Integral Petroleum SA v Scu-Finanz AG

A question whether a company is bound by the act of an officer concerns the officer’s authority and the attribution of that act to the company. It is governed by the law of the company’s incorporation, not by the formal-validity rule in Article 11 of the Rome I Regulation.

Article 11 presupposes that the company has expressed a will to be legally bound. A requirement for joint signatories goes to whether that will has been expressed at all. In any event, company-law and corporate-agency questions fall outside the Regulation under Article 1(2). A purchaser cannot rely on the execution deeming provision in the Companies Act 2006, as modified for overseas companies, where the document does not purport to comply with the incorporation law’s requirement for joint authority.

Integral Petroleum SA and SCU-Finanz AG, both Swiss oil-trading companies, entered into a supply contract governed by English law and subject to the exclusive jurisdiction of the English High Court. The contract was signed for SCU by one prokurist, although the Swiss Register of Commerce recorded that its two prokurists had joint signature authority.

Integral obtained default judgment for damages. Popplewell J set it aside under CPR rule 13.3, principally because SCU had a defence bound to succeed: its sole signatory lacked authority under Swiss law to bind it. Integral appealed from that order, challenging both the conflict-of-laws conclusion and the discretionary decision. The central issue was whether the absence of the second signature concerned contractual formal validity under the Rome I Regulation, or corporate authority governed by Swiss law.

1. Appeal dismissed. Floyd LJ, with whom Kitchin and Jackson LJJ agreed, held that Popplewell J was right to set aside the default judgment. SCU’s defence that it was not bound by the supply contract was bound to succeed on the evidence then available.

2. The issue was not whether a concluded contract failed a formality. It was whether the act of a sole prokurist could be attributed to SCU and bind it. That was an issue of the company’s constitution, broadly understood, and of the authority of its representative. It was governed by the common-law conflict rules and the law of SCU’s incorporation, namely Swiss law.

3. Article 11 of the Rome I Regulation did not apply. Formal validity concerns an external requirement attaching to an existing expression of a will to be legally bound. A company can express such a will only through a person with authority to act for it. The absence of a required joint signatory therefore concerned authority, not form. Even if Article 11 were capable of wider application, Article 1(2)(f) and (g) excluded questions of corporate constitution and whether an agent or organ could bind a company. Article 20 did not prevent the application of ordinary private-international-law rules to an issue outside the Regulation’s scope.

4. Swiss law required the signatures of both joint prokurists. The sole signature did not bind SCU. The alternative argument based on the Overseas Companies (Execution of Documents and Registration of Charges) Regulations 2009 also failed. The document did not purport to be signed by a person acting with SCU’s authority under Swiss law, as required by the modified section 44 of the Companies Act 2006.

5. Under CPR rule 13.3, promptness remained a factor of considerable significance, but the strength of the defence was also material. Once the judge’s conclusion that the principal defence was bound to succeed stood, there was no basis to interfere with his discretionary order. It was unnecessary to consider SCU’s further proposed defence or the remaining grounds.

• Court of Appeal (Civil Division): Appeal dismissed: [2015] EWCA Civ 144 .
• Commercial Court (Popplewell J): Set aside Integral’s default judgment under CPR rule 13.3 because SCU had a defence with real prospects of success: [2014] EWHC 702 (Comm) .