Jurisdiction rules allowed Scottish sub-contractor to sue in English commercial court

Out-Law News | 08 Dec 2014 | 5:26 pm | 3 min. read

A Scottish sub-contractor was not barred from bringing a claim against a Dutch company in the England and Wales commercial court under EU law because the "place of performance of the obligation" could take place on either side of the border, the court has ruled.

Dutch oil and gas company GDF Suez had tried to argue that, as a Scottish company, Canyon Offshore was not entitled to pursue it for non-payment of some invoices owed to it by the original contractor, Cecon, in the English courts. The contract between Cecon and Canyon was governed by English law and subject to arbitration in Rotterdam, while the original contracts between GDF and Cecon were governed by Dutch law and related to subsea pipelines being constructed on the Dutch continental shelf.

The 2001 Judgments Regulation (23-page / 204KB PDF) allows a party to be sued in a different court to that of its place of business provided that the court is in "the place of performance of the obligation". In his judgment Judge Mackie pointed out that Canyon's invoices provided that payment could be made directly to its place of business in Aberdeen, or electronically to its bank account in London.

"The presumption that the debtor must seek out the creditor at his place of business and pay him there is of long standing but it is readily displaced implicitly and not just expressly," he said.

"As I see it the terms of the alleged contract are essentially the same as those provisions of [the sub-contract] which give rise to the liability to pay and to payment itself. These provided that Cecon was obliged to pay Canyon within 30 days from receipt of a correctly prepared invoice. It was not, as it were, required to travel to Aberdeen with a wad of cash ... As GDF was undertaking to perform Cecon's payment obligation is follows that, one way or another, the place of performance of the obligation was prescribed by the invoices and was equally England or Scotland," he said.

Judge Mackie said that the purpose of the regulation was to ensure "legal certainty and the need for a normally well informed defendant reasonably to be able to foresee in which courts other than his domicile he may be sued". In previous cases, this had been taken to mean that a single place of contractual performance had to be identified, but this was not necessary in the case in question, he said.

"The later cases suggest an evolution towards permitting claimants to have a choice, within [the regulation], of where to sue provided that there is sufficient proximity and predictability. I conclude that Canyon had that choice provided that it met the other requirements," he said.

"Applying, as best as I can, those concepts to the facts of this case I conclude that a normally well informed defendant would be reasonably able to foresee that, apart from at his domicile, he might be sued in either of the places where payment was required to be made under the alleged contract. At the time of assuming the payment obligation, the essence of what he was required to do under the alleged contract, he could readily have discovered that payment was due in Scotland or England," he said.

Litigation expert Richard Dickman of Pinsent Masons, the law firm behind Out-Law.com, said that although EU rules governing jurisdiction were "one of the more successful pieces of EU legislation", this did not mean that they catered for "every possible situation, as this case shows".

"The traditional presumption that a debtor must pay at the creditor's place of business is not always consistent with modern commercial practice, where payments are usually made electronically," he said. "As the relevant invoices provided for electronic payment in London or by other means in Aberdeen, the judge concluded that there were two possible places of performance; and that therefore gave the claimant the choice between suing either in England or Scotland, the claimant choosing the former."

"However, whether such a 'dual place of performance' is in fact permissible under the Judgments Regulation remains to be seen: the judge gave permission to appeal to the Court of Appeal which may, in turn, refer the matter to the EU courts for a ruling," he said.

A 'recast' version of the Judgments Regulation comes into force in January 2015. However, Dickman said that the position in this case would be the same under either version of the regulation.