Grovit v De Nederlandsche Bank NV & Ors

The first defendant is the Dutch Central Bank (“the Bank”). The second and third defendants are two of the Bank’s senior officers. The claimants have started these proceedings against the defendants in this country for libel, in respect of an allegedly defamatory letter sent by the Bank to the second and third defendants by fax from the Netherlands to London. The letter was sent in the course of the Bank’s duties as regulator and supervisor of the financial institutions in the Netherlands.

The Bank claims that it is entitled to immunity under Section 14(2) of the State Immunity Act 1978 (“The Act”). The second and third defendants claim that they are entitled to the same immunity as the Bank since they sent the letter in discharge of their official duties. The claimants say that the defendants are not entitled to immunity because (1) the Council Regulation (EC) 44/2001 (“the Judgments Regulation”) is mandatory and must be interpreted as having abrogated state immunity and (2) the Judgments Regulation applies to “civil and commercial matters” (article 1) and these proceedings are a civil and commercial matter because the claims are private in form (being actions for libel) and the second and third defendants acted maliciously and outside their official duties.

The judge rejected all of the claimant’s arguments, declared that the court had no jurisdiction and ordered that the claim be struck out. The claimant sought permission to appeal on five grounds. They were given permission to appeal by this court by Sedley and Maurice Kay LJJ on two of these, namely that the judge was wrong (1) to uphold the defendants’ claim to immunity and (2) to decide that this action was not a civil and commercial matter within the meaning of article 1 of the Judgments Regulation.

The claimants are involved in a group of companies, the Chequepoint Group, that operate money transaction offices. One of the companies, Carigna Investments NV, (“Carigna”), applied to the Bank for registration in the Netherlands. The Bank exercises regulatory functions in relation to money transaction offices. At all material times the second defendant was employed by the Bank as head of the Money Transaction and Trust Offices Department and the third defendant was employed as a supervisor in that department.

By letter dated 16 July 2004, sent by fax, the Bank stated its intention to refuse registration. The fax was sent to the London Office of another company in the Chequepoint Group, Harada Limited. The letter gave detailed reasons for the stated intention not to register. These included assertions that the directors and executives of Chequepoint were untrustworthy in a number of respects. The letter was headed with the name of the Bank and signed by the second and third defendants. On 15 February 2005 these proceedings were issued by the claimants in England claiming damages for libel.

In September 2005 the defendants issued applications for declarations that the court had no jurisdiction to deal with the claims on the grounds that they were entitled to state immunity under the Act, and/or common law.

The Judgments Regulation, Article 1(1):

“This Regulation shall apply in civil and commercial matters whatever the nature of the court or tribunal. It shall not extend, in particular, to revenue, customs, or administrative matters.”

Article 2(1):

“Subject to this Regulation, persons domiciled in a Member State shall, whatever their nationality, be sued in the courts of that Member State.”

Article 5:

“A person domiciled in a Member State may, in another Member State, be sued … (3) in matters relating to tort, delict or quasi-delict, in the courts for the place where the harmful event occurred …”

It is common ground that the claimants must succeed on both grounds of appeal if the decision of the judge is to be reversed. There was a discussion before us as to the order in which the issues should be determined. Mr Kennelly submits that the judge was wrong to decide the state immunity point first. He has drawn our attention to Lechouritou v Federal Republic of Germany Case C-292/05. In that case the claimants were victims of atrocities by the German Army in Greece during World War 2. They brought proceedings in Greece seeking compensation for their financial losses and material damage. The Republic of Germany pleaded state immunity and the Greek courts found that, subject to the effect of the Brussels Convention, Germany was entitled to immunity. The ECJ was asked (1) whether the claim was a civil or commercial matter within the scope of the Brussels Convention and if so (2) whether state immunity was compatible with the Brussels Convention.

The court decided that this was not a civil and commercial matter so that the Brussels Convention did not apply. It therefore did not go on to consider the immunity issue. Advocate General Ruiz Gerabo Colomer considered the first question and concluded that the claim was not a civil and commercial matter. He did however go onto consider the second question, although it was not necessary for him to do so.

Mr Kennelly submits that it is significant that the ECJ refused to address the second question but rather proceeded directly to the question of whether the matters in issue were properly “civil or commercial”. I do not accept that this decision provides clear authority for the proposition that the judge in the present case was wrong decide the immunity issue first. Nevertheless, since I have formed the clear view that the judge reached the right conclusion on the civil and commercial matters issue, I find it convenient to follow the approach adopted by the ECJ in Lechouritou and deal with that issue first.

Mr Kennelly’s point is disarmingly simple: he says that a claim in libel is a private law claim to be distinguished from a claim for judicial review. As he puts it in his skeleton argument:

“The claim is overwhelmingly private in nature, being a defamation action.”

He cites and adopts paragraph 2.24 in Briggs and Rees’ Civil Jurisdiction and Judgments (4^th Ed, 2005). It is clear that the phrase “civil and commercial matters” bears an autonomous meaning rather than one drawn from national law. Having reviewed a number of ECJ decisions, the authors say this at page 49:

“The broad principle of the distinction is therefore this. First, if the claim is one based on ordinary civil law, it will be a civil or commercial one, even if it is brought by a public law entity. It will retain this character even if the only claimant which could bring the proceedings is a public law entity, for it is the character of the right relied on, rather than the nature of the claimant doing the relying, which determines the impact of Article 1. But secondly, if the claim is one which appears to be vested in only a public body, which is bringing a claim which no other claimant could have brought, attention then turns to the obligations imposed on or owed by the defendant. If these are obligations owed by him as a matter of ordinary civil or commercial law the claim likewise falls within Article 1, no matter how or by whom they come to be enforced. Thirdly, only if the position of the defendant is one in which he is placed as a matter of public law, and the claim is made against him by an entity exercising rights which only it has, will the claim not be a civil or commercial one. In other words, there is a dual test which requires the non-civil or non-commercial law character of the claim to be established by reference to claimant and defendant. To the extent that the case law provides any more detailed guidance, the Court of Justice indicated in Eurocontrol v Rüffer, that recourse could be had to the general principles of Member States’ legal systems to see how similar claims are there categorised; but in practice such guidance may be of extremely limited help. More helpful will be to ask the question: is the action brought by or against a public law body acting as such, or by or against it instead acting as any other private individual? If the claim is one brought by or against a private law person, performing duties which in other states are performed by organs of government, the claim should nevertheless be seen to be based in private law and to fall within the scope of the Judgments Regulation.”

I find this to be a valuable analysis, in particular the statement that it is more helpful to ask whether the claim is brought by or against a public law body acting as such or by or against it instead acting as any other private individual. Case C-172/91 Sonntag v Waidmann [1993] ECR 1-1963 concerned a claim by the parents and brother of a pupil who suffered a fatal accident during a school trip. One of the questions referred to the ECJ was whether an action for damages against a teacher in a state school was a “civil” matter within the meaning of the first sentence of the first paragraph of Article 1 of the Brussels Convention. At paragraph 20 of its judgment, the court said this:

“It follows from the judgments in the LTU and Rüffer cases cited above that such an action falls outside the scope of the Convention only when the author of the damage against whom it is brought must be regarded as a public authority which acted in the exercise of public powers.”

The court then proceeded to consider whether a teacher in a school is exercising public powers and decided that a teacher is not. The substantive duties on a teacher were, so far as concerned the standards of care in relation to the pupils, identical to those owed by all individuals, state employees or not, to those in their care. It followed that the action was a civil matter within the meaning of the Convention.

Lechouritou is an example on the other side of the line. Once again the court addressed the question of whether the public authority was acting in the exercise of its public powers (see paragraph 31 of the judgment). The court resolved this question in the following way:

“37.

As [the advocate general] has observed in points 54 to 56 of his opinion, there is no doubt that operations conducted by armed forces are one of the characteristic emanations of state sovereignty, in particular inasmuch as they are decided upon in a unilateral and binding manner by the competent public authorities and appear as inextricably linked to states’ foreign and defence policy.

38.

It follows that acts such as those which are at the origin of the loss and damage pleaded by the plaintiffs in the main proceedings and, therefore, the action for damages brought by them before the Greek courts must be regarded as resulting from the exercise of public powers on the part of the state concerned on the date when those acts were perpetrated.

39.

Having regard to the case law recalled in paragraph 30 of this judgment, a legal action such as that brought before the referring court therefore does not fall within the scope ratione materiae of the Brussels Convention as defined in the first sentence of the first paragraph of Article 1 thereof.”

In the present case the judge disposed of the issue in the following way:

“59.

Mr Kennelly’s first point (that a defamation action is overwhelmingly private in nature) is at first sight attractive. However, I am addressing this point only on the hypothesis that I was wrong to hold that state immunity was unavailable in a case where service has been affected pursuant to the Judgments Regulation Article 5(3). I remind myself that I must interpret the concept of a civil matter by reference, first, to the objectives of the Regulation and, secondly, to the general principles which stem from the national legal systems as a whole.

“60.

The objectives of the Regulation, as set out in the Recitals, give no support to the view that it was intended to enable claimants to implead natural or legal persons in proceedings relating to anything done by them in the exercise of the sovereign authority of a foreign state. And the general principles of law include the principle of state immunity in public international law. In the light of those considerations, and the guidance in paragraph 20 of Sonntag, I have no hesitation in holding that this action, brought on this Intended Decision Letter (which was written against the public law background set out above) is not a civil matter within the meaning of the Regulation.”

In my judgment the judge clearly reached the right conclusion on his point. The Bank and its employees, the second and third defendants, were undoubtedly exercising public law powers. They were performing the role of an administrative authority carrying out governmental supervisory functions which had been delegated to the Bank by the Dutch Government to protect the integrity of the financial system in the Netherlands (see the statement of Professor Doctor Schilder, quoted by the judge at paragraph 14 of his judgment).

These functions included dealing with the applications for registration that were made by Carigna. The letter on 16 July 2004 was sent in performance of those functions. If there had been a challenge to the lawfulness of the letter under English domestic law, it would have been by way of judicial review and not in a private law claim; that is because the sending of a letter was a public law function. The fact that incidentally the letter contained libellous material did not deprive it of its essentially public law character. For these reasons, I would uphold the judge’s decision on the civil and commercial matter issue.

At the close of Mr Kennelly’s submissions we informed the parties that this was the conclusion that we had reached on this issue. We asked the parties whether in these circumstances they wished us also to decide the immunity issue. Neither party wished us to do. I therefore propose to say nothing about that issue.

I would therefore dismiss this appeal.

I agree.

I agree that this appeal should be dismissed for the reasons which my Lord, Lord Justice Dyson, has just given. Article 1 of the Judgments Regulation applies the regulation to “civil and commercial matters”. The appellant’s simple but only point within the permission to appeal granted by this court is that a claim for libel is a “civil matter”. This supposes that the question only has to address the nature of the claim which the claimant brings irrespective of the nature of the defendant, and the function which it was undertaking and from which the claimant’s claim derived. Lord Justice Dyson has referred to the judgment of the European Court of Justice in Sonntag and in Lechouritou and the matter to my mind is shortly and decisively, for present purposes, put in those judgments and in summary in paragraph 31 of Lechouritou where the court said:

“Thus, the Court has held that, although certain actions between a public authority and a person governed by private law may come within the scope of the Brussels Convention, it is otherwise where the public authority is acting in the exercise of its public powers. [Reference is then made to various authorities].”

In my judgment, in agreement with Lord Justice Dyson, Tugendhat J came to the right decision as to the exercise by the defendants in this case of their public powers and came to the right conclusion as to the non-application in the case of the Judgments Regulation.

For these very short reasons I, too, would dismiss this appeal.

Order: Appeal dismissed.