Etihad Airways PJSC v Flother

This appeal concerned the scope and effect of Article 31(2) of Regulation (EU) No 1215/2012 (Brussels Recast) and whether that provision applies to an "asymmetric" exclusive jurisdiction clause. The Facility Agreement contained an asymmetric clause which gave the English courts exclusive jurisdiction to settle disputes brought by the borrower (Air Berlin) but permitted the lender (Etihad) to bring proceedings in other competent fora. The Court of Appeal held that Article 31(2) does apply to the exclusive element of such an asymmetric clause where, as here, one party has contracted to sue only in the designated court.

The court concluded that Article 31(2) should be read in light of recital (22) and the objective of reversing the consequences of Gasser (the so‑called "Italian torpedo") so as to give priority to the chosen court to decide its jurisdiction. The judge's reasoning in the High Court that the English court was seised on the basis of the Article 25 agreement and that Article 31(2) therefore required a stay was upheld. The appeal was dismissed.

Background and parties: Etihad (lender) and Air Berlin (borrower) entered a Facility Agreement governed by English law containing clause 33, an asymmetric jurisdiction clause providing exclusive jurisdiction to the English courts for disputes brought by the borrower but permitting Etihad to sue in other competent courts. Air Berlin later became insolvent; its insolvency administrator, Prof. Flöther, brought proceedings in Germany based on a separate Comfort Letter. Etihad commenced mirror proceedings in England seeking declarations that (i) the German proceedings fell within the scope of the Facility Agreement jurisdiction clause and were governed by English law, and (ii) Etihad had no liability under the Comfort Letter or under culpa in contrahendo.

Procedural posture: The German proceedings were first seised. Jacobs J in the Commercial Court dismissed Air Berlin's application to restrain the English proceedings; Air Berlin was granted permission to appeal to the Court of Appeal on a single issue: whether Article 31(2) of Brussels Recast applies to asymmetric jurisdiction clauses so as to oblige a stay of the English proceedings in favour of the court first seised. The High Court judge had found there was a good arguable case that the German claim fell within the scope of the Facility Agreement and that Article 31(2) applied.

Relief sought: Etihad sought declaratory relief that the German claims were within the exclusive jurisdiction clause and governed by English law and that Etihad was not liable on the Comfort Letter or under culpa in contrahendo.

Issues before the Court:

• Whether Article 31(2) of Brussels Recast applies to an asymmetric exclusive jurisdiction clause which is exclusive only as to claims brought by one party;
• Whether the English court was "seised on the basis of" an agreement as referred to in Article 25 for the purposes of Article 31(2);
• Whether a reference to the Court of Justice of the European Union was required.

Reasoning and holdings: The court carried out an autonomous interpretation of Brussels Recast. It emphasised party autonomy, the purpose of recital (22) and the statute's objective of preventing abusive "torpedo" litigation by giving priority to the designated court. The court rejected a narrow construction of Article 31(2) that would exclude asymmetric clauses, concluding that the clause in question comprised separate elements: an exclusive obligation (binding Air Berlin to sue in England) and a non‑exclusive element (permitting Etihad to sue elsewhere), and that Article 31(2) protects the exclusive element. The court also considered arguments based on the Hague Convention and prior case law (including Commerzbank, Meeth, Codere/Codere decisions and Walker J), and rejected the submission that the Hague Convention required a different result. The Court of Appeal considered the matter acte clair and declined to refer questions to the CJEU. The appeal was dismissed.

Appeal dismissed. The Court held that Article 31(2) of Brussels Recast applies to the exclusive element of an asymmetric jurisdiction clause where one party has agreed to bring proceedings only in the designated court; in those circumstances the court of another Member State must stay proceedings until the designated court declares it has no jurisdiction. The reasoning relied on party autonomy, recital (22) and the objective of reversing the effects of Gasser, and rejected arguments that the Hague Convention or a narrow construction of Article 31(2) required a different outcome.

Appeal from Commercial Court (QBD), Mr Justice Jacobs: [2019] EWHC 3107 (Comm). Permission to appeal to the Court of Appeal was granted limited to the Article 31(2) issue; an application for wider permission was refused by Flaux LJ on 21 January 2020. Parallel German proceedings: Berlin District Court stayed the German proceedings on 13 May 2020 under Article 31(2); the Berlin appellate court dismissed Air Berlin’s appeal on 3 December 2020 (unagreed translation provided in the bundle). The present judgment is [2020] EWCA Civ 1707.