Vol 6 (2009) - Issue 4

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Jefferies International Limited v Landsbanki Islands HF [2009] EWHC 894 (Comm)

If proceedings are commenced in England pursuant to an exclusive jurisdiction clause against a company domiciled in another Convention State under the Lugano Convention, in what circumstances (if any) is it possible to stay those proceedings permanently under section 49(2) of the Supreme Court Act 1981, or temporarily on a case management basis under Civil Procedure Rule 3.1(2)(f)?

In Jefferies International Limited v Landsbanki Islands HF [2009] EWHC 894 (Comm), these questions arose in the context of a disputed debt claim commenced by Jefferies by a claim form issued in the Commercial Court on 18 December 2008. In Iceland, Landsbanki had been placed into a reorganisation procedure on 7 October 2008 pursuant to which its members’ powers were assumed by the Icelandic Financial Supervisory Authority and its directors were replaced by a special Resolution Committee. In England, Landsbanki was subjected to a freezing order on 8 October 2008 pursuant to the Anti-Terrorism, Crime and Security Act 2001, but it was licensed to carry on ordinary business activities by HM Treasury.

Landsbanki had applied for a moratorium under Icelandic legislation, which was granted on 5 December 2008, but the relevant provisions of that legislation were repealed by the Icelandic Parliament on 15 April 2009. The case did not therefore touch on the effect to be given to that moratorium under paragraph 5(1) of the Credit Institutions (Reorganisation and Winding Up) Regulations 2004, which provides that ‘[a]n EEA insolvency measure has effect in the United Kingdom in relation to … any debt or liability of that credit institution, as if it were part of the general law of insolvency of the United Kingdom.’

In these circumstances, Mr Justice Cooke affirmed the presumption that parties should litigate where they have agreed to litigation and held that departure from that starting point required rare and compelling circumstances. He refused a temporary stay on a case management basis because such a stay would not assist the reorganisation procedure in Iceland and would in fact place Landsbanki in a better position in England relative to its position in Iceland in which no moratorium was now in force.

Cooke J, applying Mazur Media Limited v Mazur Media GmbH [2004] 1WLR 2966, in fact recognised that he had no discretion to permanently stay the proceedings in the circumstances. SCA 1981 s 49(3) entitles a Court to stay proceedings whenever necessary to prevent injustice, but, pursuant to section 49 of the Civil Jurisdiction and Judgments Act 1982, that power is not to be exercised in a way contrary to the Brussels Convention or the Lugano Convention. The position is the same in respect of the Judgments Regulation which is directly applicable without national legislation. The mandatory scheme of jurisdictional rules requires that a Court seized under those rules have no discretion to stay proceedings in favour of a Court of another jurisdiction on forum non conveniens grounds, Owusu v Jackson [2005] QB 801.

A Court must, of course, retain control of its own proceedings, and the power to stay proceedings is an essential component of that control. As such, it is important to identify when (if ever) a stay on a case management basis will in substance be a stay contrary to any mandatory jurisdictional rules at hand.