Out-Law / Your Daily Need-To-Know

Out-Law News 4 min. read

Court puts squeeze on orange juice cartel damages claims

A Brazilian company accused of being involved in an illegal cartel will not have to face mass damages claims in the UK after the High Court in London ruled that it does not have jurisdiction to consider the case.

However, claims raised against two of the company’s board members can proceed after the court determined that it does have jurisdiction to hear those.

Competition law expert Alan Davis of Pinsent Masons, the law firm behind Out-Law, said the judgment provides useful guidance about when an international company might be sued in England and Wales in relation to events abroad – something that in the context of claims brought by large numbers of claimants is sometimes referred to as ‘class action tourism’. 

At the heart of the case considered by the High Court are two claims, backed by more than 1,500 Brazilian orange farmers, against orange juice producer and exporter Sucocítrico Cutrale and two of its board members. The farmers are seeking redress for harm they claim they have been caused by restrictions on competition arising from the alleged cartel.

There is ongoing litigation in Brazil in relation to the alleged cartel, but the farmers are seeking to have their claims heard before the courts in England and Wales. Sucocítrico Cutrale and board members José Luis Cutrale and José Luis Cutrale Jnr have objected to this.

Whether the courts in England and Wales have jurisdiction to hear a case is currently determined with reference to the Brussels Recast Regulation, which is EU legislation that continues to apply in the UK to proceedings which, like the proceedings here, were commenced before the end of the Brexit transition period on 31 December 2020. The Regulation governs matters of jurisdiction and, among other things, provides courts with a right to hear cases brought against people or companies if those people or companies are considered to be domiciled in their country. According to Article 63, where companies are domiciled is where they have their statutory seat, central administration or principal place of business.

In his ruling, Mr Justice Henshaw clarified that a company can only have one place of “central administration” for the purposes of Article 63 and that, in the context of the dispute, the farmers had failed to show they had “the better of the argument” that London was where Sucocítrico Cutrale has its central administration. The farmers had claimed that Cutrale Snr had been effectively running the company from London since moving from Brazil at a time when he faced criminal charges in relation to the alleged cartel in 2006, but the judge considered that, if there was a single place of central administration for the company, that was still Brazil.

The farmers’ secondary argument was that, regardless of where Sucocítrico Cutrale is domiciled, they were entitled to serve it with court papers under the Civil Procedure Rules (CPRs) in England and Wales. However, Mr Justice Henshaw rejected that argument in this case, finding that the farmers had not done enough to show that the company had a place of business in the jurisdiction for the purposes of the CPRs.

The High Court accepted, however, that there was sufficient evidence of Cutrale Snr’s links to England and Wales for the claims against him as an individual to proceed. In turn, the claims against Cutrale Jnr, who is domiciled in Switzerland, as an individual were so closely connected with those against Cutrale Snr that the court considered it would be expedient for the claims against both men to be dealt with in England.

It further rejected arguments raised by the men that the proceedings against them in England and Wales should be put on hold or ‘stayed’ until after the Brazilian litigation concerning the alleged cartel has concluded. In case the judge was wrong in his conclusion that Sucocítrico Cutrale could not be sued in England, he also considered and rejected similar arguments for a stay in relation to the company.

Finally, the judge also considered whether, if he had not already found as he had done in certain respects, he would have stayed the English proceedings against Sucocítrico Cutrale and Cutrale Snr on the grounds of an English common law principle known as “forum non conveniens”. The principle essentially requires the English court to find the forum, or place, in which the case can most suitably be tried, in the interests of the parties and of justice. The judge concluded that he would narrowly have found that the English proceedings should be stayed in favour of Brazil. He examined closely the arguments put to him that there may be significant delays in Brazilian litigation, concluding that the relevant question was whether any features of the Brazilian system resulted in “a real risk that substantial justice will be unobtainable”. On the basis of that test, he did not consider that the evidence before him justified a stay.

Litigation expert Michael Fletcher said the High Court’s decision was welcome news for defendants sued in England in respect of overseas cartels, and potentially other overseas activities.

“The court here applied a high threshold and demonstrated that they will not lightly accept jurisdiction in respect of claims brought by claimants in England and Wales for strategic reasons,” Fletcher said.

“It is important to note that forum non conveniens arguments are not available to defendants where the Brussels Recast Regulation – the basic premise of which is that defendants must be sued where they are domiciled – applies. As a result of Brexit, the Brussels Recast Regulation no longer applies to new proceedings. This means that the English courts now have discretion to apply forum non conveniens – potentially so as to decline jurisdiction over proceedings, even in cases involving defendants domiciled in England and Wales,” he said.

This position would be short-lived if the UK were to re-join the Lugano Convention, which provides a similar jurisdiction regime to that in the Brussels Recast Regulation and similarly restricts the scope for forum non conveniens arguments. The UK has applied to re-join this Convention, but it is not yet clear whether the EU will accept its application.

Fletcher said, though, that, for the time being at least, the greater availability of forum non conveniens arguments in these types of cases may be welcomed by UK entities with subsidiaries or other group entities overseas.

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