Anchor defendants: limits on their use as a way of getting around jurisdictional rules

Out-Law Analysis | 14 Sep 2017 | 4:59 pm | 3 min. read

ANALYSIS: Recent comments by judges in the Court of Appeal may have cast doubt on the use of 'anchor defendants' as a means of establishing jurisdiction where the case against that party is in reality weak or hopeless.

Although not material to the court's ultimate decision in the case, the court's majority decision on an argument based on Article 6 of the Brussels Regulation is both interesting and potentially instructive. Article 6, which has since been superseded by the similarly-worded Article 8 of the Brussels I (Recast) Regulation, creates an exception to the general rule that a party domiciled in an EU member state should be sued there. It allows for a party to be sued in a court where a co-defendant is domiciled "provided the claims are so closely connected that it is expedient to hear and determine them together to avoid the risk of irreconcilable judgments resulting from separate proceedings".

Ms Sabbagh had raised various claims in the English courts against a Mr Wael Said Khoury (Wael) and several others. Only Wael was domiciled in the UK, and so was the anchor defendant for the purpose of establishing jurisdiction. The jurisdiction of the English courts was asserted against all but one of the others in terms of Article 6. Those others applied to the court to set aside the claim against them on the ground that Sabbagh could not establish a good arguable case against Wael.

Anchor defendants: a 'good arguable case'

The court found that there was an adequate claim against Wael, so the judges' comments on the jurisdiction question are not strictly binding. The judges were ultimately split on the question, with Lord Justices Patten and Beatson in the majority and Lady Justice Gloster dissenting.

The judges carried out an extensive review of the existing jurisprudence of both the UK courts and the Court of Justice of the EU (CJEU). In particular, they pointed to CJEU authority that if one could show that the "sole object" of pursuing the case in a particular jurisdiction was to 'oust' the domicile of the other defendants, that could enable the court to effectively disapply Article 6.

Ultimately, none of the authorities reviewed by the judges supported any relaxation of the general principle that any derogations from the rules on jurisdiction must be restrictively interpreted, and "cannot be interpreted in such a way as to allow a plaintiff to make a claim against a number of defendants for the sole purpose of removing one of them from the jurisdiction of the courts of the member state in which that defendant is domiciled". Accordingly, none of the CJEU jurisprudence precluded consideration of the substantial merits of the claims made against the anchor defendant.

It was essential to focus on the position of the anchor defendant rather than on the position of other defendants. If a claim against another defendant fell away, there was no impact on the jurisdictional result; but without a legitimate claim against the anchor defendant, there was "no reason for the foreign co-defendants to be ousted from their jurisdiction of domicile". If this was the case, how could the risk of irreconcilable judgments arise? It could not be expedient to determine a claim against an anchor defendant that was not seriously arguable, together with a claim against a foreign co-defendant who would not be there at all were it not for the anchor defendant's presence.

Turning to which test should be applied, the court felt that it would be very difficult to meet a requirement for evidence of abuse or fraudulent intention. Likewise, setting a threshold requiring proof that the 'sole object' of bringing the claim against the anchor defendant was to oust the co-defendants from their domicile would make it difficult to prevent forum shopping. If there was no serious issue to try against the anchor defendant, that would allow claimants to remove foreign defendants from jurisdictions of domicile in a way not approved by the CJEU.

Accordingly, a claim against an anchor defendant that was "hopeless or presents no serious issue to be tried" should in and of itself be enough bring it within the "sole object" exception identified by the CJEU. That was consistent with a restrictive interpretation of exceptions to the domicile rule. Without more, it could be inferred that the purpose of bringing an unsustainable claim against an anchor defendant was to remove co-defendants from their domicile jurisdictions.

This was a matter of policy. Article 6 should not be misused; and it would be a misuse to allow "hopeless claims" to oust domicile jurisdiction.

The fact that the court decided this issue by a majority demonstrates the differing opinions on the issue which are likely to arise again - at least until decided by a higher court. In the meantime, it represents a healthy dose of realism designed to prevent artificial uses of the jurisdictional rules.

As there is a whole list of exceptions to the domicile rule, there may be another basis on which the true defendant of interest can be made subject to the jurisdiction of the courts here despite being domiciled outside of the UK. What the Sabbagh judgment does is discourage artificial characterisation, to create what is in reality an artificial jurisdiction.

Craig Connal QC is a commercial litigation expert at Pinsent Masons, the law firm behind Out-Law.com.