Law Report: English action `not related' to Spanish proceedings

Sarrio SA v Kuwait Investment Authority; Court of Appeal (Lord Justice Evans, Lord Justice Peter Gibson, Lord Justice Brooke) 12 August 1996

The question whether proceedings brought in two different states were "related actions" for the purpose of article 22 of the Brussels Convention, as scheduled to the Civil Jurisdiction and Judgments Act 1982, so as to entitle any court other than that first seised to stay the action, depended on whether the primary issues of fact, upon which the reasoning of the judgment of the court first seised must necessarily be based, were the same or different in the two sets of proceedings.

The Court of Appeal allowed an appeal by the plaintiff, Sarrio SA, against the decision of Mr Justice Mance ([1996] 1 Lloyd's Rep 650) who, on the application of the defendant, the Kuwait Investment Authority, had stayed the plaintiff's actions because they were related to actions already commenced in Spain and there was a risk of irreconcilable judgments in the two jurisdictions.

Charles Hollander (Linklaters & Paines) for the plaintiff; Andrew Popplewell and Paul Wright (Baker & McKenzie) for the defendant.

Lord Justice Evans said the plaintiff was a Spanish company, domiciled in Spain. The defendant could be described as the investment arm of the government of Kuwait, though with a separate legal identity. It was based in Kuwait but had a branch office in London.

The subject matter of the English actions was a claim for damages for negligent misrepresentations allegedly made on behalf of the defendant in the course of negotiations for the sale of part of the plaintiff's business to Grupo Torras SA, who represented the defendant's investments in Spain.

The defendant objected to the jurisdiction of the English court essentially because the plaintiff should be required to consolidate these actions with proceedings it had already brought in Spain. The Spanish proceedings did not include the claim for damages for negligent misrepresentation made in these actions, but they arose out of the sale contract between the plaintiff and Grupo Torras which the representations were alleged to have induced. The defendant therefore contended that the two sets of proceedings either involved the same cause of action, within article 21 of the Convention, or that they were related actions within article 22 and should be heard together in Spain.

Put shortly, the central issue in Spain was whether the contractual undertakings made by or in the name of Grupo Torras were binding as a matter of law on the defendant as owner of its shares; in England, whether Javier de la Rosa, the person who negotiated the sale contract with the plaintiff, made certain representations on behalf of the defendant, in addition to and apart from whatever he said on behalf of Grupo Torras.

Both sets of proceedings required an investigation of the history of the negotiations and background circumstances. The judge concluded, and his Lordship agreed, that the causes of action and the objects of the two sets of proceedings were different, and therefore article 21 of the Convention did not require the English court to decline jurisdiction.

Article 22 provided that where "related actions" were brought in two contracting states (as Spain and England were) any court other than the first seised might stay its proceedings or decline jurisdiction, and that:

For the purpose of this article, actions are deemed to be related where they are so closely connected that it is expedient to hear and determine them together to avoid the risk of irreconcilable judgments.

Whether these and the Spanish proceedings were "related actions" depended on an overall consideration of the extent to which there was a risk that the judgment of the Spanish court would be irreconcilable with the judgment in these actions, if permitted to proceed.

Applying the test set by the European Court of Justice in The Maceij Rataj [1995] 1 Lloyd's Rep 302, the primary issues of fact, on which the court's "reasoning" for its decision would be based, were distinct in these actions from those raised in Spain.

It followed that there was no risk of irreconcilable judgments so as to make article 22 apply.

Paul Magrath, Barrister