Deutsche Bank AG London Branch v Petromena ASA

This is an appeal by the first defendant, Petromena ASA (“Petromena”) against the order of Gloster LJ (as she now is) refusing a declaration that the English Court has no jurisdiction over the claim. In this action the claimant, Deutsche Bank AG (“DB”), seeks declarations of non-liability in respect of claims which Petromena has brought against DB in Norway. Petromena says the English court has no jurisdiction to entertain DB’s claim for a negative declaration.

DB contends by its respondent’s notice that, whatever the position in relation to Petromena’s grounds of appeal, the court now has jurisdiction as a result of events which occurred subsequent to the hearing before Gloster J. The critical event is that on 30 October 2013 Petromena filed a second acknowledgment of service. DB submits that, under CPR Part 11(8), the filing of this second acknowledgment of service amounts to a submission to the jurisdiction of the English court. It is logical to consider this point first of all, because if DB is right and Petromena has submitted to the jurisdiction, it is common ground that Petromena’s grounds of appeal will be moot.

I start by setting out the chronology relevant to this point.

On 10 October 2012 Petromena filed a first acknowledgment of service on form N9, having ticked the box against the words “The Defendant intends to contest jurisdiction”. This is one of four options available on the form, the other three allowing the defendant to indicate an intention to admit the claim, to defend all of the claim or to defend part of the claim. None of these were ticked.

On 7 November 2012 Petromena applied to the English court for an order declaring that it did not have jurisdiction. Gloster J (as she then was) heard the application on 4 March 2013. The judge reserved her judgment. On 3 September 2013 Gloster LJ (as she had by then become) circulated a copy of her draft judgment on Petromena’s jurisdiction challenge to the parties’ representatives, in accordance with the usual practice. The parties filed and exchanged written skeletons as to the appropriate form of order. In its written submissions Petromena asked for permission to appeal. Permission was opposed by DB. DB’s draft order included a provision stating that “[Petromena] may file a further acknowledgment of service within 14 days”. Petromena’s representatives made no comment on this provision.

Judgment was formally handed down on 14 October. There was no formal representation in court at the handing down. Gloster LJ refused permission to appeal, and made an order including the provision permitting (but not requiring) Petromena to file a further acknowledgment of service within 14 days, as permitted by CPR Part 11(7)(b).

On the same day, 14 October 2013, Petromena filed an appeal to the Supreme Court of Norway. The appeal raised two issues: (i) whether the Norwegian (rather than the English) court was the court first seised of the matter and (ii) whether the causes of action in England and Norway were the same or related.

The sealed order disposing of the jurisdiction challenge was received by DB’s solicitors on 28 October 2013. On 29 October 2013 DB’s solicitors wrote to Petromena’s solicitors in the following terms:

It appears that Petromena’s solicitors had not yet received a copy of the sealed order because, by email on the evening of 29 October, they requested such a copy from DB’s solicitors. DB complied with that request within an hour. The following morning, 30 October, Petromena’s solicitors emailed that an acknowledgment of service was being filed with the court that morning.

On 30 October Petromena filed its second acknowledgment of service. A copy was provided to DB’s solicitors. On the acknowledgment of service form only the box saying that Petrmomena intended to defend the whole of the claim was ticked.

On 31 October 2013 Petromena’s solicitors wrote to inform DB of Petromena’s intention to apply to this court for permission to appeal the order of Gloster LJ. The letter continued:

DB’s response on 1 November 2013, through its solicitors, was that there was no basis for any stay of the English proceedings. As to the English proceedings, in accordance with CPR 11(8) Petromena had submitted to the jurisdiction of the English court when it filed its second acknowledgment two days previously. An appeal would therefore be pointless. They added that they were not clear as to the basis on which the Norwegian appeal provided support for a stay of the English proceedings.

On 4 November 2013 Petromena filed an appellant’s notice with this court seeking permission to appeal. By a letter of the same date its solicitors rejected the assertion that, by filing its second acknowledgment of service, Petromena had “somehow submitted to the jurisdiction in England”. They expressed the view that the steps taken by Petromena were consistent with its position that the English court has no jurisdiction to hear the dispute.

In due course Petromena obtained permission to appeal to this Court. DB applied to set aside that permission under CPR 52.9 on the grounds that the appeal was moot given Petromena’s submission to the jurisdiction. Tomlinson LJ, hearing the application as a single Lord Justice, considered that the point was better considered by the full court hearing the rest of the appeal.

I should first set out the provisions of Article 24 of the Lugano Convention and CPR Part 11.

CPR Part 11 provides:

Both parties relied on ECJ jurisprudence for the purposes of interpreting Article 24 of the Lugano Convention. Most of the jurisprudence to which we were referred is concerned with the scope of the exception in the second sentence of Article 24 and in particular what is meant by an “appearance … entered to contest the jurisdiction.” Previous English language versions of Article 24 limited the exception to appearances entered “solely” to contest the jurisdiction, whilst other versions (e.g. the French “si la comparution a pour l’objet de contester la compétence”) arguably had no equivalent restriction. This gave rise to problems in countries where the procedural law required the defendant to advance a case on the merits at the same time as any challenge to the jurisdiction. Where a substantive defence was served in parallel with a challenge to the jurisdiction, would the entering of an appearance be solely for the purposes of challenging jurisdiction?

In Case C-150/80Elefanten Schuh GmbH v Pierre Jacqmain [1982] 3 CMLR 1, the defendants had raised their objection to jurisdiction some nine months after filing their defence on the merits. The national court asked the ECJ whether the exception in Article 24 applied if the defendant had not only challenged jurisdiction but also made submissions in the action itself. The ECJ held at [17] that the equivalent provision of the 1968 Brussels Convention:

More recently, in Case C-1/13Cartier Parfums-Lunettes v Ziegler France SA [2014] I.L. Pr. 25, the ECJ was concerned with the date at which, under Article 27 of the Convention, the jurisdiction of a court first seised could be regarded as “established”. In reviewing the overall scheme of the Convention, the Court relied on its previous interpretation of Article 24 in Elefanten Schuh, in holding that:

We were not referred to any authority which lays down an autonomous definition of “enters an appearance” in the first sentence of Article 24. I do not understand the ECJ to be saying in Elefanten Schuh that the making of submissions on the substance of the action defines the entry of an appearance within the first sentence of Article 24. Rather, the court is explaining that after such submissions have been made, it is too late to take advantage of the exception in the second sentence. Likewise, Cartier-Parfums, to the extent that it is concerned with Article 24 at all, is concerned with the scope of the exception in the second sentence.

Professor Briggs and Mr Rees QC, in Civil Jurisdiction and Judgments (5^th edn. 2009) (“Briggs and Rees”), while recognising that “enters an appearance” may have an autonomous meaning, go on to say at paragraph 2.83 that precisely how and when the entering of an appearance takes place is governed by rules of local procedural law, provided always that these rules do not impair the effectiveness of the Convention. That view is consistent with the general approach of the ECJ to procedural rules: see Case 365-88Kongress Agentur Hagen GmbH v Zeehaage BV [1990] ECR I-1845 cited by Simon Brown LJ in Harada Limited (trading a Chequepoint) v Turner[2003] EWCA Civ 1695 at [30]. Thus national law must not contain rules which compel a defendant to enter an appearance and thereby submit to the jurisdiction in order to protect his position on the merits. Such rules would impair the operation of the Convention.

It is therefore to national procedural rules that one must look, in the first instance, to determine whether an appearance has been entered. Once one has determined that question as a matter of national procedural law, it is necessary to ask whether the result is consistent with the effective operation of the Convention.

Two cases are of particular importance in relation to the interpretation of CPR Part 11, and its predecessor in Order 8 of the Rules of the Supreme Court. They are the combined cases of Sage v Double A Hydraulics and Chambers v Morgan Starkings (unreported Court of Appeal 28 March 1992 (“Sage/Chambers”)), and Hoddinott v Persimmon Homes (Wessex) [2008] 1 WLR 806 (“Hoddinott”).

Sage/Chambers was concerned with the former RSC Order 12 rule 8, but the parties were agreed that the mechanism for challenging the jurisdiction of the court did not differ in substance from CPR Part 11.

Mr Sage claimed against his employer for injuries he sustained in the course of his employment. The writ was not served until after the period for its service had expired. The defendants applied, in time, to set aside service but, due to an oversight, failed to attend the hearing of their summons, which was in consequence dismissed. In the meantime the statement of claim had been served, and during the period when there was no pending application to set aside the writ, the defendants issued a summons seeking an extension of time for the defence. The defendants subsequently applied to reinstate the application to set aside the writ.

Mr Chambers’ writ for damages for injuries sustained in a motor accident was also served out of time. The defendant applied, also in time, to set the writ aside and the plaintiff applied to extend the time for service of the writ. The district judge dismissed the defendant’s application and extended time for service of the writ. The defendant thereupon served a further acknowledgment of service and on the same day issued a notice of appeal against the judge’s order. She also filed a defence. On the appeal, the defendant was permitted to withdraw the second acknowledgment of service and her appeal was heard on the merits.

Farquharson LJ delivered the judgment of the court, which also included Lord Donaldson MR and Stocker LJ. In a passage dealing with the law applicable to both appeals, he said this:

Applying this disinterested bystander test to the facts of Sage, the court regarded the issue of a summons seeking an extension of time, in the period when there was no extant challenge to the jurisdiction, as an act inconsistent with the maintenance of such a challenge. The challenge to the validity of the writ therefore failed. By contrast, in Chambers, the court considered that, when the second acknowledgment of service was returned, the disinterested bystander with knowledge of the facts would have been in no doubt that a challenge to jurisdiction had been mounted and was being vigorously maintained. There was thus no waiver of the defendant’s rights.

In Hoddinott the claimant applied without notice to the defendant and shortly before the expiry of the four month period for service of a claim form for an extension of time for its service. A two month extension was granted, whereupon the defendant applied to set aside the extension of time on the ground that no good reason had been advanced for the extension. The defendant subsequently filed the acknowledgment of service but did not make an application under rule 11(1) challenging the jurisdiction of the court.

Dyson LJ (giving the judgment of the Court of Appeal, which also included Sir Anthony Clarke MR and Jacob LJ) held that the meaning of CPR Part 11 paragraphs (1) to (5) was clear. In particular, if a defendant filed an acknowledgment of service and failed to make an application under paragraph 11(1) within the specified period he was, as the rule states, “to be treated as having accepted that the court has jurisdiction to try the claim”. This was so despite the existence of the defendant’s application to set aside the order granting the extension of time, which no doubt carried with it the implication that the defendant did not accept that the court had jurisdiction. The court held that that application was, by virtue of paragraph 11(5), treated as abandoned.

It does not appear that Sage/Chambers was cited to the court in Hoddinott. The application of the disinterested bystander test was therefore not considered in Hoddinott. Given the co-pending application to set aside the extension of time for service of the writ, it might be suggested that an application of that test would have led to a different result. Sage/Chambers was, however, a case under the former RSC, whereas Hoddinott was decided under the CPR. Although there was no substantive change in the mechanism provided for in the two sets of rules for challenging the jurisdiction, the CPR represented a significant change of culture in the court’s attitude to the application and interpretation of rules. It was a “new procedural code”: CPR Part 1.1(1). Whilst authorities under the RSC remain of persuasive authority on the construction of the CPR, they are not binding: Biguzzi v Rank Leisure plc[1999] 1 WLR 1926.

Quite apart from this, there is an important distinction between the cases of Sage and Chambers. Sage was a case of what one might call common law waiver, the doing of an act inconsistent with maintaining a challenge to the jurisdiction. Such a waiver must clearly convey to the claimant and the court that the defendant is unequivocally renouncing his right to challenge the jurisdiction, and the application of a bystander test is plainly apt. By contrast, Chambers was concerned with the effect, under the RSC, of a defendant returning a second acknowledgment of service. Order 12 rule 8(7) (which applied to both a first and second acknowledgment) provided that:

It does not appear to have been argued in Chambers that, in the case of this statutory form of submission to the jurisdiction, a disinterested bystander test is simply not applicable. Instead the court applied the same test to both cases.

It is true that a further distinction between Chambers and Hoddinott is that the former is concerned with a second acknowledgment of service, and the latter is concerned with a first acknowledgment of service. This led Mr Choo-Choy QC, who appeared for Petromena, to submit that we should follow Chambers in preference to Hoddinott as governing the position in relation to second acknowledgments under paragraph 11(8), leaving the Hoddinott rulein place only for first acknowledgments under the earlier paragraphs of the rule. He further submitted that it was possible to read a qualification into 11(8) as a matter of construction. The qualification was that the deeming effect of the filing of a second acknowledgment of service only occurs when no jurisdictional challenge may be mounted by way of an appeal under CPR 52.4. Such a qualification was necessary, notwithstanding the ability to request an extension of time for filing the acknowledgment of service, because otherwise the appeal against the rejection of the jurisdiction challenge becomes subject to collateral discretionary considerations. It would also, in some cases, cut down the time a defendant has to appeal.

I cannot accept these submissions. The language of CPR 11(8) is clear, and it is unlikely in the extreme that the draftsman intended the words in paragraphs (5) and (8) to have different meanings. The correct course for a defendant who has failed in a jurisdiction challenge and who wishes to appeal is to ask for an extension of time for filing the acknowledgment of service sufficient to enable his application for permission to appeal, or his appeal, to be determined. It is quite unrealistic to suppose that a sensible claimant, or if not the court, would refuse such an extension when the effect of such a refusal would be to render the appeal nugatory. It is unnecessary therefore to read qualifying words into paragraph 11(8).

In my judgment, the words “he shall be treated as having accepted that the court has jurisdiction to try the claim” in paragraphs (5) and (8) of CPR Part 11 are to be given the same construction, namely that preferred by this court in Hoddinott. The disinterested bystander test has no application to what I have called statutory submission to the jurisdiction. Thus, where the conditions of those paragraphs are met, the defendant is to be treated as having submitted to the jurisdiction. The rigour of such a construction is mitigated by the fact that it remains possible to withdraw an acknowledgment of service with the permission of the court: see CPR Part 10 PD 5.4. The effect of the withdrawal, if permitted, would no doubt be that there is no longer a submission to the jurisdiction. No such application was made at first instance in the present case, although, as I shall explain, one is informally launched in Mr Choo-Choy’s skeleton before us.

I do not see that there is any impediment in Article 24 of the Convention to construing the rules in this way. Jurisdiction is conferred under that Article where the defendant enters an appearance. One of the ways in which this occurs under English procedural law is when the defendant returns a second acknowledgment of service after an unsuccessful challenge to the jurisdiction. The defendant is not compelled to return the acknowledgment of service in order to protect his position on the merits: he may apply for a stay or an extension of time if he wishes to continue his challenge. The operation of these rules is fully consistent with, and does not impair the operation of, the Convention.

Mr Choo-Choy submitted that a second acknowledgment of service filed subject to express or implied jurisdictional protest is not an appearance for the purposes of Article 24. He relies on Harada Limited (trading as Chequepoint) v Turner[2003] EWCA Civ 1695, in which the Court of Appeal rejected the suggestion that the appellant in an employment tribunal dispute had submitted to the jurisdiction when the entire proceedings to date had been conducted subject to jurisdictional protest.

I reject that argument. What was under consideration in Harada was whether conduct in participating in proceedings under a jurisdictional protest amounted to a submission to the jurisdiction. The court rejected that suggestion on the basis of Elefanten Schuh. The only requirement was for the appellant to indicate he was challenging jurisdiction before filing a defence on the merits. There was no provision equivalent to CPR 11 in play before the court in that case. The optional filing of a second acknowledgment of service in litigation under the CPR is, by contrast, an act which deems a party to have submitted to the jurisdiction. It only does so if the defendant takes that step after he has had an opportunity of challenging the jurisdiction. I see no reason why the step of filing the acknowledgment of service should not be treated as the entry of an appearance for the purposes of Article 24.

I would add that, even if I had adopted the appellant’s construction of the CPR, I would not have been persuaded that the application of the disinterested bystander test, on the facts of the present case, would have led to a different conclusion. One factor which would, of course, heavily influence the disinterested bystander was that Petromena had filed a second acknowledgment of service at a time when it had been refused permission to appeal by Gloster LJ and not intimated any intention to continue its jurisdiction challenge by way of appeal. Against this, Mr Choo-Choy submitted that the bystander would understand from Petromena’s pursuit of the Norwegian appeals that it was still continuing to challenge the jurisdiction of the English court.

Assuming in favour of Mr Choo-Choy, without deciding the point, that it is correct to allow the disinterested bystander to raise his eyes above the horizon of the particular domestic proceedings concerned, and look to events in the foreign court, I was not persuaded that there was any inconsistency between Petromena’s conduct in Norway and abandoning the challenge in England.

The Norwegian proceedings were directed, from Petromena’s perspective, to obtaining findings in Petromena’s favour that Norway was the court first seised and that the causes of action in England and Norway were the same or related. A finding that Norway was first seised and that the causes of action were the same would have provided the ammunition for applying for a mandatory stay in England under Article 27 of the Convention; a finding that they were related would be the basis for a discretionary stay under Article 28. Those articles provide as follows:

What would the disinterested bystander make of this? Mr Choo-Choy submitted that he would conclude that Petromena’s conduct was not consistent with agreeing to the jurisdiction of the English court. He submitted that there would be no point in pursuing the Norwegian appeals whilst at the same time submitting to the jurisdiction here. Following success in Norway, Petromena’s application for a mandatory stay would be met by DB’s submission that it was no longer open to Petromena to challenge the jurisdiction even in the manner provided for by Article 27(1): see CPR 11(8). An application for a discretionary stay would also be susceptible to the argument that Petromena had already agreed to the jurisdiction of the English court.

I do not accept this argument. Firstly, Article 27(1) is mandatory in its application. Where its conditions are made out, the court must grant a stay of its own motion and subsequently decline jurisdiction if the foreign court’s jurisdiction is established. Secondly, if Petromena had findings in its favour on the two preconditions for the operation of Article 27(1), it would be no answer for DB to say that Petromena had submitted to the jurisdiction. As pointed out at paragraph 2.10 of Briggs and Rees, Article 27 takes precedence over a number of earlier articles including Article 24.

It follows that, had the disinterested bystander test been relevant, I would have held that there was no necessary inconsistency between Petromena’s conduct in Norway and acceptance, at least until the decision of the Norwegian Supreme Court, of the jurisdiction of the English court to hear the claim. The bystander would consider, as Mr Handyside pithily put it, that Petromena had decided to put all their jurisdictional eggs in the Norwegian basket.

Finally I should deal with Petromena’s application to withdraw its acknowledgment of service. There is no formal application before the court for this purpose. Paragraph 117 of Mr Choo-Choy’s skeleton suggests that a common law submission to the jurisdiction can be withdrawn before it is relied on, and there is no evidence that the CPR 11(8) submission was relied on here, or that DB would be prejudiced in any way by the withdrawal.

I am not prepared to entertain this informal application. If such an application were made in accordance with the rules it would have to be supported by evidence: see CPR Part 10 PD paragraph 5.5. No such evidence has been filed. The court therefore has no explanation of why Petromena filed the acknowledgment of service, rather than seeking an extension of time for filing it. Moreover Petromena’s solicitors were informed immediately of the consequences of the filing of the acknowledgment, but did not take any steps to seek to withdraw it until its skeleton argument was filed in this appeal. They should have applied promptly to the Commercial Judge for this relief, and they did not.

I would therefore uphold the judge’s order on the ground that the English court has jurisdiction under Article 24 of the Convention by reason of Petromena’s appearance by filing a second acknowledgment of service.

The Article 24 question is whether Petromena submitted to the jurisdiction of the courts of England and Wales when they filed the second acknowledgement of service on 30 October 2013 in the context of their previous declared position, their appeal to the Norwegian Supreme Court and their application for a declaration. That depends on whether Petromena entered an appearance here within the meaning of Article 24 of the Lugano Convention.

For the reasons he sets out, I agree with Floyd LJ that one must look to the CPR provided that the effectiveness of the Convention is not impaired by those rules. I have no difficulty accepting that our domestic rules are consistent with the Convention. As to whether this court should follow Sage/Chambers or Hoddinott I am firmly of the view that the new procedural code provided by the CPR required a change of culture which is reflected in Hoddinott. The words in CPR 11 are clear and unambiguous and the consequence of their application must be that Petromena are to be treated as having submitted to the jurisdiction. I equally would not permit Petromena to withdraw its second acknowledgement of service by the informal application made in the face of this court.

I agree that Petromena has, on the facts of this case, submitted to the jurisdiction. It is true that, before the enactment of the CPR, this court thought that the right test was “whether a disinterested bystander with knowledge of the case would regard the acts of the defendant (or his solicitor) as inconsistent with the making and maintaining of a challenge to the validity of the writ or to the jurisdiction”, see page 4 of the unreported judgment of this court in Sage. It is also true that Sage does not appear to have been cited to this court in Hoddinott v Persimmon Homes Ltd[2008] 1 WLR 806. But I am satisfied that we should follow the more recent authority, because the CPR, as Floyd LJ has pointed out, are “a new procedural code”. It would be a recipe for muddle and inconsistency if we were to construe Part 11(8) differently from Part 11(5).

The course to be followed by a defendant, who wishes to appeal from a judge’s decision that the English court has jurisdiction to try a claim and does not wish a judgment in default to be entered while it is appealing, is to ask the judge to extend the time for acknowledgment of service pending an appeal or (if she refuses permission to appeal) pending an application for permission to this court and thereafter, if permission is given, the appeal.

We do not know if the failure to do this was an oversight. If it was, an immediate application to the judge to withdraw the second acknowledgment of service could have been made once DB made it clear on 1^st November 2013 that its position was that Petromena had submitted to the jurisdiction. It is pointless to speculate now (15 months later) whether that application, if supported by evidence, would have had any chance of success.

I agree with Floyd LJ, therefore, that the respondent’s notice should be upheld and that the English court has jurisdiction under Article 24 of the Lugano Convention.

In those circumstances it is strictly unnecessary to consider whether the judge was right in her reasons for saying that the English court has jurisdiction in any event. But since permission to appeal was granted on the basis that she was arguably wrong and since the case might go further, it is right that we should deal with those arguments in what will be a second part of our judgment.

In summary, Petromena submits that its claims cannot be heard in England and should continue in Norway on the basis that:-

jurisdiction is ousted in favour of Norway under Article 23 of the 2007 Lugano Convention (“the Convention”), because the claims fall within the scope of a Norwegian exclusive jurisdiction agreement contained in a loan agreement dated 22^nd May 2006 pursuant to which Petromena issued certain bonds (“the Loan Agreement”);

the English Court does not have jurisdiction under Article 5 of the Convention because Petromena’s claims fall to be characterised as contractual for the purposes of the Convention, and England is not the place of performance of the obligation in question under Article 5.1.

DB, on the other hand, contends that its action should continue in England on the grounds that:-

the Norwegian jurisdiction clause is irrelevant since the claims made by Petromena against DB do not arise out of, or in connection with, the Loan Agreement; the causes of action asserted by Petromena are founded upon an allegation that DB assumed the role of an adviser to Petromena, in addition to its role as bondholder; and it is DB’s alleged assumption of that role of adviser to Petromena, rather than any term of the Loan Agreement, that is said to have given rise to the various duties that were allegedly breached;

Article 5.1 of the Convention does not apply, since the claims sought to be asserted by Petromena, are plainly claims in tort/delict and not contractual; accordingly, the English Court has jurisdiction under Article 5.3 on the basis that the place where the harmful event alleged by Petromena occurred, was England; alternatively, if the claim is to be characterised as contractual, the place of performance was England.

Petromena now accepts that, if its claims are not to be characterised as contractual, they are claims in tort/delict and that there will be jurisdiction in England pursuant to Article 5.3 of the Convention.

It is the terms of the Convention that apply in this case (rather than the usual Regulation (EC) No. 44/2001) because the Member States of the European Union and Norway agreed to be bound by the terms of the Convention which came into force on 1st January 2010.

In so far as material, the relevant provisions of the Convention provide as follows (in the same terms as the Regulation):-

Subject to the provisions of this Convention, persons domiciled in the State bound by this Convention shall, whatever their nationality, be sued in the courts of the State …

If the parties, one or more of whom is domiciled in a State bound by Convention have agreed that a court or the courts of a State bound by Convention are to have jurisdiction to settle any disputes which have arisen or which may arise in connection with a particular legal relationship, that court or those courts shall have jurisdiction. Such jurisdiction shall be exclusive unless agreed otherwise. …”

I can recite the facts as found by the judge. Most of them are not in dispute.

Petromena was a holding company registered in Norway which undertook no operational activity of its own. It had four wholly owned subsidiaries, Petromena Limited, PetroRig 1 Pte Ltd, PetroRig II Pte Ltd and PetroRig III Pte Ltd. The first of these subsidiaries was registered in Cyprus and the other three were registered in Singapore. Petromena Limited owned an oil drilling ship (SS Petrolia), and the other subsidiaries were the owners of oil rigs which were being constructed for them at the Jurong Shipyard in Singapore. Petromena was listed on the Oslo Stock Exchange, but it is now in bankruptcy in Norway. It raised funds to finance the construction of oil rigs through its subsidiaries, which are now also in bankruptcy. Petromena was represented in the relevant events by its director, Mr Berge Gerdt Larsen, and by its managing director, Mr Lars Moldestad, both based in Norway.

DB is a German financial institution incorporated under the laws of Germany. It has a London branch, registered in London as such (“DB London”). Under English law, the place of registration, DB London is not a separate legal entity from DB. The complaints made by Petromena against DB all relate to the alleged conduct of DB London. DB London was represented in the relevant events by Mr Ivan Capriello and Mr Håkan Wohlin. Mr Capriello is a structured credit trader and, at the time, was a director in DB London’s Credit Solutions Group. He was based in London at DB London’s office at 1 Great Winchester Street. From time to time Mr Capriello was assisted by Mr Wohlin, who was then the Co-Head of the Western Europe Desk in the Debt Capital Markets team and covered inter alia the Nordic market.

In about May 2006, Petromena issued a series of bonds (“the bonds”) in the amount of NOK 2 billion in order to raise funds that would be lent or contributed by Petromena to PetroRig 1 Pte Ltd and PetroRig II Pte Ltd in order to part-finance the rigs that were to be constructed for them. The terms of the bonds were contained in the Loan Agreement of 22^nd May 2006 between Petromena as borrower and Norsk Tillitsmann ASA (“Norsk Tillitsmann”), a Norwegian company based in Norway, as trustee (“the Loan Trustee”) on behalf of the holders of the bonds (“the Bondholders”).

Clause 21.1 of the Loan Agreement contained a Norwegian jurisdiction and choice of law clause in the following terms:-

By purchasing the bonds, the Bondholders acceded to and became bound by the Loan Agreement (including the Norwegian exclusive jurisdiction clause). The Loan Agreement provided on page 3:-

Clauses 3 and 4 of the Loan Agreement provided for the bonds to be listed on the Oslo Stock Exchange and registered with Verdipapirregisteret (“VPS”), a Norwegian depositary. The bonds were registered with VPS, but in fact were never listed or traded on any Norwegian stock exchange. Sales of the bonds were settled through the Euroclear trading platform, based in Brussels, Belgium.

The Loan Agreement provided that Bondholders could not sue Petromena directly to enforce the bonds, but could only recover the bonds through action taken by the Loan Trustee. Thus clause 15.5 provided that “the individual Bondholder cannot of his own accord recover his bond(s) directly from the Borrower”. However, the holder(s) of at least 10% of the bonds had the right under clause 15.3(a) to require the Loan Trustee by written demand to accelerate repayment under the bonds in the event of a defined Event of Default.

In the autumn of 2008, the Petromena Group was facing considerable financial difficulties, since significant additional funding was required in order to complete the three rigs that were under construction in Singapore. At this time, DB, through DB London, had become the holder of approximately 26.3% of the bonds, which were trading well below par.

In or around November 2008 Mr Capriello was asked by his superiors at DB London to take over responsibility for managing a portfolio of distressed assets owned by DB London, which included DB’s holding of 26.3% in the bonds. DB London performed an internal analysis with a view to identifying the best way to maximise its recovery in respect of its holding of the bonds. It concluded that the optimal course would be for Petromena to obtain further funding to enable the rigs to be completed and put into operation.

Mr Wohlin approached Petromena in December 2008 and stated that he was “responsible for debt capital markets in Europe for [DB], based in London”; he indicated that DB was supportive of Petromena’s desire to complete the construction of the rigs and to put them into operation, since, despite the steep fall in Petromena’s bond prices, DB believed in Petromena’s role in the long-term future of the ultra-deepwater market. Mr Wohlin stated that DB might be willing to provide additional debt financing in order to fill Petromena’s short-term liquidity shortfall and to complete the rigs. Petromena referred DB London to its financial advisers, Pareto Securities A/S (“Pareto”). In February 2009 DB London’s holding was increased to 33.4%.

Thereafter, various discussions and communications took place between DB London and Pareto (and/or Petromena) regarding the possibility of DB London participating in a new US$100 million bond issued by Petromena, which would have had a different priority ranking from the bonds themselves. However, no such additional funding was ever agreed to be, or was in fact, provided by DB, whether through its London Branch or otherwise.

According to Mr Capriello (and to some extent this evidence may be in dispute), on 26^th March 2009 one of the Bondholders alerted other Bondholders (including DB London) that it had been approached by a broker, Fearnley Fonds ASA (“Fearnley”), with an unsolicited offer to purchase its bonds. After discussions between DB London, and certain other Bondholders, and the discovery that the broker was acting for Seadrill, a major Norwegian oil drilling company and a competitor of Petromena, DB London and the other Bondholders each conditionally agreed to sell their respective bonds to Fearnley. According to Mr Capriello, the decision to sell DB London’s bonds was made by him in London, after taking instructions from his superiors in London. DB London’s sale of its bonds was made to a Bermuda affiliate of Seadrill, through the Euroclear system. According to Petromena, the agreement for sale was made without notice to Petromena.

On 2^nd April 2009, DB London, in its capacity as Bondholder, sent by email a written letter to Norsk Tillitsmann, the Loan Trustee, making a demand in writing for the purposes of clause 15.3(a) of the Loan Agreement requiring the Loan Trustee immediately to declare the entire remaining Loan, including accrued interest and costs, to be in default and due for payment. Other Bondholders made similar requests. In response, on 3^rd April 2009, Norsk Tillitsmann, as Loan Trustee, accelerated the bonds and declared the entire outstanding amount in default and payable in accordance with clause 15.3 of the Loan Agreement.

The three rigs which were under construction were sold between 26^th June 2009 and 8^th December 2009, and Petromena subsequently went into bankruptcy in Norway on 21^st December 2009.

Two years later in December 2011 Petromena instituted a claim against DB in Norway claiming (and I adopt the summary contained in paragraph 22 of the witness statement of Mr East filed in support of Petromena’s application to the Commercial Court for an order that it had no jurisdiction to try DB’s claim for a declaration of non-liability):-

DB’s conduct constituted the giving of investment advice;

DB should not have put itself in the position of giving advice since that was in conflict with its role as a bondholder;

DB failed to give priority to the interests of Petromena;

DB owed a duty of loyalty by reason of its conduct as adviser which it breached by selling its interest in the bonds to Petromena’s competitor Seadrill Ltd; and

DB acquired and wrongly used insider information about the refinancing of the construction costs of Rig I.

This claim was, as required by Norwegian law, initiated before the Oslo Conciliation Board but on 20^th June 2012 the Board dismissed the proceedings as unsuitable for conciliation. The next day DB issued proceedings in England seeking declarations that it was not liable to Petromena in respect of the claims being brought against it but, before those proceedings were served on Petromena in Norway, Petromena filed its own proceedings in the Oslo District Court against DB making the claims set out in the previous paragraph, which were described as being “based on the general law of non-contractual damages”. The “Writ to Oslo City Court” or (as I shall call it) the Oslo Writ is a complex 33 page document and I will recite only the summary as set out in paragraph 5.4.7 of the document:-

The English court was first seised because the claim form was issued on 21^st June 2012, but will not have jurisdiction if there was an agreement that the claims should be tried in Norway or if the claims are rightly to be categorised as relating to a contract which is to be performed in Norway (or some other place than England).

By the time of the judgment Gloster J had become Gloster LJ. In relation to Article 5.1 she dealt with the conundrum that DB had to have an arguable case that its claim was a “matter relating to a contract” when DB was denying that any such contract ever existed, by citing the judgment of Saville LJ in Boss Group Ltd v Boss France S.A.[1997] 1 WLR 351. That held that it was sufficient that a defendant was alleging that such a contract did exist for jurisdiction to exist in relation to a claim for negative declaratory relief. Gloster LJ then held that the expression “matter relating to a contract” had an autonomous meaning in European law which did not require that there should be a contract in English law but held that there did have to be an alleged agreement; the facts of the present case did not amount to an allegation of an agreement because the claim was that DB had foisted itself upon Petromena and undertook unilaterally to act as its advisor without any remuneration. If that was wrong she held that the services provided (and to be provided) under the “contract” were provided in England so that there was, in any event, jurisdiction pursuant to Article 5.1 of the Convention, if there was a “contract”. She then held that the actual claim was in tort/delict and there was jurisdiction under Article 5.3. She also held in a brief paragraph that the jurisdiction clause in the Loan Agreement had no relevance to the dispute and that Article 23 of the Convention had no application.

Mr Choo-Choy QC on this appeal presented his submissions in the opposite order. He placed most emphasis on the argument that Petromena’s Norwegian claims fell within the jurisdiction clause in the Loan Agreement but alternatively that there was a claim relating to a contractual matter which was not to be performed in England so that neither Article 5.1 nor Article 5.3 applied. I will deal with the submissions in that order.

The question is whether Petromena’s claims constituted disputes arising “out of or in connection with the Loan Agreement”. If they do, then they are to be resolved in the Norwegian courts partly because the clause so says and partly because Article 23 itself provides that a jurisdiction clause is to be exclusive unless agreed otherwise. The judge accepted the submissions of Mr Handyside QC for DB that the jurisdiction clause must be construed as subject to some sort of limitation.

Mr Choo-Choy submitted:-

DB’s role as an existing bondholder was an essential part of the background to the assertion that it became Petromena’s adviser;

the question whether DB assumed a duty as adviser had to have regard to the fact of and the terms of the Loan Agreement;

if it was held that DB did assume a duty as adviser, those duties had to be considered in relation to its position as bondholder and must, therefore, arise in connection with the Loan Agreement;

the alleged breach of the duty of loyalty was similar to the breach of morality alleged in Continental Bank v Aeakos[1994] 1 WLR 588 which was there held to arise out of the terms of the agreement in that case; and

the Oslo writ could well have alleged (and now purported to do so by way of an admittedly later amendment) that DB was in breach of clause 15.3(a) of the Loan Agreement in requiring the Loan Trustee to accelerate repayment of the bonds after the Event of Default.

Attractively as these submissions were presented, I cannot accept them. If parties make a loan agreement in what one may call traditional form and then some years later enter into an entirely different agreement or commitment which will impose fiduciary (or similar) duties of loyalty and avoidance of conflict on the party who originally made the loan, it is not at all obvious that the parties will intend or expect the jurisdiction provision of the Loan Agreement to apply to the entirely new relationship between them. The first relationship is an ordinary arms-length commercial one of lender and borrower; the second relationship of adviser and advisee is much more than an arms-length commercial relationship and effectively entirely different from it because of the requirement to put the advisee’s interests first in preference to the adviser’s own. A dispute arising from a breach of this second relationship does not arise out of the original loan relationship; nor, to my mind, does such a dispute arise in connection with that relationship; the relationship of adviser/advisee is so different from the arms-length relationship of commercial lender that the connection with the original relationship has virtually vanished and is, at most, only of historical relevance.

Since Fiona Trust v Privalov[2008] 1 Lloyds Rep. 254; [2007] Bus. L.R. 1719 it is axiomatic as a matter of English law, that jurisdiction clauses and arbitration clauses should be widely and generously construed but this does not extend to all relationships however different even if they are assumed by the parties to an original relationship. The question in that case was whether a claim that contracts which had allegedly been induced by bribery fell within a standard form of arbitration clause. The House of Lords held that they did. In para 13 Lord Hoffmann said:-

English law cannot, however, be decisive of the matter in the European context. It is important to note that Article 23 is itself confined to agreements to settle disputes

The court held that the requirements of Article 17 would be satisfied if the clause “may be interpreted as referring to the disputes between the company and its shareholders”, leaving it to the domestic court to determine whether the clause was to be so construed or not. In reaching that conclusion it said (para 31) that the requirement that the dispute arise in connection with a particular legal relationship:-

Continental Bank v Aeakos is readily distinguishable from the present case because the claim by the borrower, based on Article 919 of the Greek Civil Code, was that the bank exercised its rights under the loan agreement contrary to business morality. That claim was said to come within clause 21.02 of the loan agreement by which the borrower agreed to submit to the jurisdiction of the English courts. In giving the judgment of this court, Steyn LJ said:-

No comparable claim is made in the Oslo writ in the present case. I have set out the summary of the proceedings in that lengthy document and no such claim can be discerned.

It is true that in a subsequent document somewhat confusingly also called an Oslo Writ, Petromena come somewhat closer to such a claim when asserting for the first time:-

Deutsche Bank’s declaration of Default pursuant to the Bond Loan Agreement clause 15.3(a) strengthens the circumstance that the dispute that has arisen is a dispute arising from or in connection with the Bond Loan Agreement clause 21, which reads as follows: “[d]isputes arising out of or in connection with the Loan Agreement which are not resolved amicably, shall be resolved in accordance with Norwegian law and the Norwegian Courts.” This legal venue is exclusive, pursuant to the Lugano Convention Article 23,”

As a matter of English law the allegations made by Petromena would not be regarded as alleging a contract with DB but would arguably give rise to a claim for negligence pursuant to Hedley Byrne v Heller[1964] A.C. 465 and/or claims for breach of fiduciary duty, if it were held that DB had entered a fiduciary relationship with Petromena. They would be regarded as coming within Article 5.3 of the Lugano Convention rather that Article 5.1. Petromena’s Norwegian lawyers, no doubt, came to a similar conclusion since the Oslo writ claimed “non-contractual damages” and relied on Article 5(3) to establish jurisdiction in Norway.

The first page of the Oslo writ asserts that DB acted “on its own initiative” in contacting Petromena and offering “to act as advisor, arranger and potential leader for supplementary financing” required by Petromena. Not entirely surprisingly, this led to the judge’s conclusion in paras 52-53.

This conclusion was attacked by Mr Choo-Choy on the basis that it got too much out of the word “initiative” in the Oslo writ. If the writ was read fairly it showed, he submitted, that there was an offer which was accepted by Petromena’s conduct in responding to negotiations and that was enough to make the claim a claim in a “matter relating to a contract” within the autonomous meaning of that phrase in European law.

I do not find it necessary to come to any final conclusion on this question save to say Mr Choo-Choy’s submission has some force if one looks at the overall conduct alleged in the Oslo writ. The fact that the writ itself claims non-contractual damages cannot be conclusive of the matter. The reason why it is unnecessary to form a view about this is that, on any view, if there was a contractual obligation, the place of performance of that obligation was, as the judge held, England and jurisdiction under Article 5(1) would therefore be established if the claim was a matter relating “to a contract”.

Mr Choo-Choy challenged this conclusion of the judge also, but authority is clearly against him. The leading case is Wood Floor Solutions Andreas Domberger v Silva Trade[2010] 1 WLR 1900, a case in which a commercial agent, an Austrian company sued its principal in Austria for wrongful termination of its agency. The Austrian court asked for a ruling stating the basis of the criteria for determining the place of performance of the contract. A commercial agent contract is not so far removed from the sort of contract alleged in this case which is said to have elements of mandate about it. Gloster LJ (para 57) set out all the relevant conclusions of the Court of Justice of the European Union but for the present purpose it suffices to set out para 40 of the judgment:-

If one has regard to the factual aspects of the present case and, in particular, the time spent in England and the importance of the activities carried out in England it is evident, as the judge held, that the place where DB for the most part carried out its advisory activities (if, indeed, that was what it was doing) was London. The relevant employees engaged in putting together such advice spent the overwhelming majority of their time in London and carried out nearly all their activities there just as the commercial agent in Wood Floor carried out nearly all its relevant activities in Austria. The most relevant meeting between the parties took place in London. Moreover, the judge held (in a conclusion not now challenged) for the purpose of Article 5(3) that the events which caused damage to Petromena occurred in England; that in itself is a strong pointer to the place where the services were to be provided.

Mr Choo-Choy submitted that the parallel case in Article 5(1)(b) of sale of goods provided that the place of delivery was the place of performance and, by analogy therefore, the place where the advice was received was the place of performance for the services of giving that advice. But that presses the analogy of sale of goods too far particularly since Wood Floor expressly took the case of sale of goods into account, see paras 24-26. Counsel also asserted that the acts identified by the judge were merely preparatory and, on the authority of Rehder v Air Baltic Cpn [2010] Bus. L.R. 549, should not be relevant to determine the place of performance. That was, however, a different case which determined that an airline performs its contract for passenger carriage in the place of departure not in the place where its head office selects the aircraft and decides it is airworthy. An expert who is in the business of giving advice (whether he or she is a barrister, solicitor, financial or other adviser) essentially performs the service in the place where information is collated, relevant meetings are held and the advice is formulated rather than in the place in which it happens to be received.

I would therefore uphold the judge’s decision that if (which is on any view a doubtful question) the claim is a matter relating to a contract, it is a claim relating to a contract which was to be (and was) performed in England and DB thus established jurisdiction in England if there was truly a contractual claim.

So whether the claim is contractual or tortious does not matter. On either view England has jurisdiction and the judge was right to dismiss Petromena’s application that the English court did not have jurisdiction.

I have had the benefit of reading in draft the judgments of my Lords. For the reasons they both give I agree that the courts of England and Wales have jurisdiction and that the judge was right to dismiss Petromena’s application for a declaration that the courts here did not have jurisdiction.

Given the difference of emphasis but not outcome as between my Lords in relation to the question of whether the claim made by Petromena arises in connection with the Loan Agreement, I would add this. The question to my mind is not whether the relationship of debtor and creditor created by the Loan Agreement and the commitment created by the advisory relationship are different. The two relationships are different legal relationships. It is not necessary to look to the detail of the difference or the characterisation of the latter relationship, i.e. whether it is a contract or not, because the important question is whether the advisory relationship arose in connection with the Loan Agreement. I accept that in principle a dispute arising out of the advisory relationship may also be connected with the relationship arising out of the Loan Agreement but not on the alleged facts of this case.

Applying the principles described by Longmore LJ derived from Fiona Trust v Privalov and Powell Duffryn Plc v M Petereit, the answer to the question must involve an enquiry which has regard to the purpose of Article 23 which is to avoid a party being taken by surprise by the assignment of jurisdiction. I agree with my Lords that an analysis of the claims made by Petromena in the Oslo writs shows that the claims do not in themselves demonstrate a sufficient connection with the Loan Agreement relationship. The thrust of Petromena’s claim is the allegation of breach of duty comprised in the advisory relationship not in the relationship of debtor and creditor.

I also agree that if the advisory relationship was contractual, the place of performance was England.

I agree with Longmore LJ that, assuming the claim made by Petromena is a matter relating to a contract, it is a contract where the place of performance was England. England therefore has jurisdiction under Article 5(1).

I have had more difficulty than Longmore LJ with the argument that the claim made by Petromena in the Oslo Writs is not one which arises out of or in connection with the Loan Agreement. Whilst I entirely accept that the relationship of debtor and creditor created by the Loan Agreement and the relationship of advisor and client allegedly created under a subsequent advisory agreement are fairly and accurately described as different legal relationships, my difficulty lies in the fact that, at least in some circumstances, a dispute which arises under the advisory relationship may nevertheless properly be described as connected with the relationship created by the Loan Agreement.

For my part, I do not read the speech of Lord Hoffmann in Fiona Trust v Privalov (cited by Longmore LJ in paragraph 29 above) as setting the outer limits of the grasp of exclusive jurisdiction clauses of this kind. The issue in that case was whether a dispute about the validity of the charterparty was one arising “under” the agreement. The House of Lords rejected semantic arguments based on the absence of the phrase “in connection with” in the relevant clause. It does not follow that a claim for a breach of a separate contract can never arise in connection with the contract in which the clause is contained.

Moreover the language of Article 23 of the Convention – “in connection with a particular legal relationship” – does not seem to me obviously to exclude, at least on a first reading, a dispute which arises “in connection with” two relationships.

However, in Powell Duffrynv M Petereit (cited and analysed by Longmore LJ in paragraphs 84 and 85 above) the ECJ held that the purpose of the words “in connection with a particular legal relationship” in Article 23 was to prevent a party from being taken by surprise by the assignment of jurisdiction to disputes which “may arise out of its relationship with the other party to the contract and stem from a relationship other than that in connection with which the agreement conferring jurisdiction was made”. It went on to hold at paragraph 32:

It follows therefore that even if it can be said that there is some connection between the claims raised by the Oslo Writs and the Loan Agreement, such a connection is not sufficient for the purposes of Article 23. The claims do not arise out of or in connection with the relationship between DB as bondholder and Petromena as its debtor under the Loan Agreement “as such”. I agree therefore in the result that the exclusive jurisdiction clause does not confer jurisdiction on the Norwegian courts.