King v Crown Energy Trading A.G. & Anor

For jurisdictional purposes, a corporation’s central administration and principal place of business are questions of substance rather than form. The court must identify where the company’s important administrative and business functions are actually carried on. The two concepts may overlap, although they are not identical. The good arguable case standard is flexible and does not require the court to decide the jurisdiction issue on the balance of probabilities at an interlocutory hearing. Where several defendants are closely connected, the Lugano Convention permits them to be sued together if separate proceedings create a risk of irreconcilable judgments and joint determination is expedient.

The claimant brought proceedings concerning the termination of his employment by Crown Energy Trading A.G. He claimed damages for breach of a service agreement, and pursued Crown Resources A.G. as guarantor and for bonus, profit-share and wrongful inducement claims.

The defendants sought to set aside service in Zug. The central issues were whether Crown Resources had its central administration or principal place of business in England under Article 60 of Council Regulation (EC) No. 44/2001, and whether Crown Energy could be joined under Article 6(1) of the Lugano Convention.

The applications to set aside service were dismissed.

1. The claimant had to show a good arguable case that domicile existed under Article 60, and, if necessary, that the other defendant could be sued under the Lugano Convention. The standard lies between a serious issue to be tried and proof on the balance of probabilities. It is flexible, but an interlocutory hearing is not converted into a trial. After the argument is complete, the case must retain sufficient cogency to qualify as a good arguable case (paras [4]–[7]).
2. The expression “principal place of business” requires attention to the chief or most important place of business, not necessarily the place where most business is conducted. The Rewia was an essential guide, but Article 60 required consideration of the distinct statutory concepts of central administration and principal business (paras [8]–[14]).
3. Central administration concerns substance rather than technical corporate form. Relevant matters included the location of senior personnel, administrative functions and committees exercising direction and control. Central administration and principal place of business can substantially overlap (paras [11]–[14], [20]).
4. There was a good arguable case that Crown Resources’ central administration and principal place of business were in London. The location of its senior executives, committees, substantial offices and operational direction outweighed the fact that important trading personnel and some directors were based in Zug (paras [18]–[31]). Either finding established jurisdiction against Crown Resources.
5. Crown Energy could be sued under Article 6(1) because it was one of several defendants and the claims were closely connected. Following Kalfelis v Schroeder, the proceedings were related where it was expedient to hear them together to avoid a risk of irreconcilable judgments. The broad common-sense criteria in Sarrio SA v Kuwait Investment Authority were satisfied because the claims required substantially overlapping inquiries (paras [33]–[37]).