Speed Investments Ltd & Anor v Formula One Holdings Ltd & Ors

MR JUSTICE LEWISON: Formula One motor racing is controlled by a number of companies within the Formula One Group. The principal companies are Formula One Administration Limited and Formula One Management Limited. However, another company called Formula One Holdings Limited is the parent or great-grandparent of both.

Formula One Holdings Limited is in turn owned by SLEC Holdings Limited (SLEC). SLEC is owned 75 per cent by Speed Investments Limited (Speed), and 25 per cent by Bambino Holdings Limited (Bambino). Speed is in turn owned in varying proportions by three banks.

Speed, Bambino, Formula One Holdings and others are all parties to an agreement called the SLEC Shareholders Agreement. The SLEC Shareholders Agreement was made on 12th May 2000. Clause 3.2 provided that the maximum number of directors of Formula One Holdings should be eight and that Formula One Holdings should permit the holders of a majority in nominal value of the A shares as defined to appoint four persons to be directors of FOH. It went on to provide that FOH should permit the holders of a majority in nominal value of the B shares to appoint four persons to be directors of FOH.

Clause 3.3 contained covenants by SLEC and Formula One Holdings to procure:

Clause 3.6 amplified the provisions relating to the appointment of directors in the event that an option was exercised. Clause 5 provided that immediately following the execution of the agreements, the shareholders should procure the passing of resolutions, adopting new articles of association of, among other companies, Formula One Holdings. Those articles of association were duly adopted.

By clause 4 of the agreement, Bambino covenanted and undertook to Speed that the details set out in parts 1 and 2 of schedule 1 were in all respects true, complete and accurate. The details set out in part 2 of schedule 1 included a list of directors of Formula One Holdings in which Messrs Bernard Ecclestone and Stephen Mullens were described as B-directors.

At the heart of the overall dispute is the control and future of Formula One racing. The immediate cause of the proceedings was the appointment on 7th October 2002 by Bambino of the third and fourth directors, the Argands, as directors of Formula One Holdings. The claimants say that Bambino was not entitled to appoint the Argands, because it had exhausted its rights of appointment. This is because it says that Messrs Ecclestone and Mullens were B-directors of Formula One Holdings. Bambino says that the Argands were validly appointed because Messrs Ecclestone and Mullens were not B-directors, they were appointed as ordinary directors and remained ordinary directors, despite the provisions of the SLEC Shareholders Agreement, which described them as B directors.

The applications before me are applications by the second, third and fourth defendants disputing the jurisdiction of this court. The application in each case is made under Part 11 of the Civil Procedure Rules.

The two claimants are each Jersey companies. The first defendant is a company registered in England and Wales. The second defendant is another Jersey company and the Argands are individuals domiciled in Switzerland. The first defendant is playing no active part in the litigation.

The applications are based partly on Council Regulation (EC) No 44/2001, the ("Judgments Regulation"), and partly on the Lugano Convention incorporated into domestic law by Section 3A of the Civil Jurisdiction and Judgments Act 1982. Jersey is not a part of the United Kingdom, either for the purpose of the judgments regulation or for the purposes of the Lugano Convention. Switzerland is not a member state of the European Union, but it is a contracting state for the purposes of the Lugano Convention.

The proceedings were begun in this court by a claim form dated 1st March 2004. The claim was served on Bambino shortly afterwards in reliance on Part 6.19 of the Civil Procedure Rules. The Court's permission was therefore not obtained. The claim was served on the Argands in Switzerland on 19th March 2004.

The relief claimed in the action is described in the claim form as follows:

The Particulars of Claim plead the essentials of the claim starting at paragraph 32. That part of the pleading reads as follows:

"33. Bambino was not entitled to appoint Monsieur Argand and Madame Argand-Rey as B-directors of FOH because Bambino had already exhausted its rights to appoint B-directors under the new FOH articles. Alternatively, Bambino has estopped from denying that it had already exhausted its right to appoint B-directors under the new FOH articles. The claimants will say as follows:

Paragraph 37 of the Particulars of Claim pleads:

Paragraphs 41 and 42 of the Particulars of Claim read as follows:

The allegations relating to the appointment of directors rely on the articles of association of FOH.

On 15th March 2004, the first defendant, Bambino, begun proceedings in Switzerland. The Swiss court, according to the evidence, was definitively seised of those proceedings on 15th or 16th March, but in any event, before 19th March, which is the date upon which the Argands were served with the English proceedings. The Argands are also defendants in the Swiss proceedings. Bambino claims against them a declaration that they have been validly appointed as directors of Formula One Holdings. There is unlikely to be much, if any, dispute about that part of the claim as between the Argands and Bambino.

The claim also seeks to set aside certain pledges of shares by former shareholders of SLEC, which, it is said, will remove the banks' ability to control Speed.

Formula One Holdings is also a defendant to the Swiss proceedings, but it seems likely that, as with the English proceedings, it will play no active part.

As I have said, Bambino is a Jersey company. Jersey, as I have said, is neither a member of the European Union, nor a contracting state for the purposes of the Lugano Convention. This court's jurisdiction over Bambino is therefore governed by Article 4 of the Judgments Regulation. It provides as follows:

Article 4, as I have just recited is subject to Articles 22 and 23. If, therefore, Article 22 applies, then that is what decides jurisdiction. Article 22 provides, so far as relevant, as follows:

Article 23 applies where the parties have agreed that a court or the courts of a member state are to have jurisdiction to settle any disputes which have arisen. Although clause 30 of the SLEC Shareholders Agreement confers jurisdiction on the Geneva courts, that does not bring Article 23 into play because, of course, Switzerland is not another member state.

Bambino's position is that the claimant's claim is not within Article 22.

The position of the Argands is governed by the Lugano Convention. Article 16 of the Lugano Convention is for practical purposes in the same terms as Article 22 of the Judgments Regulation. Article 17 of the Convention permits parties to choose their own forum, but Article 17(3) makes it clear that a choice of jurisdiction clause cannot oust the exclusive jurisdiction conferred by Article 16. The Argands also say that the claimant's claim is not within Article 16.

They have also argued that the SLEC Shareholders Agreement contains a choice of jurisdiction clause conferring jurisdiction on the courts of Geneva. Although they themselves are not parties to it and although most of the parties to it are not domiciled in an contracting state, Formula One Holdings was so domiciled and is also a party to the Swiss proceedings. But Mr Rosen QC, who appears on their behalf, accepts that clause 30 is not something on which the Argands can rely, at least at this stage in the proceedings.

In addition, the Argands say that the Swiss court is the court first seised of the proceedings, consequently they say that Article 21 of the Lugano Convention comes into play. That Article provides as follows:

The Court of Appeal has discussed the scope of Article 16 of the Brussels Convention, which is in the same terms as Article 22 of the Judgments Regulation and Article 16 of the Lugano Convention. The main discussion took place in the case of Grupo Torras v Al-Sabah [1996] 1 Lloyds Law Reports, page 7. Lord Justice Stuart-Smith said at page 15:

It certainly appears to have been assumed in that case that the board of directors of a company is one of its organs. Indeed, if not, it is difficult to see what the organs of a company are. In my judgment, it follows from what Lord Justice Stuart-Smith said that Article 16(2) is conferring exclusive jurisdiction on the courts of the place of incorporation of a company, if the subject matter of the proceedings raises questions about the constitution and internal management of the company and/or the composition of its board of directors. Although I accept that Article 22 of the Judgments Regulation and Article 16 of the Lugano Convention must be narrowly construed as exceptions to the usual domicile rule, these questions are at its core.

The scope of Article 16(3) was considered by Mr Justice Harman in Re Fagin's Bookshop Plc [1992] Butterworth's Company Law Cases, page 118. The proceedings concerned the register of members of the company kept under the Companies Act 1985. Mr Justice Harman said this:

The register of directors is also required to be kept by the provisions of the Companies Act 1985. It is open to inspection by the public. It is true that unlike the register of members it is not a document of title, but it is nevertheless in my judgment a public register.

One of the matters that can be taken into account in interpreting the Lugano Convention is the Jenard Report. That report emphasises the jurisdiction of the state where information in relation to companies is made public. In the case of the register of directors, that state is, of course, the United Kingdom.

Mr Rosen says that the dispute is essentially a contractual dispute. It is a dispute about the effect of the SLEC Shareholders Agreement. As I have mentioned under clause 30 of that Agreement, the parties had conferred jurisdiction on Geneva. The Geneva proceedings raise a number of issues, such as the possibility of setting aside the share transactions, which, he says, are logically prior to the issues raised by the English action. Mr Rosen accepts, however, that what is important for the present purposes is not the subject of the dispute but the subject of the proceedings.

He says that what is the subject matter of the proceedings is a question of characterisation. You look at the facts pleaded in support of the claim and the legal theory underpinning it. The facts pleaded, he says, are the terms of the SLEC Shareholders Agreement. The legal theory is the legal effect of the SLEC Shareholders Agreement. Therefore the claim is about the SLEC Shareholders Agreement and that is its subject matter. In support of that submission, Mr Rosen relies on the decision of the Court of Appeal in Ashurst v Pollard [2001] Chancery Reports, page 595. Lord Justice Jonathan Parker set out in paragraph 53 of his judgment a number of factors which the court should take into account in determining whether Article 16(1) applies, and by analogy, Mr Rosen argues that the same criteria apply to Article 16(2) and 16(3).

In the course of the discussion of the law, Lord Justice Jonathan Parker quoted with approval a paragraph in the opinion of Advocate General Darmon in Webb v Webb, in which the Advocate General said as follows:

In one sense, Mr Rosen's submission is true. But the reason why the SLEC Shareholders Agreement matters is because it affects the composition of the board of Formula One Holdings, so the claim is also about the composition of the board. I accept Miss Jones QC's submission that there is no necessary mutual exclusivity between a contractual dispute and a dispute falling within Article 22 of the Judgments Regulation. Both the Judgments Regulation and the Lugano Convention contemplate that an exclusive jurisdiction clause may purport to oust a exclusive jurisdiction given directly by Article 22 of the Judgments Regulation or Article 16 of the Lugano Convention, in which event they are of no legal effect. An exclusive jurisdiction clause will usually be found in a contract. Thus, where there is an overlap between the two, Article 22, or Article 16 as the case may be, prevails.

Miss Jones also says that the claimants do not claim damages for breach of the claimant or any contractual remedy. The right to appoint directors is not a right conferred by the contract, it is a right conferred by the articles of association which themselves are the constitution of the company. It is true that the articles of association altered because the SLEC Shareholders Agreement required that to be done, but once the articles of association were altered, rights to appoint directors were right arising out of those articles and not under the SLEC Shareholders Agreement. The SLEC Shareholders Agreement is merely the background giving rise to the claim and constitutes no more than the manner in which Bambino exhausted its right to appoint B-directors. I accept this submission.

In my judgment, the subject matter of the English proceedings is the composition of the board of directors of Formula One Holdings and therefore it does fall within Article 22(2). The claim to rectify the register of directors, in my judgment, falls within Article 22(3). Thus, so far as Bambino is concerned, the application fails.

I turn then to the position of the Argands. Does Article 21 of the Lugano Convention require me to defer jurisdiction to the Swiss court? Article 21 only applies if the parties to the Swiss proceedings are the same parties as the parties to the English proceedings. Miss Jones submits that since the Argands are on the same side as Bambino in England, (all of them are defendants) but on opposite sides in Geneva (where Bambino is a claimant and the Argands are defendants) they are not the same parties. She accepts that if the Argands had been claimants in the Swiss proceedings, this submission could not succeed. She says that there is no dispute between Bambino and the Argands over the validity of their appointment.

I see the force of this as a matter of common sense, but the European Court of Justice in The Tatry [1999] Queens Bench Reports, page 515 and the Court of Appeal in the Grupo Torras v Al-Sabah case said that the capacity in which the party is joined to the proceedings makes no difference. There may be reasons why under Swiss law the Argands were properly joined as defendants rather than as claimants. I do not feel able to accept Miss Jones' submission on this point.

Miss Jones then submits that Article 21 does not apply because the Swiss court is not the first seised. She says that this court is the first seised because the claim form was issued in this court before proceedings were lodged with the Swiss court. The problem here is Dresser UK Limited v Falcongate Freight Management Limited [1992] Queens Bench Reports, page 502. Under the Brussels Convention, the European Court of Justice said when a court was first seised of proceedings is a matter of national law. In so deciding, is recognised that different member states might give different answers to that question.

In Dresser, the Court of Appeal held that in English domestic law, it is the point of service of proceedings, not the point of issue of proceedings that is the moment at which the English court is definitively seised. It has since been held that the procedural change from the Rules of the Supreme Court to the Civil Procedure Rules make no difference to English law in this respect. The change is that the Brussels Convention has been superseded by the Judgments Regulation. Article 30 of the Judgments Regulation lays down an autonomous rule for deciding when a court is seised. It is clear that under that rule it is the moment when process is issued. It is clearly contemplated that the Lugano Convention would be revised to confirm with the Judgments Regulation, but that has not yet happened. Can I anticipate the change?

Miss Jones says the Judgments Regulation and the Lugano Convention are intended to create a common system and should be kept in tandem. The reports on the Convention and the Protocol for its interpretation emphasise the unity of the system. In Canada Trust Company v Stoltzenburg Number 2, 2002, 1 Appeal Cases page 1, Lord Hoffman made the same point, as follows:

Although I entirely accept that description as a matter of generality, the fact is that at the moment the Judgments Regulation and the Lugano Convention are not in identical language and consequently no question of interpretation of parallel provisions as yet arises. As Lord Hoffman also explained in the Canada Trust case, prior to the decision of the Court of Appeal in Dresser, the common law had no lis pendens rule, and the Court of Appeal had to invent a domestic rule solely for the purposes of allowing Article 21 to refer to it.

Miss Jones submits that the policy underlying that rule has changed since the introduction of the Judgments Regulation and the decision of the Court of Appeal in Dresser should no longer be treated as binding. Before Article 30, the moment at which the court was definitively seised was a question of national law. Since Article 30, it is the subject of an autonomous rule. In my judgment, the introduction of an autonomous rule cannot change English domestic law. English domestic law still governs Article 21 of the Lugano Convention. English domestic law is in my judgment that laid down by the Court of Appeal in Dresser. In the Canada Trust case, the House of Lords conspicuously declined to overrule it. Although it has been subject to criticism, whether the criticism is justified is for a higher court than this one to determine.

I conclude, therefore, that as far as the Argands are concerned, the Swiss court is the court first seised. I must not, however, lose sight of the fact that this court is first seised as regards Bambino.

I should also at this stage refer to some further provisions of the Lugano Convention. Article 19 provides:

And Article 28:

Article 16 is within title 5.

I have already referred to Article 17, which enables the parties to enter into a choice of jurisdiction clause, provided that it does not conflict with the exclusive jurisdiction provided for in Article 16. I should also mention that Article 17 is contained within section 6, which is not one of the sections mentioned by Article 28. Thus Article 16 is more entrenched than Article 17.

Although Article 21 does not in terms say that the court second seised may determine its own exclusive jurisdiction under Article 16, many commentators argue that this is implicit. Professor Kay in "Civil Jurisdiction and Enforcement of Foreign Judgments" says this at page 1222:

Professor Kaye goes on to distinguish that situation from the situation in which the second seised court has exclusive jurisdiction under Article 17 and he comes to a different view about that situation.

Dicey and Morris on Conflict of Laws, 13th edition, at paragraph 12-043, are of a similar view. They say:

They go on to make a third point relating to a decision of the Court of Appeal which appears to be a controversial one.

Lastly on this point, I should refer to the views of Briggs and Rees in Civil Jurisdictions and Judgments, paragraph 2.197. They say as follows:

The footnote to that sentence reads:

As the commentators point out, the European Court of Justice in the Overseas Union Insurance case left open the possibility that Article 21 of the Brussels Convention, equivalent to Article 21 of the Lugano Convention, might not apply where the second seised court had exclusive jurisdiction. The European Court returned to that question in the case of Eric Gasser v MISAT [2004] 1 Lloyds Reports, page 222. That was a case which concerned exclusive jurisdiction under a choice of jurisdiction clause ie Article 17. It did not concern Article 16 at all.

Amongst the parties who placed arguments before the Court were the European Commission itself. The Court recorded the European Commission's argument in the following terms:

It seems clear from that recitation of the Commission's argument that it was assumed, at least by the Commission, that such a derogation did in fact exist. The Court continued:

The European Court did not explicitly approve this argument, but it seems to me that paragraph 54 of the Court's findings, which distinguish between the effect of Article 17 and Article 16, does lend some support to the Commission's assumption. Both sides agree, however, that the European Court of Justice did not decide the question, and that is the question is still an open one. Mr Rosen submits that the language of Article 21 is clear and mandatory. The policy is to trust the court first seised to get the answer right, and if necessary, for the court second seised to decline jurisdiction.

Because this is a question now of interpreting the Lugano Convention, it is not possible to refer that question to the European Court, so I must decide it. The arguments seem to me to be finely balanced, but on balance, the arguments that commend themselves to the commentators and indeed to the European Commission commend themselves to me. It also seems to have been the view of the Court of Appeal in Prudential Assurance Co Limited v Prudential Assurance Company of America [2003] EWCA Civ 327, paragraph 22.

In addition, I must not lose sight of the fact that the same court may be first seised and second seised as regards different parties. Thus, as regards Bambino, this court is first seised, so the Swiss court must defer to this court, but as regards the Argands, the Swiss court is the first seised. If both courts are required to defer to each other, there is a potential impasse which is not a sensible conclusion.

I hold, therefore, that where exclusive jurisdiction under Article 16 is in point, the court in which exclusive jurisdiction is vested, even if second seised as regards some parties, may determine its own jurisdiction and need not stay the case pending determination by the court first seised. I therefore hold that I should determine whether the claim against the Argands is governed by Article 16.

For the reasons which led me to the conclusion that the claim against Bambino is governed by Article 22 of the Judgments Regulation, I hold that the claim against the Argands is governed by Article 16 of the Lugano Convention. Mr Rosen accepted that if I decided, as I have, that Article 22 of the Judgments Regulation and Article 16 of the Lugano Convention apply to the claims, then the question of a discretionary stay under Article 23 of the Lugano Convention does not arise. The upshot therefore is that both challenges to jurisdiction fail.