Sarrio SA v Kuwait Investment Authority

Article 22 of the Brussels Convention requires a broad, autonomous and common-sense inquiry. “Irreconcilable judgments” includes any real risk of conflicting decisions. The conflict need not concern facts essential to a cause of action, and the judgments need not have mutually exclusive legal consequences. Domestic concepts of cause of action and issue estoppel should not control the inquiry.

Actions are related when their connection makes joint determination expedient to avoid that risk. If the first-seised court can consolidate the actions and has jurisdiction over both, the second-seised court may decline jurisdiction rather than merely stay its proceedings.

The respondent, a Spanish company, sold a business to a Spanish corporate group. Part of the consideration involved acquiring shares subject to a put option. After the purchasing group entered insolvency proceedings with substantial sums unpaid, the respondent sued the appellant in Spain. It alleged that the appellant controlled the group, confused its assets with those of the group and abused its separate legal personality.

The respondent also brought English proceedings alleging negligent misrepresentations during the same negotiations. Mance J held that the Spanish and English proceedings were related under article 22 of the Brussels Convention and stayed the English action. The Court of Appeal, in Sarrio SA v Kuwait Investment Authority [1997] 1 Lloyd's Rep. 113, lifted the stay because it considered the essential issues in the two actions distinct.

The central questions were whether article 22 was confined to conflicts involving facts essential to the causes of action and, if the proceedings were related, whether the English court should stay the action or decline jurisdiction.

1. Disposition. Lord Saville delivered the only reasoned speech. Lords Goff of Chieveley, Lloyd of Berwick, Hope of Craighead and Clyde expressly agreed with his reasons. The House unanimously allowed the appeal and varied Mance J's order to one declining jurisdiction under the second paragraph of article 22 of the Brussels Convention.
2. Construction of article 22. Per Lord Saville, The Maciej Rataj [1994] ECR I-5439 required a broad interpretation directed towards coordinating judicial functions and avoiding conflicting decisions. “Irreconcilable judgments” was not confined to judgments having mutually exclusive legal consequences. The narrower approach under article 27(3), considered in Hoffmann v Krieg [1987] E.C.R. 645, arose under a provision having a different objective.
3. Proper method. Per Lord Saville, the inquiry was not limited to “primary” facts necessary to establish a cause of action. Nor should the Convention expression be given a special English meaning derived from cause of action or issue estoppel. Courts should apply the wide statutory test through a broad, autonomous and common-sense assessment. An elaborate analysis of issues which future judgments might contain would cause unnecessary expense, delay and satellite litigation.
4. Application. Per Lord Saville, both actions raised disputed questions about whether the negotiations were conducted for the appellant, the appellant's relationship with the Spanish corporate group and whether the same individual acted for the appellant. Those overlapping matters created a risk of conflicting decisions. The proceedings were sufficiently closely connected to make joint determination expedient.
5. Form of order. Per Lord Saville, the Spanish court permitted consolidation and had jurisdiction over both actions. Mance J had ordered a stay because the respondent then intended to advance its misrepresentation claim in Spain. Its later change of position did not justify preserving the English action merely until Spanish judgment. Varying the order to decline jurisdiction produced the order Mance J would have made had the later position been advanced before him and did not improperly interfere with his discretion. The interpretation and application of article 22 admitted of no doubt, so no reference to the European Court was required.

1. House of Lords: In Sarrio SA v Kuwait Investment Authority [1999] 1 AC 32, the House unanimously allowed the appeal. It varied Mance J's order to one declining jurisdiction under the second paragraph of article 22 of the Brussels Convention.
2. Court of Appeal: Evans, Peter Gibson and Brooke LJJ lifted the stay, holding that the primary issues in the English proceedings were distinct from those in Spain: [1997] 1 Lloyd's Rep. 113.
3. Commercial Court: Mance J held that the Spanish and English actions were related and stayed the English proceedings with liberty to apply.