Durbeck GmbH v Den Norske Bank ASA

Article 5(5) of the 1988 Lugano Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters requires a factual nexus between a dispute and the operations of a branch. The provision is not subject to a geographical limitation requiring the branch’s activities to take effect in the state where it is established. No universal test is appropriate, particularly for tort claims. The branch-state jurisdiction is an alternative to jurisdiction based on the defendant’s domicile. Where jurisdiction exists, proceedings may still be stayed on forum non conveniens grounds.

Durbeck GmbH sought to bring a tort claim against Den Norske Bank ASA arising from the arrest in Panama of a vessel carrying the claimant’s cargo. The arrest followed enforcement of security granted under a loan administered by the bank’s London branch.

Mr Nigel Teare QC, sitting in the Commercial Court, held that the English court had no jurisdiction under Article 5(5) of the Lugano Convention. He indicated that, if jurisdiction existed, he would stay the proceedings in favour of Panama. The appeal concerned whether the dispute arose out of the operations of the London branch and whether the English court could stay proceedings on forum non conveniens grounds.

Lord Phillips MR delivered the judgment. Lord Brooke and Lord Justice Laws agreed. The appeal was allowed on the jurisdiction issue, but the proceedings were stayed in favour of Panama.

1. Interpretation. Article 5 of the 1988 Lugano Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters derogates from the general domicile rule in Article 2. It therefore requires a particularly close connecting factor and a restrictive construction. That principle does not justify artificially restricting the natural effect of Article 5(5). The Court relied on the approach reflected in Agnew v Lansforsakringsbolagens [2000] 2 WLR 497, Martin Peters Bauunternehmung GmbH v Zuid Nederlandse Aannemers Vereniging [1983] 987, Kleinwort Benson Limited v Glasgow City Council [1999] 1 AC 153 and Kalfelis v Bankhaus Schroder, Munchmeyer, Hengst and Co [1088] ECR 5565.
2. Article 5(5). The geographical limitation suggested in paragraph 13 of Somafer v Saar Fern Gas AG [1978] ECR 2183 was an obiter dictum and had been deprived of authority by Lloyd’s Register of Shipping v Society Campenon Bernard [1995] ECR I-961. The absence of a geographical limitation applied to tort claims as well as contract claims.
3. The necessary nexus is fact-sensitive. It must be natural to describe the dispute as arising out of the branch’s activities. No universal test should be formulated, because tortious events vary widely. Article 5(5) provides a quasi-defendant’s-domicile basis for jurisdiction, regardless of where the branch’s activities take effect.
4. Here, the loan and security were negotiated in London, the decision to enforce the security was taken there, and the London branch instructed the enforcement and gave the necessary power of attorney. The dispute therefore arose out of the London branch’s activities. The relevant comparison was with Norway, the defendants’ domicile, rather than with Panama as the more convenient trial forum.
5. The claimants did not challenge the merits of the proposed stay. The Court was bound by Ace Insurance Company v Zurich Insurance Company [2001] 1 Lloyd’s Rep 618 to recognise the judge’s jurisdiction to stay the proceedings. The judge’s order was replaced by an order staying the action. The appeal was allowed with costs, and leave to appeal to the House of Lords was granted.

1. Court of Appeal (Civil Division): The appeal from the Commercial Court judgment of Mr Nigel Teare QC dated 13 June 2002 was allowed on the question of jurisdiction under Article 5(5). The Court substituted an order staying the action in favour of Panama and granted leave to appeal to the House of Lords.
2. Commercial Court: The judge held that the English court had no jurisdiction to entertain the claim. He indicated that, if jurisdiction existed, the proceedings would be stayed in favour of Panama.