Yukos International UK BV & Ors v Merinson

Under Section 5 of the Recast Judgments Regulation, an employer’s claims against an employee fall within matters relating to an individual contract of employment where the substance of the action has a material nexus with that relationship. This may include claims to annul a settlement agreement governing the termination of employment.

A jurisdiction agreement in an employment settlement is effective only if, when it was made, the parties had disagreed about a specific point and legal proceedings concerning that specific disagreement were imminent or contemplated. Awareness of circumstances which might later give rise to a claim is insufficient. A court settlement remains contractual in nature, and its enforceability under Chapter IV does not remove the jurisdiction of a court otherwise competent under Chapter II to determine whether it should be set aside.

The claimants sought damages from their former employee for alleged breaches of employment duties, together with declarations and alternative relief seeking to annul a Dutch settlement agreement which had been incorporated into a Dutch court record.

The defendant applied for a declaration that the English court lacked jurisdiction. The settlement agreement contained an exclusive jurisdiction clause in favour of the Dutch courts. The claimants accepted for the application that their claims fell within the settlement’s scope, but argued that the clause was ineffective because the claims concerned an individual contract of employment and the agreement had not been made after the dispute had arisen.

The central issues were whether the claims fell within Section 5 of the Recast Judgments Regulation, whether the statutory exception for agreements made after a dispute had arisen applied, and whether the Dutch court settlement prevented the English court from entertaining the annulment claims.

1. The application for a declaration that the English court lacked jurisdiction was dismissed. The English court had jurisdiction over both the damages claims and the annulment claims.

2. Section 5 of the Recast Judgments Regulation required an autonomous, broad and purposive interpretation. The relevant question was the reality and substance of the dispute, having regard to the protective purpose of the employment provisions. The damages claims plainly related to the employment relationship.

3. The annulment claims also related to the employment contract. Setting aside the settlement was a necessary step towards recovering compensation for alleged breaches of employment duties. The settlement regulated the termination of employment and varied the contractual terms concerning severance and confidentiality. It was therefore artificial to treat the annulment claims as unrelated to the employment contract.

4. For Article 23(1), a dispute had arisen only if: (a) the parties had disagreed upon a specific point; and (b) legal proceedings concerning that specific point were imminent or contemplated. A prior dispute about the employment relationship, or the parties’ separate awareness of circumstances capable of giving rise to a claim, was insufficient. The relevant circumstances had not been communicated between the parties and they had not joined issue on them.

5. The requirement that proceedings be imminent was not necessary. Proceedings could be contemplated even though the parties first intended to pursue negotiation or mediation. Nevertheless, the jurisdiction clause was ineffective because the specific kickback allegations had not formed an existing dispute when the settlement was made.

6. The Dutch settlement was a court settlement under Article 2 and was enforceable under Articles 58 and 59, subject to the public-policy exception. It did not have the status of a judgment and remained essentially contractual. Chapter IV concerned enforceability, not jurisdiction. A court having jurisdiction under Chapter II to determine whether the settlement should be annulled did not lose that jurisdiction because the settlement had been incorporated into a Dutch court record.

7. Consequential directions and applications for permission to appeal were adjourned to a further hearing.

First-instance jurisdiction decision. No earlier decision or appeal is stated in the judgment.