Stribog Ltd v FKI Engineering Ltd

Under article 28 of the Judgments Regulation, the court first seised is identified by applying article 30 chronologically to the pending actions. The inquiry concerns actions, not the issue which later makes them related.

Relatedness is assessed when the stay is sought or determined. A later pleading which makes two pending actions related does not ordinarily restart seisin, particularly where it introduces a defence rather than a new cause of action or party.

The court second seised then has a discretion to stay. It should exercise that discretion to avoid irreconcilable judgments, duplication and wasted costs, having regard to the appropriate forum, applicable law and progress of the proceedings. A stay may be limited to what is necessary to resolve the common issue.

Stribog began proceedings in Germany seeking declarations of non-liability in respect of claims assigned to FKI, while expressly excluding a purchase-price claim under an English-law Business Transfer Agreement. FKI later brought that excluded claim in the English Commercial Court. Stribog subsequently alleged in the German proceedings that the assignment was void under German law.

Burton J dismissed Stribog’s application to stay the English action: [2010] EWHC 1160 (Comm). He held that the English court was first seised because the German action had become related to the English action only after the English proceedings began.

The appeal concerned whether article 28 of Council Regulation (EC) No 44/2001 permitted the English court to stay its proceedings and, if so, whether it should do so. The central question was whether first seisin depended on the commencement dates of the actions or on when the issue making them related was introduced.

1. Appeal allowed unanimously. The German court was first seised and the English court was second seised. The English proceedings were stayed, but only so far and for so long as necessary for the German court to determine the validity of the assignment.

2. Under articles 28 and 30 of Council Regulation (EC) No 44/2001, seisin concerns an action rather than a particular issue within it. The courts were deemed seised on the respective dates when the German and English actions were instituted. The later introduction into the German action of the assignment-validity issue did not alter that chronology.

3. Relatedness under article 28(3) is assessed by comparing the pending actions when the stay is sought or determined. The court considers all the circumstances then existing, including matters introduced after commencement. The actions were related because inconsistent rulings on the validity of the assignment could produce irreconcilable judgments.

4. Mummery LJ held that the court should determine seisin and chronology before comparing the actions. Rix LJ preferred first to identify two pending related actions and then apply the chronological test. Wilson LJ held that the order made no difference. All agreed that Burton J had impermissibly asked which court was first seised of the issue that rendered the actions related.

5. Rix LJ further explained that a new defence or issue does not ordinarily constitute new proceedings. It differs from adding a new cause of action or party. The allegation that the assignment was invalid was consistent with Stribog’s existing claim of non-liability and did not withdraw its exclusion of the underlying purchase-price claim.

6. The discretion under article 28 is not governed by a presumption that related proceedings must be stayed. It must be exercised to avoid irreconcilable judgments while respecting the proper forum for the underlying dispute. A stay was appropriate because assignment validity was central to both actions, depended on German law, and could dispose of both. The German proceedings were also more advanced, and parallel trials would duplicate costs.

1. Court of Appeal (Civil Division): By [2011] EWCA Civ 622, unanimously allowed Stribog’s appeal and imposed a limited stay of the English proceedings pending determination in Germany of the assignment’s validity.
2. Commercial Court: Burton J dismissed the stay application in [2010] EWHC 1160 (Comm), holding that the English court was first seised and therefore lacked power to stay under article 28. He refused permission to appeal.
3. Permission to appeal: Sir Richard Buxton initially refused permission. Moore-Bick LJ granted permission on a renewed application.