Marzillier, Dr Meier & Dr Guntner Rechtsanwaltsgesellschaft mbH v AMT Futures Ltd

AMT Futures Ltd (“AMTF”) is a company incorporated in the UK, which acted as an execution only broker for the purchase and sale of derivative instruments. Marzillier, Dr Meier & Dr Guntner Rechtsanwaltsgesellschaft mbH (“MMGR”) is a firm of German lawyers.

AMTF obtained instructions from introducing brokers. They introduced clients to AMTF who wanted to trade in derivatives and AMTF did so on their behalf. In some cases, the clients suffered losses on their trades. Some 70 of AMTF’s former clients (“the former clients”) issued proceedings in Germany against AMTF in which they claimed damages in respect of their losses. AMTF challenged the jurisdiction of the German court. In the event many of them have recovered damages by way of settlement.

The agreements made between the former clients and AMTF contained provisions whereby (a) the dealings between them and AMTF were to be governed by English law; and (b) the English courts were to have exclusive jurisdiction in respect of any disputes. AMTF has relied on these provisions, and other matters, in challenging the jurisdiction of the German court.

AMTF’s case is that MMGR induced the former clients to issue proceedings in Germany and to advance causes of action under German law, and thereby to breach the terms of the applicable exclusive jurisdiction and choice of law clauses. AMTF claims damages against MMGR for their having done so, its claim being a claim in tort for inducement of breach of contract.

The question is whether or not the English Courts have jurisdiction to entertain this action under Council Regulation No 44/2001 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (“the Regulation”). Popplewell J decided that they did. MMGR says that he was wrong to do so.

Three of the 70 cases were brought in Hamburg. The remainder were brought in Duisburg or, on appeal therefrom, in Düsseldorf. The reason why the court in Duisburg was chosen is said by AMTF to have been because it had a particularly “investor friendly” approach. The claims, which were in delict or quasi delict, followed a standard model marketed by MMGR. The judge summarised them thus [7]:

The 70 different cases have had different outcomes. The position at the time of the hearing before us was said to be as follows. 51 of the 70 cases had been settled, often for considerably less than the amount claimed. Of those 51, 30 were settled before any judgment had been given. 21 were settled after a judgment was given in relation to jurisdiction. Some of the settlements were approved by the court. 4 cases have been determined by a final judgment - 2 in favour of AMTF and 2 against. In the 15 cases which have not finally been settled, 4 are pending in the lower court. In 11 cases the lower court has made a decision and an appeal is pending. In 5 of those 11 cases AMTF was the winner in the lower court.

The damages sought by AMTF in the action include claims for (a) monies paid in settlement; (b) legal costs incurred in Germany and in England; (c) loss of management time; and (d) loss of profit in respect of future contracts. AMTF also seeks injunctive relief restraining MMGR from any further inducement.

The contractual documentation between the former clients and AMTF consisted of a “Customer” or “Terms of Business” letter and a Client (or Customer) Agreement with terms of business. There were 5 different agreements used by AMTF over time.

The earliest relevant client agreements were on the SFA Terms (1991)which provide that:

The SFA Terms (1991) incorporated the terms of the Netting Agreement annexed to those terms, which provides at clause 12 as follows:

As the judge recorded, over time the terms of the law and jurisdiction clauses came to be drawn more widely still. It is plainly seriously arguable that the German proceedings commenced by the 70 former clients were commenced in breach of the exclusive English jurisdiction clause and that, as a matter of contract the entirety of the legal relationship between the client and AMTF in relation to the client’s account was agreed to be subject to English law. That raises questions as to the scope of Article 14 of the Rome II Regulation, with which we are not presently concerned. The terms of the letter contained an acknowledgment signed by the client that he understood that AMTF was only providing a dealing service and was not providing advice. The standard terms themselves contained provisions to the like effect. The letters included a confirmation that the introducing broker acted as his advisers and would be receiving a commission from AMTF per transaction.

The purpose of these arrangements, so far as AMTF was concerned, was as follows. AMTF was unwilling to assume the costs and risks, including regulatory risks, of advising on investments. The terms and conditions and letters were drafted so as (i) to make clear to clients the limited scope of the services to be provided; (ii) to comply with the UK regulatory regime to which AMTF is subject, and align the law of the contract with that of the regulatory regime; and (iii) to protect AMTF against the risk of becoming subject to proceedings outside England in courts which might not apply English law and would certainly be less familiar with it. It was only on those terms that AMTF was prepared to trade. The first set of contractual documentation was prepared on the basis of legal advice received by AMTF and the later sets of terms were prepared by English lawyers acting on behalf of a trade association of brokers, including AMTF, who were regulated by the SFA or the FSA.

Article 2 of the Regulation provides:

Article 5 provides:

Accordingly whether or not MMGR can be sued in England depends on whether the place where “the harmful event occurred” was in this country. There are at least five major cases in which the ECJ has had to consider a situation in which the act giving rise to loss or damage has arisen in one country and the loss or damage in another (or more than one other) country.

In Handelskwekerj GJ Bier NV v SA Mines de Potasse d’Alsace (Case 4320/74) [1978] QB 708 the delictual claim was for damage caused to the plaintiff’s nursery garden in Holland. The garden was watered from the Rhine and its seed beds were damaged by saline waste flowing down the river from the defendant’s mine in France. The Court made clear [11] that the freedom of choice provided by the exceptions to Article 2 in Article 5 was:

In that case the tort was not complete until the effluent had found its way to the plaintiff's land; there was no place other than Holland where the damage could be said to have occurred; and the damage to crops was (as the ECJ pointed out in Dumez [12] – see below) the direct effect of the release of the saline waste.

In Dumez France and Tracoba v Hessiche Landesbank (Helaba) (Case C-220/88) [1990] ECR I-49 two French companies sought compensation for the damage which they claimed to have suffered owing to the insolvency of their German subsidiaries, which was said to have been brought about by the suspension of a property development project for a German prime contractor allegedly on account of the cancellation by the German banks of loans granted to the prime contractor.

The ECJ held [13] that the cancellation by the German banks of the loans “originated and produced its direct consequences in the same Member state” namely Germany in which the banks, the prime contractor and the subsidiaries were all established. The plaintiffs were only indirect victims. The court held that the concept of the “place where the damage occurred”indicated the:

In Marinari v Lloyd’s Bank Plc[1996] QB 217 Mr Marinari complained that the bank’s staff had refused to return some dubious promissory notes which he had lodged in an envelope with the bank in Manchester and had reported him to the police as a result of which he was arrested. He brought proceedings in Italy. The ECJ held that:

The case illustrates the focus by the court on the place of initial damage rather than damage consequential on that initial damage. As the Advocate General put it [39] in Kronhofer (see [25] below), Marinari:

In Réunion Européene SA v Spliethoff’s Bevrachtingskantoor B.V.[2000] QB 690 a consignment of peaches was carried by sea from Australia to Rotterdam and then by road to a town in France. On arrival the peaches were found to be overripe because of a breakdown of the cooling system on the voyage. Proceedings were brought in France against (i) the Australian issuer of the bill of lading, (ii) the actual carrier, whose registered office was in Amsterdam and (iii) the Master, who resided in Amsterdam.

In his opinion the Advocate General stressed [48] the need to define the relevant damage which he regarded as:

The Court held that the place where the harmful event occurred, for the purpose of a tortious claim against the actual carrier was to be regarded as the place where the actual maritime carrier was to deliver the goods i.e. Rotterdam. It observed:

In Rudolf Kronhofer v Marianne Maier and OrsCase C-168/02 an Austrian investor sought to recover damages in an Austrian court for financial loss said to have been suffered as result of the wrongful conduct of four investment consultants of a German company, who persuaded him on the telephone to enter into a call option in relation to shares. As a result he transferred $ 82,500 to an investment account of the company in Germany. This was used to subscribe for highly speculative call options on the London Stock Exchange, a transaction which resulted in a loss of part of the sum transferred.

The Advocate General agreed that “financial damage which has simultaneous and co-extensive consequences in a Contracting state other than that in which it arises and is suffered by the victim” did not fall with Article 5 (3).

In that case the claimant had claimed that Austria was the place where the harmful event occurred because it was there that his assets were concentrated. The Austrian court had regarded Germany as the place where the damage occurred as well as the event giving rise to it.

The Court held that the special jurisdiction rules, which provided exceptions to the fundamental principle in Article 2, were to be restrictively interpreted [14]. The fact that the damage allegedly suffered by the claimant in Germany was said to have affected the whole of his assets simultaneously did not justify conferring jurisdiction on the courts of a Contracting State “other than that on whose territory the event which resulted in the damage occurred and the damage was sustained, that is to say all of the elements which give rise to liability” [17-18]:

Certain key features appear from these authorities. First, the Regulation is to be given a community, not a national, construction.

Second, the ECJ has, for obvious reasons, resolutely set itself against any interpretation of the Regulation which would mean that a claimant would, in practice, always be able to sue in tort in the courts of its own domicile and thus determine the competent court by his choice of domicile. In one sense a corporation may be said to suffer a loss wherever it keeps its accounts, for that is where its loss is ultimately felt. Where claimant and defendant are domiciled in two different States, the adoption of such an approach would lead to a result the exact opposite of that provided for by the basic rule in Article 2 which is that a defendant is to be sued in the courts of his domicile, not that of the claimant.

Third, where harm might be regarded as happening in two different States the search is not for one or more States in which damage has been suffered but, if possible, for the State in which “the harm” has occurred, sometimes referred to as the jurisdictionally significant harm. As Popplewell J put it at [34] (5) (b):

Fourth, the Article 5 exception is designed to cover cases where there is a particularly close connecting factor between the dispute and courts other than those of the State of the defendant’s domicile, which “justifies the attribution of jurisdiction to those courts for reasons relating to the sound administration of justice and the efficacious conduct of the proceedings”: see Bier [11]; Dumez [17]; Shevill [19]; Marinari [10] and Kronhofer[15]. That is the reason for the exception. It does not mean that the application of Article 5 involves any form of forum conveniens test.

Fifth, one of the aims of the Convention is that there should be foreseeability and certainty as to the State where jurisdiction may lie: Reunion [36]; Kronhofer [20].

None of these cases concerned a situation in which what was complained of was that a tortfeasor had been induced not to do something. Such a situation arose in Dolphin Maritime & Aviation Services Ltd v Sveriges Angfartygs Assurans Forening (The Swedish Club) [2009] EWHC 716[2009] 1 CLC 460. In that case the defendant P & I Club was alleged to have procured a breach of Dolphin’s agreement with cargo underwriters, for whom Dolphin was acting, that any payment by the Club would be made in London. The court held that the place where the damage occurred or where the event giving rise to the damage caused injury was England where Dolphin did not receive the money which, if the contract had been performed, it should have received.

In the course of my judgment I said this:

Both parties accept that Dolphin was correctly decided. The judge regarded it as supporting his conclusion. Mr Thomas de la Mare QC for AMTF submits that he was entirely right to do so. Mr Hugh Mercer QC for MMGR submits that the decision in Dolphin was correct on its facts but that in the present case the facts require the opposite conclusion.

The reasoning of the judge was, in essence, as follows. In cases where the tort or delict involves the claimant being deprived of a contractual benefit the damage is likely to have occurred at the place at which the claimant would have received that benefit [35]. This principle is applicable to an exclusive jurisdiction clause where the harmful event is said to be a breach of the rights and obligations conferred thereby. Such a clause involves a positive obligation to submit disputes falling within its scope to the courts of the chosen jurisdiction; and, also, contains a negative obligation not to bring claims falling within its scope before any other court or tribunal elsewhere. These two aspects are not quite the opposite sides of the same coin since the negative obligation may be broken without reference to the positive obligation: AES Ust-Kamenogorsk Hydropower Plant LLP v Ust-Kamenogorsk Hydropower Plant JSC [2013] 1 WLR 1889 per Lord Mance at [21].

The judge rejected the argument that the breach induced was the breach of an obligation not to do something in Germany. He regarded the relevant obligation as the positive obligation to bring proceedings in England not merely the negative obligation not to bring proceedings in Germany. The jurisdiction clause required the former client to sue AMT, if at all, in England. Once the client had decided to bring proceedings somewhere the obligation was to seek determination in the English court. That was the relevant obligation whose breach was induced by MMGR. He held that Dolphin could not be distinguished on the basis that there was in the present case no breach of a positive obligation to do something in England. Nor did it matter that in all probability no claim would ever have been commenced in England because it would have been regarded as bound to fail. That, in his view, reinforced the conclusion that the damage was suffered in England; if the tort had not been committed any proceedings would have been brought in England where they would have been struck out.

The judge went on to hold that, where, as here, the forum chosen comprises the national courts of the system of law which the parties have chosen, one of the main functions of the choice of forum is the selection of a tribunal which is familiar with the law in question and so best placed to determine and apply it to any dispute which has arisen so as to uphold the parties’ rights. A primary function of the jurisdiction clause is to secure that protection [43]. In this way the benefit of an exclusive English jurisdiction clause in an English law contract goes to the heart of the substantive rights and obligations which arise out of the contractual relationship. In this case the contractual benefit to AMTF of the exclusive English jurisdiction clause comprised the right to be sued, if it was to be sued anywhere, in England, where AMTF was entitled to have resolved any disputes falling within the scope of the clause. The right of recourse to the English courts was there in order to protect and enforce AMTF’s substantive rights, and the harm which it had suffered was the loss of the protection and enforcement of those rights in the English Court. It was the deprivation of that benefit that was the harm suffered in England where the benefit ought to have been enjoyed.

AMTF advanced before the judge an alternative and secondary submission, which was that it had suffered damage in England because it was from England that it had had to pay the costs of defending the claims and the expense of settling them.

The judge rejected this alternative submission, saying:

The argument presented by Mr de la Mare on behalf of AMTF was in essence as follows. An exclusive jurisdiction clause has a positive and a negative element. In the present case the positive element is that, if a former client seeks to litigate, he promises that it is in England alone that he will do so. The negative element is that he will not litigate anywhere else. It is important, however, not to be distracted by a consideration of whether reliance is being placed in the action on the negative or the positive. The substance of the promise that the former clients made was that any litigation would take place in England. England was, therefore, the place at which, under the clause, performance was to take place. The harm which AMTF has suffered is the loss of the benefit promised to them that any litigation would be in England. That loss was the initial – jurisdictionally significant – harm, and it was suffered in England. As Dolphin shows, a failure to do something may be the harmful event; and it will occur in the place where the promised thing should have been done but was not.

A consequence of the loss of that benefit was that AMTF was sued in Germany. That does not mean that the relevant harm was the consequential loss that followed from the loss of the benefit. That loss was not the initial harm but, as it were, the harm downstream. Such a conclusion ties in Article 5 (1) and (3). Both the contract and the ancillary claim for inducement of its breach are governed by the same law.

MMGR makes two submissions. Firstly it says – rightly – that in English law – an inducement of breach of contract is not actionable without proof of special damage. Special damage was suffered when AMTF started incurring costs in relation to the actions in Germany. Accordingly the tort did not become complete until then and, when it did, that was in Germany, which must, therefore be taken to be the place where “the harm” occurred. It relies, in this respect on the reference in Kronhofer to the territory on which the entirety of the damage, that is to say all of the elements which gave rise to liability, was sustained.

I am not convinced by this. In principle the Regulation is not to be interpreted by reference to particular requirements of national law. In Marinari the German Government submitted that in interpreting Article 5 (3) the Court should take account of the applicable national law on non-contractual civil liability. The ECJ held [17] that the Convention did not intend to link the rules on territorial jurisdiction with national provisions concerning the conditions under which non-contractual civil liability is incurred. Further, all that was being said in Kronhofer was that, on the facts of that case all the elements of the tort occurred in the same place.

The second submission is that the reality of the claim is not that MMGR did not procure the commencement of litigation in England. The fact that no litigation was begun in England had no deleterious consequences for AMTF. The real complaint is that MMGR procured the former clients to start proceedings in Germany in consequence of which, as the judge rightly found, AMTF suffered loss predominantly in Germany.

Mr Mercer reserved MMGR’s position on whether Article 5 (3) permits account to be taken of purely economic damage. On the current state of ECJ authority it plainly does. Moreover the former clients’ invocation of jurisdiction must have assumed that it did.

The judge’s analysis is a powerful and attractive one. I have, however, come to the conclusion, for the following reasons, that the submissions of MMGR are to be preferred.

There is a material distinction between the facts in Dolphin and the facts of the present case. In Dolphin the failure to pay in England, which the defendants were said to have induced, was the sole, direct and immediate cause of the loss which the claimant had suffered, namely the non receipt of the money. In the present case the failure to start proceedings in England against AMTF did not of itself cause AMTF any loss at all. What did cause the loss was the proceedings which were started in Germany

I do not regard the resolution of this case as turning on the question whether the relevant obligation was an obligation to litigate in England or an obligation not to litigate in Germany, especially when “the negative aspect is as fundamental as the positive”: AES Ust-Kamenogorsk at 1897 D per Lord Mance JSC. Nor, as it seems to me, does it turn on whether the essential benefit of the promise was that, if performed, it would ensure that rights under an English law contract were determined in England. The key question is where in reality AMTF suffered the damage which forms the basis of its tortious claim. To that question the answer is, in my judgment, Germany – for the reasons given by the judge when rejecting AMTF’s alternative submission. The damage which AMTF has suffered (in Germany) is the cost and expense caused by the litigation.

To describe the harm as the loss of the benefit of being sued only in Englandshows, as is the case, that a failure to sue in England would cause no loss, and suing in England would confer no benefit, unless it meant that AMTF was not sued in Germany. The benefit of not being sued in Germany would have been that AMTF would not suffer, as in the event it did, the effect of being sued there which was that it had to settle and pay out large sums in that country. Put another way, if one asks where did AMTF lose the benefit of only being sued in England it was in Germany where it was sued and where it had to pay.

If one looks at the matter more broadly and asks: what was the harm which, in this case, occurred in England, it seems to me impossible to say that it was the failure to issue proceedings here; and, if the harm was that proceedings were issued in Germany, then it was in Germany that the harm was suffered. Per contra in Dolphin the harmful event could properly be regarded as the non-payment (in England) of the amount due (in England) which caused (in England) the harm in question namely the non-receipt of that amount.

Such a conclusion is consistent with the authorities of the ECJ. If I ask myself (i) what is “the place where the event giving rise to the damage … directly produced its harmful effects upon”AMTF (Dumez)”; or (ii) where was the “actual damage” which “elsewhere can be felt” or the “initial damage” suffered (Marinari); or (iii) what was the place where the damage which can be attributed to the harmful event (commencement of proceedings) by “a direct and causal link” (Réunion) was sustained, the answer is, in my judgment, Germany.

Lastly it does not seem to me that any analogy helpful to AMTF can be drawn between this case and one where an initial and/or direct damage is suffered, which founds jurisdiction, whereas a more remote damage is insufficient for that purpose. I find it impossible to view the deprivation of the benefit of being sued in England as the initial damage or harm, with the loss in Germany being either subsequent or remoter damage. Further, if the question is where the damage occurred, as opposed to where it was felt, the answer seems to me that it was in Germany.

Insofar as it is relevant to consider whether England or Germany is the place where the parties could expect any action to take place or the place whose jurisdiction was justified for “reasons relating to the sound administration of justice and the efficacious conduct of the proceedings”, there is something to be said for both England and Germany. If MMGR procured a breach of an English law contract with an exclusive jurisdiction clause they could certainly anticipate the possibility of being sued in England. But given that they are domiciled in Germany and that the bulk of the loss was suffered there, they could reasonably have anticipated that, under the terms of the Convention, the place where they should be sued in tort was Germany. Insofar as the efficacious conduct of the proceedings is concerned, England would have the advantage that an important question on liability is whether there was a breach of an English law contract, which MMGR induced. At the same time since Germany is the place where the losses were incurred there would be advantages in proceedings being conducted there. In any event the exercise with which the court is concerned is not the selection of a forum conveniens.

I would accordingly, allow the appeal. I do not reach this conclusion with any great enthusiasm since there is much to be said for the determination of what is in essence an ancillary claim in tort for inducement of breach of contract to be made in the court which the contract breaker agreed should have exclusive jurisdiction in respect of that contract, rather than in the courts of the country where the inducement and breach occurred. But the governing law of the relationship between the former clients and AMTF (which did not have to be that of England & Wales) is not a determining factor in the allocation of jurisdiction under the Regulation.

Mr Mercer submitted that, if, contrary to his submissions, the relevant damage occurred in England that could only be on the basis that the loss of the contractual benefit on which AMTF relied was a separate “harmful event”, for the purposes of Article 5 (3), from that which had occurred in Germany with the result that there was in effect a separate cause of action in that respect. In those circumstances the only losses which could be recovered in the English Court would be those which occurred in England to the exclusion of all those which occurred in Germany. That would only leave for determination in England the claim for an injunction. He relied by analogy on the case of Shevill v Oress Alliance SA[1995] 2 AC 18 where the victim of a libel distributed in several contracting states could only rely on Article 5 (3) to recover damages before the Contracting State in which the publication was distributed and solely in respect of harm caused in that State.

MMGR also obtained permission to advance, and did advance, an additional ground of appeal, which was not argued before the judge. Mr Mercer submitted that the High Court could not exercise any jurisdiction over MMGR in relation to the subject matter of the action because any such claim necessarily and unavoidably offended against Community Law principles. Insofar as an injunction was claimed it would, it was said, involve the Court in being asked to grant an order which amounted to an order restraining a party from commencing proceedings before a properly constituted court of a Member State. Insofar as damages were sought it involved the Court being asked to determine issues which breached the principle of effective protection of EU law rights and of sincere cooperation under EU law, and constituted a collateral attack on the assumption of jurisdiction by the German courts, and of judgments or court settlements obtained by investors in Germany, when under the Regulation any such attack was permitted only in the court where the proceedings had been commenced.

If my brethren agree that the appeal should be allowed for the reasons that I have given, it is not necessary to reach any decision on either of these points and I do not propose to do so.

I wish, however, to observe that the additional ground of appeal does not seem to me to be well founded. The injunction sought does not seek to preclude anyone from commencing proceedings in Germany but to preclude MMGR from inducing former clients to do so. The claim for damages does not appear to me to be a collateral attack on the assumption of jurisdiction by the German courts, which is entirely a matter for them. It is a claim for damages in respect of loss resulting from inducement of the breach of an English law contract. This involves consideration of AMTF’s private law rights in contract or tort.

MMGR’s contentions are also inconsistent with the decisions reached in the litigation between the owners and insurers of the “Alexandros T”. In Starlight Shipping Co v Allianz Marine & Aviation Versicherungs AG[2014] EWCA Civ 1010 [15] – [22] this court held that, leaving aside an antisuit injunction, EU law was no obstacle to enforcing causes of action in respect of breaches of an exclusive jurisdiction clause by an award of damages and other relief. The court upheld Burton J’s decision to award declarations, damages and indemnities in respect of the owners’ wrongful commencement of Greek proceedings. Flaux J subsequently held [2014] EWHC 3068 (Comm); [2014] 2 Lloyd’s Rep 579 that while Turner v Grovit[2005] 1 AC 101 precluded an injunction in restraint of Greek proceedings it did not preclude the making of an award of damages in lieu.

Further, as I understood him, Mr de la Mare indicated that his client did not intend to include in its claim a claim in relation to any former client who had been the beneficiary of a final judgment on the merits.

In addition, it does not seem to me that MMGR, which was not a party to any of the German proceedings, is entitled to the benefit of any form of estoppel so as to preclude AMTF from contending that there has been an inducement of a breach of the exclusive jurisdiction clause.

Lastly, the additional ground of appeal was advanced as a matter of law when, if potentially valid, it must depend on what the German courts have (or have not) decided and their reasoning, and on the precise terms and circumstances of the settlements, as to which we have scant and wholly inadequate evidence.

I agree, but like my Lord I view with little enthusiasm the result to which we are compelled.

I agree.