Sarrio S.A. v Kuwait Investment Authority

The House of Lords interpreted article 22 of the amended Brussels Convention (as incorporated into domestic law by the Civil Jurisdiction and Judgments Act 1982) broadly. The court rejected a narrow test which would confine the risk of "irreconcilable judgments" to conflicts only on so‑called "primary" issues essential to a cause of action. Instead a common‑sense, wide enquiry is appropriate: actions are "related" if they are so closely connected that it is expedient they be heard together to avoid the risk of conflicting decisions. Applying that test, the Lords held that the English misrepresentation proceedings and the Spanish proceedings (in which related corporate liability and piercing the corporate veil were alleged) were related and that the English court should decline jurisdiction under the second paragraph of article 22, rather than merely stay the action.

The respondent, a Spanish cardboard manufacturer, sold a special paper business to a Spanish group. Part of the purchase price was used to buy shares in companies within that group; the respondent had a put option requiring the group to buy back those shares in instalments. After the group entered a Spanish insolvency procedure, the respondent sued in Spain alleging that the appellant (a Kuwaiti investor and indirect majority shareholder) was the de facto decision centre and therefore liable under Spanish law for sums unpaid under the put option. While that litigation was pending the respondent commenced English proceedings alleging negligent misrepresentations made on behalf of the appellant during the negotiations for the sale.

The procedural issue before the House of Lords was whether the English proceedings fell within article 22 of the amended Brussels Convention so that the English court should stay or decline jurisdiction because related proceedings were pending in Spain (the court first seised). The first instance judge (Mance J.) had stayed the English proceedings; the Court of Appeal lifted the stay ([1997] 1 Lloyd's Rep. 113) adopting a narrower test which focused on "primary" issues necessary to establish a cause of action. The matter was taken to the House of Lords.

The Lords considered (i) whether the Article 22 concept of "related actions" should be given a broad, autonomous Community meaning in line with the European Court’s decision in The Maciej Rataj, (ii) whether distinguishing "primary" from other issues was appropriate, and (iii) whether, if actions were related, a stay or a declinature of jurisdiction was the correct exercise of discretion in the particular circumstances. The court held that article 22 must be given a broad, common‑sense interpretation consistent with the objectives of coordination and avoidance of conflicting decisions. It rejected the artificial distinction between primary and secondary issues and declined to import English issue‑estoppel analysis into the article 22 enquiry. The Lords concluded that the English and Spanish actions were so closely connected that it was expedient they be heard together and that the English court should decline jurisdiction under the second paragraph of article 22, particularly because the respondent had changed its procedural stance and had not pursued consolidation in Spain. The Lords also decided there was no need to refer the matter to the European Court.

• Nature of relief sought: a stay of the English proceedings or, alternatively, that the English court decline jurisdiction under article 22 because of related Spanish proceedings.
• Issues framed: whether the actions were "related" within article 22; whether there was a risk of irreconcilable judgments; and whether the English court should stay or decline jurisdiction.
• Reasoning: article 22 requires a broad, practical test; avoid over‑sophisticated distinctions between classes of issues; where actions are closely connected and the first court can consolidate, the second court may properly decline jurisdiction.

Appeal allowed. The House of Lords held that article 22 should be given a broad, common‑sense interpretation and rejected the Court of Appeal's narrow "primary issues" approach. The English and Spanish actions were "related" and, given that the Spanish court could consolidate and was first seised, the House varied the first instance order to one declining jurisdiction under the second paragraph of article 22.

At first instance Mance J. in the Commercial Court stayed the English proceedings. The Court of Appeal (Evans, Peter Gibson and Brooke L.JJ.) reversed and lifted the stay (reported at [1997] 1 Lloyd's Rep. 113). The House of Lords allowed the appeal and varied the order to decline jurisdiction under article 22 ([1997] UKHL 49).