Antonio Gramsci Shipping Corporation & Ors v Lembergs (Rev 1)

A jurisdiction agreement under Article 23 of the Council Regulation (EC) No 44/2001 depends on the parties’ actual consent, established clearly and precisely. Consent is an autonomous question of EU law but also a question of fact.

A non-party cannot be deemed to have accepted a company’s jurisdiction clause merely because the non-party controlled the company and allegedly used it to perpetrate a fraud. The recognised cases involving shareholders, contractual succession, assignment or agency rest on an existing consensual relationship or the transfer of contractual rights and obligations.

English law permits piercing the corporate veil only where a person interposes a controlled company to evade an existing legal obligation, liability or restriction. It cannot be used solely to create consent to jurisdiction.

The appellants owned vessels chartered to five offshore companies under charterparties containing exclusive English jurisdiction clauses. They alleged that the companies and their controllers used the charterparties fraudulently to divert profits. Having obtained judgment against the companies, the appellants sought to pursue Mr Lembergs, an alleged beneficial owner and controller.

Teare J held in the Commercial Court, [2012] EWHC 1887 (Comm), that Articles 23 and 24 of the Council Regulation (EC) No 44/2001 did not confer jurisdiction over Mr Lembergs. The appeal concerned Article 23 alone. The previously advanced argument that he could be treated as a party to the charterparties had been abandoned following the Supreme Court’s decision in VTB Capital.

The central question was whether EU law deemed a controller to have consented to a company’s jurisdiction clause where the controller allegedly used the company as a device or façade to conceal wrongdoing.

1. Appeal dismissed. Beatson LJ, with whom Ryder and Lloyd LJJ agreed, held that Mr Lembergs could not be deemed to have consented to the English jurisdiction clauses. The question proposed by the appellants would not be referred to the Court of Justice of the European Union.

2. Article 23 of the Council Regulation (EC) No 44/2001 is founded on party autonomy. It requires consensus concerning the chosen jurisdiction to be established clearly and precisely. Whether the person against whom the clause is invoked consented is an autonomous question of EU law, but the existence of that consent remains a question of fact. Departures from domicile-based jurisdiction must be construed strictly and applied in clear cases without investigating the merits of the underlying dispute.

3. The European authorities did not establish a general doctrine of deemed consent. Powell Duffryn concerned a consensual relationship between a company and a shareholder. The shareholder’s act of becoming and remaining a member amounted to agreement to the articles. The bill-of-lading and assignment authorities depended on succession to contractual rights and obligations. The agency authority depended on actual or apparent authority. Those situations did not dispense with consent.

4. The nature of a contract may affect the conditions by which a third party accepts a jurisdiction clause. The only relevant principle identified in the authorities was the transfer of the contract, or of all its rights and obligations. No such transfer occurred here. Nor had Mr Lembergs authorised the corporate defendants to contract on his behalf. The allegation was instead that he deliberately avoided becoming a party.

5. The alleged ownership, control and fraudulent use of the companies did not automatically justify piercing their corporate veils. Under Prest and VTB Capital, English law permits veil piercing where a person interposes a controlled company to evade an existing legal obligation, liability or restriction. The doctrine could not be invoked merely to create jurisdiction which would otherwise be absent. It was therefore untenable to pierce the veil to deem Mr Lembergs to have accepted the companies’ jurisdiction clauses.

1. Court of Appeal (Civil Division): The appeal was dismissed by [2013] EWCA Civ 730 . The court affirmed the conclusion that Article 23 did not confer jurisdiction and refused to make a reference to the Court of Justice of the European Union.
2. Commercial Court: Teare J held in [2012] EWHC 1887 (Comm) that Articles 23 and 24 of the Council Regulation (EC) No 44/2001 did not confer jurisdiction over Mr Lembergs.