Exclusive jurisdiction: Supreme Court interprets Brussels Regulation on jurisdiction narrowly

In the case of Akçil v Koza Ltd, the Supreme Court clarified the scope of Article 24(2) of the Brussels I Recast Regulation on jurisdiction and the recognition and enforcement of judgements in civil and commercial matters. 

The Supreme Court ruled that the English courts did not have exclusive jurisdiction to hear certain claims brought by an English subsidiary company against its Turkish parent company and its trustees.

Facts of the case

The case concerned a dispute over the control of Koza Ltd, the English subsidiary company of Koza Altin, a Turkish gold mining company founded by Mr. Ipek, who became subject to criminal investigations and proceedings in Turkey. The Turkish criminal courts appointed trustees to control the Turkish parent company in place of the existing management.

Koza Altin and the trustees served notices to convene a general meeting of Koza Ltd to remove its directors, including Mr. Ipek, and replace them with three of the trustees. Mr. Ipek and Koza Ltd brought proceedings in England to restrain the meeting, arguing that the notices were void because:

• Mr. Ipek had not consented to the proposed changes (the ‘English company law claim’); and
• The English courts should not recognise the authority of the trustees to cause Koza Altin to do anything as a Koza Ltd shareholder, since they were interim appointees only and acting contrary to Turkish law, human rights and natural justice (‘the authority claim’).

Exclusive jurisdiction

Mr. Ipek and Koza Ltd argued that the English courts had exclusive jurisdiction under Article 24(2) of the Brussels I Recast Regulation against Koza Altin and the trustees in respect of both the English company law claim and the authority claim. Article 24(2) provides that:

“The following courts of a Member State shall have exclusive jurisdiction, regardless of the domicile of the parties: […]

(2) in proceedings which have as their object the validity of the constitution, the nullity or the dissolution of companies or other legal persons or associations of natural or legal persons, or the validity of the decisions of their organs, the courts of the Member State in which the company, legal person or association has its seat. In order to determine that seat, the court shall apply its rules of private international law.”

It was accepted by both parties that the English courts had exclusive jurisdiction under Article 24(2) in respect of the English law company claim, as it related to the validity of the internal affairs of Koza Ltd, an English company.

The dispute was whether the authority claim also fell under that Article which would mean that the English courts had exclusive jurisdiction over that claim too, or whether that claim should be litigated in Turkey. The judge at first instance found that both claims fell within the scope of Article 24(2) because the authority claim was inextricably linked with the English company law claim, meaning that the English courts had exclusive jurisdiction over both claims. The Court of Appeal agreed.

What did the Supreme Court say?

Koza Altin and the trustees appealed to the Supreme Court, which unanimously allowed the appeal and held that the English courts did not have exclusive jurisdiction to hear the authority claim. Some key points about its reasoning and interpretation of Article 24(2) are set out below:

• The Supreme Court rejected the lower courts’ finding that the authority claim was inextricably linked with the English law company claim and held that Article 24(2) must be interpreted narrowly because it is a derogation from the general jurisdictional rule under the Brussels I Recast Regulation that jurisdiction is based on domicile.
• The case law of the Court of Justice of the EU (CJEU) demonstrated that a mere link between a claim which is covered by Article 24(2) and a claim which is not covered by it is insufficient to bring both claims within the scope of that Article (CJEU’s judgment in Hasset v South Eastern Health Board).
• The Court of Appeal had misinterpreted the decision of the CJEU in BVG v JP Morgan on which it relied for its judgment. In that decision, the CJEU said that one of the aims of Article 24(2) was to confer exclusive jurisdiction on the courts of an EU member state where those courts are best placed to deal with certain disputes because there is a particularly close connection between those disputes and the member state concerned. Article 24(2) will only apply to legal proceedings where their principal subject matter comprised the matters set out in that Article (i.e. matters relating to an EU company’s internal affairs and the decisions of its organs).
• The English company law claim and the authority claim were distinct claims, and each one could be brought without any need to consider the merits of the other. A mere link between a claim which engages Article 24(2) and one which does not was not sufficient to bring the latter within the scope of that Article.
• Assessing the authority claim as a distinct set of proceedings, the Supreme Court found that it did not concern the validity of the decisions of a company which had its seat in an EU member state (as required by Article 24(2)). The principal subject matter of the authority claim concerned the validity of the decisions of Koza Altin, a company which had its seat in Turkey.
• The Supreme Court also noted that since Turkey was not a member state of the EU, its courts did not have exclusive jurisdiction over the authority claim by virtue of Article 24(2). Therefore, even though the authority claim did not fall within the exclusive jurisdiction of the English courts by virtue of that Article, the English courts could assume jurisdiction over that claim on another basis, if one could be found in the general English regime in the Civil Procedure rules.
• The Supreme Court also considered whether the English courts had jurisdiction over the trustees with respect to either of the two claims. It held that the English courts did not have exclusive jurisdiction over the trustees in respect of the authority claim as that claim did not fall within Article 24(2). The English courts did not have exclusive jurisdiction over the trustees in respect of English company law claim either as the trustees were not necessary parties to that claim.

Comment

Article 24 provides that the courts of a member state shall have exclusive jurisdiction, regardless of the domicile of the parties, over a number of very specific matters, including issues concerning the company’s constitution, internal affairs and the decisions of its organs (Article 24(2)).

This case highlights that Article 24(2) must be interpreted narrowly. It is also helpful in shedding some light on the issue of when a claim for which the English courts have exclusive jurisdiction under Article 24(2) can be brought together with another distinct claim. A mere link between a claim which is covered by Article 24(2) and one which does not is not sufficient to bring the latter within the scope of the Article.

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at November 2019. Specific advice should be sought for specific cases. For more information see our terms and conditions.