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Challenging jurisdiction — lessons to learn when it comes to costs

Virginie Medard explains what the impact of Brexit has been on jurisdiction and recognition of judgments in the EU.

Since the UK’s departure from the European Union on 31 December 2020, Regulation (EU) No 1215/2012 on jurisdiction and the recognition and enforcement of judgments (the Brussels I Recast) ceased to apply. When it comes to jurisdiction, a UK-domiciled claimant seeking to serve proceedings in a Member State of the European Union will now need to rely on English common law. The claimant will have to satisfy the court that:

  • there is a serious issue to be tried;
  • the cause of action falls within one of the service gateways (CPR rule 6); and
  • England is the proper place in which to bring the claim.

In these uncertain times, defendants may be tempted to take on the jurisdictional challenge. But at what cost?

The recent decision in Abu Dhabi Commercial Bank PJSC v Shetty & Ors [2022] EWHC 1020 (Comm) demonstrates the danger of taking an unreasonable approach.

This matter related to fraud claims worth more than $1bn. The claimant (Abu Dhabi Commercial Bank PJSC) alleged massive fraud within NMC Plc, its main subsidiary located in the United Arab Emirates (UAE), NMC healthcare Plc, and its other subsidiaries (together “The Group”). The Group’s activity was the operation of private medical facilities, mainly in the UAE. The first four defendants were the majority shareholders of NMC Plc and/or the officers or senior officers of the Group company.

The claim was issued in the High Court of Justice of England & Wales. Although the first four defendants challenged jurisdiction and argued that the above three requirements were not met under the common law, the Honourable Justice Pelling QC concluded that:

  • There was a real issue to be tried between the claimant and each of the defendants;
  • The first defendant had been properly served and, in consequence, the claims against the other defendants passed through the necessary and proper gateway.

However, the judge found that the courts of Abu Dhabi were the most appropriate forum for the issues to be tried. The claim was stayed and the defendants sought to recover their costs of the jurisdictional challenge.

The applicable principles when it comes to costs are to be found under CPR Part 44.2(2) “(a) the general rule is that the unsuccessful party will be ordered to pay the costs of the successful party; but (b) the court may make a different order”.

Under CPR 44.2(4), “In deciding what order (if any) to make about costs, the court will have regard to all the circumstances, including —

(a) the conduct of all the parties;

(b) whether a party has succeeded on part of its case, even if that party has not been wholly successful…”.

Under CPR 44.2(6), “(6) The orders which the court may make under this rule include an order that a party must pay —

(a) a proportion of another party’s costs;

(b) a stated amount in respect of another party’s costs;

(c) costs from or until a certain date only;

(d) costs incurred before proceedings have begun;

(e) costs relating to particular steps taken in the proceedings;

(f) costs relating only to a distinct part of the proceedings; and

(g) interest on costs from or until a certain date, including a date before judgment…

When challenging jurisdiction, a defendant may raise issues with all three requirements under common law to dissuade the claimant from pursuing a claim or increase its potential chances of success. This was certainly the case in this claim.

Interestingly for all parties involved, the judge stated:

“A defendant who had succeeded on one of the issues but had lost on the other two issues should not expect to recover its full costs of the jurisdictional challenge:

So to this case, I am entirely satisfied that the defendants have succeeded in the result and so in principle are entitled to recover at least some of the costs of the jurisdiction application. However, as I have said, that application depended on three true issues, two of which the defendants lost”.

The judge decided that the appropriate solution was “to direct that each of the defendants should recover one-third of their costs of the jurisdiction challenge”.

Defendants should be aware that narrowing issues, and making reasonable concessions, represents the best way forward to avoid disappointment when it comes to recovering costs.

For advice on jurisdictional challenges on legal costs, contact our cross-border claims lawyers.

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