Should a claim be stayed where foreign proceedings arise from the same dispute but are not framed in identical terms?

Written on 8 Jul 2020

Osborne Clarke secures a victory in staying a claim brought in England on the basis of proceedings brought in Cyprus involving the same underlying causes of action but different legal entities.

Article 29 of the recast Brussels Regulation provides, where proceedings involving the same cause of action and between the same parties are brought in the courts of different Member States, that the court first seised should hear the case. This position is displaced where there is an exclusive jurisdiction clause nominating a Member State. However, it does not apply where a party has entered an appearance in proceedings outside of the nominated Member State.

But what if the parties in both sets of proceedings are not identical? That was the situation in a recent case, Awendale Resources v Pyxis, in which Osborne Clarke acted.

What was the issue?

Proceedings were started in Cyprus by Infinitum Ventures Ltd (IVL), acting in a derivative action for the benefit of Pyxis Capital Management (PCM), against Awendale Resources Incorporated (ARI) and PCM's director. ARI submitted an appearance in those proceedings and then commenced proceedings against PCM in England. PCM sought a stay of those proceedings.

The subject agreements in both proceedings were the same, and contained an exclusive jurisdiction clause for the courts of England & Wales, but Article 29 applied, given ARI's appearance in the Cypriot proceedings.

As a result, the court had to decide whether the two proceedings involved the same cause of action and the same parties. The judge applied a broad interpretation and accepted that the substance of the two proceedings involved the same cause of action.

The same parties?

The issue here was whether the same parties were involved in both sets of proceedings. IVL – not PCM – was the party in the Cypriot proceedings and it did not directly own shares in PCM. Instead, its shareholding in PCM was held on trust.

The judge noted that "it is possible for two separate corporate entities to be treated as the same party for the purpose of Article 29". Again, the court looks to the substance and not the form.

He found that there could be an arguable case in Cyprus that IVL was entitled to bring the derivative action in Cyprus for the benefit of PCM and all its shareholders. Accordingly, PCM was the true claimant in the Cypriot proceedings and so the claim in England did involve the same parties.
On this basis, the test in Article 29 was satisfied and the English proceedings were stayed.

Osborne Clarke comment

The popularity of English law in international corporate and commercial contracts is such that English courts consider many cases involving foreign parties. This case shows that the actions taken by the parties once a dispute has arisen may play a big role in determining which court the case ends up in – it is not a simple matter of the jurisdiction clause.

The choice of the right forum for the resolution of any complex dispute involving multiple agreements or types of claim and multiple parties is a nuanced matter. This choice should be carefully considered with legal experts from relevant jurisdictions at the stage that the contracts are being drafted and if a dispute arises.