obtained this year or the next. Read more
ADR reform
In November 2011, the European Commission issued two legislative proposals - one on ADR and the other on ODR (on-line dispute resolution) in relation to consumer disputes in the EU. The objective of the ADR proposal is to put in place quality out-of-court entities to deal with any contractual disputes between consumers, whilst the ODR proposal aims to create an EU-wide "online platform" that will allow disputes about purchases made online in another EU country to be resolved online. The proposals do not make ADR mandatory at the EU level, although Member States may make the procedures compulsory if they so wish. The Commission believes that its proposals on ADR and ODR will contribute to “promoting access to swift, cheap and effective dispute resolution through ADR procedures as a means to empower consumers” and have committed to adopting the package by the end of the year, although it is unlikely to come into effect until 2014. Read more from the EU.
In the UK in June 2011, the Ministry of Justice issued a consultation paper seeking views as to whether: 1) mediation in small claims; and 2) mediation assessment hearings and / or pre-action directions including a mandatory settlement stage in county court claims up to £100,000 should become compulsory. The consultation closed in June and the MOJ’s response is expected shortly. Read more from the MOJ.
EU contract law reform
Following the publication of its Green Paper on the harmonisation of EU contract law in July 2010, the European Commission has steered a middle course through this controversial issue, publishing a draft Regulation for a Common European Sales Law in November 2011. The CESL is mandatory in one sense in that, if passed, the draft Regulation will be directly applicable in all Member States, but the CESL is also optional in that it allows individuals and businesses the choice of whether or not to adopt it in their contracts. The CESL will exist as an option alongside national contract law. Sellers can voluntarily use a set of rules that is identical in all Member States, but those who do not want to use it can simply continue using their national rules.
The CESL will only apply to cross-border sale of goods contracts where one party is established in a Member State and where both parties voluntarily and expressly agree to use the CESL in their contract. However, the House of Commons has exercised its right to challenge the CESL, on the grounds that it does not comply with EU Treaty principles of subsidiarity and proportionality. As the Commission plans to have the CESL agreed in time for the twentieth anniversary of the Internal Market on 1 January 2013, the debates on the CESL will rage throughout this year. Read EU proposal; Read House of Commons objection
