Wednesday, 28 February 2018

Place Where Harm Occurs, as Basis for Jurisdiction, is Limited: U.K. Supreme Court

            Sometimes, for strategic reasons, a foreign litigant prefers to sue in the Courts of the United Kingdom.    For example, Russian oligarchs have often done so, even when the connection between the U.K. and the dispute is tenuous.     A recent ruling of the U.K. Supreme Court narrows the British courts’ jurisdiction.  In AMT Futures Ltd. v. Marziller  [2017] UKSC 13, AMT chose the British courts for a claim against a lawyer, Marziller, who resides in Germany. AMT could sue Marziller in the U.K. only if the claim is for damage “sustained within [the U.K.]”  (CPR PD 6B r.3.1(9)).    This rule is based on the Brussels I Regulation (s 7(2)).  Such jurisdiction is an exception to the general rule that a defendant is to be sued in the defendant’s domicile.  
            The facts are these.  Marziller had sued AMT on behalf of AMT clients, in Germany. He did so despite the fact the client contracts contained a exclusive jurisdiction clause in favour of  the U.K. courts.     AMT challenged the jurisdiction of the German courts but lost, and paid over two million pounds to settle the case.     AMT then sued Marziller, arguing that Marziller had deprived AMT of the benefit of the exclusive jurisdiction clause by inducing AMT’s clients to breach their contract.   AMT argued that the harm occurred in the U.K. based on the fact AMT had paid the settlement out of an account in England and based on the exclusive jurisdiction clause in favour of the U.K. 
            AMT succeeded at the trial level, but the Court of Appeal and U.K. Supreme Court ruled that the claim could not be brought in the U.K.  The Supreme Court stated that promoting certainty is central to the Regulation.  A defendant ought to be able to predict where he might be sued.  Exceptions to the general rule that a defendant is to be sued in his domicile are to be restrictively interpreted.   There must be a close connection between the court and the action, for the sake of the sound administration of justice.    The rationale for the ‘damage sustained in the jurisdiction’ exception is that the courts of such jurisdiction are in a particularly good position to determine the evidence of actual damage.   However, on the facts here, where the inducement to breach occurred in Germany, such rationale would not apply.       Various rulings of the Court of Justice for the European Union have limited the scope of the ‘damage sustained in the jurisdiction’ exception to initial and direct damage to the immediate victim.  
            This wariness about damage sustained as a basis for jurisdiction is found also in Canada.   The Supreme Court of Canada expressly rejected ‘damage sustained’ as a presumptive connecting factor for tort cases in Club Resorts v Van Breda [2012] S.C.J. no. 17.   Its reason:  that an injury may occur in one jurisdiction and the injured person suffer the pain and inconvenience in a second, or a third.    “damage sustained”, as a presumptive connecting factor, would risk “sweeping into that jurisdiction claims that have only a limited relationship with the forum”  (para 89).    Similarly, the Court Jurisdiction and Proceedings Transfer Act,  in force in B.C.,  Saskatchewan and Nova Scotia, which deems several types of claims to have a real and substantial connection (e.g. claims relating to a tort occurring in the province, or claims relating to a contract to be performed in the province) does not include damage sustained in that list.