Ccunico Resources NV & Ors v Daskalakis & Anor

For the purposes of section 5 of the Lugano Convention, whether a relationship is one of employment is determined by substance rather than contractual labels. Relevant considerations include services provided for remuneration, control and direction, and integration into the organisation. Those considerations are applied flexibly and by reference to the contract and the surrounding facts.

Senior executives may remain employees despite substantial autonomy, limited supervision, board membership, or work across a corporate group. There is no general concept of group employment. However, a group company that is not the formal employer may fall within section 5 where the contractual arrangements form an integral part of the employment and the claims are of a kind ordinarily brought by an employer. Claims alleging dishonesty, fiduciary breaches or tortious conduct may still relate to employment. A jurisdiction clause ineffective under Article 23(5) cannot confer jurisdiction through the Contracts (Rights of Third Parties) Act 1999.

The claimants brought claims against two former senior executives arising from alleged losses suffered by companies in the Cunico group. The claimants relied on jurisdiction clauses in advisory contracts between Cunico Marketing FZE and the defendants. The defendants challenged the jurisdiction of the English court.

The defendants were domiciled in Switzerland, so the Lugano Convention governed jurisdiction. The central issues were whether the claims related to individual contracts of employment within section 5 of the Convention, whether the defendants’ work for different group companies affected that analysis, and whether the jurisdiction clauses could be relied upon by group companies that were not parties to the advisory contracts.

The court also considered the consequences for the separate 2018 Claim and alternative arguments concerning the Contracts (Rights of Third Parties) Act 1999.

1. Jurisdiction challenge allowed. All claims in the 2017 Claim were matters relating to individual contracts of employment within Article 18 of the Lugano Convention. The jurisdiction clauses in the advisory contracts were therefore ineffective under Article 23(5). The court envisaged a declaration that it had no jurisdiction and an order setting aside service.
2. The employment question was one of substance, not form. The useful criteria were services provided over time for remuneration, control and direction, and integration into the counterparty’s organisation, as identified in WPP Holdings Italy SRL v Benatti [2006] EWHC 1641 (Comm) and endorsed by the Court of Appeal in [2007] EWCA Civ 263. The criteria were not hard-edged and had to be applied flexibly by reference particularly to the contract.
3. Executive authority and autonomy did not prevent employment. Nor did board membership or limited practical supervision. The defendants were employees of Feni, and Mr Daskalakis and Mr Mundhra were also employees of Resources in their wider CEO and CFO roles. The advisory contracts were documentary devices for payment and did not alter the true employment relationships.
4. There was no general concept of group employment. A claim by a non-employer group company could nevertheless fall within section 5 where the contractual arrangements with the employee were an integral part of employment by another group company and the claims were of a kind ordinarily brought by an employer. That was the effect of Samengo-Turner v J&H Marsh & McLennan (Services) Ltd [2007] EWCA Civ 723 and Petter v EMC Europe Ltd [2015] EWCA Civ 828.
5. Arcadia Petroleum v Bosworth [2016] EWCA Civ 818 did not exclude claims alleging dishonesty, fiduciary breach or tort from section 5 where the claimant was the employer. Alfa Laval Tumba AB v Separator Spares International Ltd [2012] EWCA Civ 1569 supported that conclusion. Applying those principles, Marketing’s claims against both defendants also fell within section 5.
6. Since Article 23(5) deprived the jurisdiction clauses of legal force, the Contracts (Rights of Third Parties) Act 1999 could not create an enforceable jurisdiction right for Resources or Feni. The remaining alternative arguments were unnecessary to the result. The court nevertheless indicated that pre-November 2007 claims would not have been within the later advisory-contract jurisdiction clauses.

This was a first-instance decision. The judgment referred to an earlier judgment in the same litigation concerning default judgment and relief from sanctions: [2018] EWHC 3382 (Comm). The present judgment did not determine an appeal from that decision.