Court refuses anti-suit injunction to restrain US proceedings where English court also has jurisdiction under Recast Brussels Regulation

Sarah Speller

In Petter v EMC Europe Ltd and another, Mr Justice Cooke refused to grant an anti-suit injunction restraining the defendant from continuing proceedings before the US court, even though he found that the English court also had jurisdiction over the dispute under the provisions relating to employment contracts in the Recast Brussels Regulation.

The facts

The claimant was a senior employee of the first defendant (“EMC Europe”). EMC Europe was an UK indirect subsidiary of the second defendant, EMC Corporation (“EMC”), a US corporation headquartered in Massachusetts. As the claimant was regarded as a “key employee”, EMC awarded him a number of restricted stock units. On each award of units, the claimant entered into a Restricted Stock Unit Agreement (the “RSU Agreements”). The RSU Agreements incorporated EMC‘s Stock Plan, which was stated to be subject to Massachusetts law and granted exclusive jurisdiction to the courts of Massachusetts.

The claimant subsequently resigned and accepted a position with one of EMC’s competitors. EMC commenced proceedings against him in Massachusetts, relying on the exclusive jurisdiction clause incorporated into the RSU Agreements. The claimant then issued proceedings against both EMC and EMC Europe in the English High Court, and applied for an anti-suit injunction restraining EMC from continuing the Massachusetts proceedings. He argued that, under Section 5 of the Recast Brussels Regulation (Regulation (EU) No. 1215/2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters), EMC was his employer and a party to his employment contract, and therefore any disputes relating to his employment contract had to be brought in the English courts.

Section 5 of the Recast Brussels Regulation governs jurisdiction over individual contracts of employment. Article 21 of the Regulation provides (amongst other things) that an employee may sue an employer which is not domiciled in an EU Member State in the court of a Member State where (or from where) the employee habitually works. Article 22 of the Regulation provides that an employer may only sue an employee in the courts of the Member State where the employee is domiciled.

The claimant argued that the court was bound by Samengo-Turner v J&H Marsh & McLennan (Services) Ltd [2007] EWCA Civ 723 (a case decided under the original Brussels Regulation (Regulation 44/2001)), where the Court of Appeal held that employees domiciled in England had a statutory right to be sued in England, and granted an anti-suit injunction in their favour, despite the existence of New York law and jurisdiction clauses, because that was the only way to protect the statutory right. (It is worth noting that the Recast Brussels Regulation actually offers greater protection to employees than the original Regulation, because it makes it possible for an EU-based employee to sue an employer who is based outside the EU in a Member State court.)

The key issues for the court were therefore whether EMC was the claimant’s “employer”, and whether the RSU Agreements were to be regarded as a contract of employment, for the purposes of the Recast Brussels Regulation.

Decision

Cooke J held that the claimant had a good arguable case that EMC was his employer and the RSU Agreements amounted to a contract of employment. This meant that the claimant was entitled to bring his claim in the English court under article 21 of the Recast Brussels Regulation, and, under article 22, EMC was only entitled to bring proceedings in the English court. Cooke J also found that the Massachusetts jurisdiction clause incorporated into the RSU Agreements was of no legal force as far as the English courts were concerned (the effect of articles 23 and 25 of the Recast Brussels Regulation). This was notwithstanding a ruling by the Massachusetts court that the parties were, as a matter of Massachusetts law, bound by the jurisdiction clause.

Despite these findings, however, Cooke J declined to grant the claimant an anti-suit injunction. Although he had to have regard to the decision in Samengo-Turner, the judge considered he was not bound to follow it, because injunctions were always a matter of discretion and turned on their own facts.

There was clearly an irreconcilable clash between the English and Massachusetts courts on the question of jurisdiction: under Massachusetts law (as provided for by the RSU Agreements), the Massachusetts court had jurisdiction, yet by virtue of the Recast Brussels Regulation, the jurisdiction clause in the RSU Agreements was unenforceable and the English court had jurisdiction (although it would apply Massachusetts law). The consequences of granting – or not granting – an injunction had to be considered against this background.

Although the claimant was seeking an interim injunction, the reality was that an injunction, if granted, would almost certainly be final in its effect. That effect would almost certainly be to prevent EMC from pursuing its claim in the forum chosen by the parties, i.e. Massachusetts.

This meant the judge had to have regard to the balance of convenience. He held that the balance of convenience lay in EMC’s favour. It seemed likely that, if an injunction were granted, EMC would continue with the Massachusetts proceedings and would not play any part in the English proceedings. If proceedings continued in both courts, the losing party in each jurisdiction would be likely to resist enforcement in the other jurisdiction and to succeed in doing so because of the perceived lack of jurisdiction of the other court.

The requirements of comity did not allow the grant of a final anti-suit injunction in this case. Cooke J commented that although he understood the Court of Appeal’s desire to grant an injunction in similar circumstances in Samengo-Turner, that decision had been criticised, and he considered the criticism to be “well-grounded”.

The judge considered the following factors also weighed against the grant of an injunction:

  • Although the claimant was entitled, under the Recast Brussels Regulation, to bring his claim in the UK, he was in breach of contract in pursuing the claim outside Massachusetts;
  • The grant of an anti-suit injunction was essentially inimical to the Regulation, which did not allow such injunctions in the context of jurisdictional disputes concerning the courts of Member States. Accordingly where, as here, the jurisdiction was granted solely by the Regulation (as opposed to a jurisdiction clause in an agreement reached between the parties), it would not seem appropriate to grant an injunction on the grounds of that jurisdiction; and
  • The proceedings in Massachusetts were not vexatious and oppressive and the ruling of the Massachusetts court on its own jurisdiction was not in breach of customary international law. Regard had to be had to the parties’ free choice of law, namely Massachusetts law, and the requirements of comity in relation to the court’s decision.

Comment

This decision clearly represents a departure from the approach taken by the Court of Appeal in Samengo-Turner. Even after putting to one side the differences between the two cases (Samengo-Turner was decided under the original Brussels Regulation, which unlike the Recast Regulation, did not entitle EU-based employees to sue employers based outside the EU in a Member State court), Cooke J commented that there was still “force” in the criticisms of the earlier decision. It supporter the view of commentators that, contrary to the view taken by the Court of Appeal, the Recast Brussels Regulation does not require Member State courts to enforce it by restraining proceedings in a non-EU Member State.

Postscript

We understand that the claimant has been granted permission to appeal this decision and the appeal is to be heard by the Court of Appeal on 14 or 15 July 2015.

Petter v EMC Europe Ltd and another [2015] EWHC 1498 (QB)

 

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