3PLR – KUWAIT OIL TANKER COMPANY SAK AND OTHERS (RESPONDENTS) V. UBS AG (APPELLANTS)

POLICY, PRACTICE AND PUBLISHING, LAW REPORTS  3PLR

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KUWAIT OIL TANKER COMPANY SAK AND OTHERS (RESPONDENTS)

V.

UBS AG (APPELLANTS)

HOUSE OF LORDS SESSION 2002-03

ON APPEAL FROM: [2002] EWCA CIV 34

OPINIONS

OF THE LORDS OF APPEAL

FOR JUDGMENT IN THE CAUSE

[2003] UKHL 31

ON THURSDAY 12 JUNE 2003

3PLR/2003/108  (HL)

THE APPELLATE COMMITTEE COMPRISED:

Lord Bingham of Cornhill

Lord Nicholls of Birkenhead

Lord Hoffmann

Lord Hobhouse of Woodborough

Lord Millett

REPRESENTATION

MAIN ISSUES

PRACTICE AND PROCEDURE – COURT

MAIN JUDGEMENT

LORD BINGHAM OF CORNHILL

My Lords,

1. I gratefully adopt and need not repeat the account given by my noble and learned friend Lord Hoffmann of the facts, history and issues in this appeal.

2. For reasons given by the House in the Société Eram case [2003] UKHL 30 I think it clear that the English court had no jurisdiction to make a garnishee order absolute in this case. Had the matter been one of discretion there were strong reasons for not making such an order, and Langley J was right to decline to do so.

3. This case, however, differs from Société Eram in one significant respect: that the United Kingdom is a party to the Lugano Convention, incorporated into English law by section 3A of the Civil Jurisdiction and Judgments Act 1982 as amended, and Switzerland (where the chose in action which the judgment creditors seek to attach is situated) is also a party. Thus the question of jurisdiction to make the order sought must be considered not simply as one of English law or private international law as applied in England and Wales but as one governed, or potentially governed, by obligations binding on the United Kingdom by virtue of international convention.

4. Two provisions of the Lugano Convention are relevant. First, article 16(5) confers “exclusive jurisdiction, regardless of domicile, . . . in proceedings concerned with the enforcement of judgments” on “the courts of the Contracting State in which the judgment has been or is to be enforced.” Secondly, article 19 provides:

“Where a court of a Contracting State is seised of a claim which is principally concerned with a matter over which the courts of another Contracting State have exclusive jurisdiction by virtue of Article 16, it shall declare of its own motion that it has no jurisdiction.”

Thus if the order which the judge was asked to make in this case involved the enforcement of a judgment he had no choice but to accept jurisdiction if the United Kingdom was the contracting state in which the judgment was to be enforced or renounce jurisdiction in favour of Switzerland if it was not.

5. The opinions of the House in Société Eram [2003] UKHL 30 indicate that Switzerland is the state in which enforcement will take place because it is there that the debt is situated upon which it is sought to execute. English authority points towards that conclusion: see, for example, Babanaft International Co SA v Bassatne [1990] Ch 13 at 35, 46. While the House was referred to no foreign authority which could be said to show international endorsement of that approach, such material as there is appears to support it rather than otherwise.
6. In his authoritative report on the Brussels Convention (Official Journal of the European Communities, No C59/1, 5 March 1979), Mr Jenard commented on article 16(5) of that convention (which is in the same terms in the Lugano Convention) in these terms:

“Enforcement of judgments

Article 16(5) provides that the courts of the State in which a judgment has been or is to be enforced have exclusive jurisdiction in proceedings concerned with the enforcement of that judgment.

What meaning is to be given to the expression ‘proceedings concerned with the enforcement of judgments’?

It means those proceedings which can arise from ‘recourse to force, constraint or distraint on movable or immovable property in order to ensure the effective implementation of judgments and authentic instruments’.

Problems arising out of such proceedings come within the exclusive jurisdiction of the courts for the place of enforcement.

Provisions of this kind appear in the internal law of many Member States.”

The recourse to which the author refers would, on facts such as those here, take place in Switzerland. The judgment of the European Court of Justice in Denilauler v Snc Couchet Frères (Case 125/79) [1980] ECR 1553 was not directed to the interpretation of article 16(5), but the observations in paragraph 16 of the judgment would apply with added force to execution:

“The courts of the place or, in any event, of the Contracting State, where the assets subject to the measures sought are located, are those best able to assess the circumstances which may lead to the grant or refusal of the measures sought or to the laying down of procedures and conditions which the plaintiff must observe in order to guarantee the provisional and protective character of the measures ordered.”

The opinion of the Advocate General (Herr Lenz) in AS-Autoteile Service GmbH v Pierre Malhé (Case 220/84) [1985] ECR 2267 was to similar effect (page 2271):

“Furthermore, the particular areas which fall under Article 16, certain disputes regarding tenancies, companies, registers, industrial property and the enforcement of judgments, are matters which, because of their particular difficulty or complexity, require that the court having jurisdiction should be particularly familiar with the relevant national law.”

Reichert and Others v Dresdner Bank AG (Case C-261/90) [1992] ECR 1-2149 was a case concerned with article 16(5) of the Brussels Convention, among other articles. In the course of its judgment the European Court of Justice said (in paragraph 26):

“From that point of view it is necessary to take account of the fact that the essential purpose of the exclusive jurisdiction of the courts of the place in which the judgment has been or is to be enforced is that it is only for the courts of the Member State on whose territory enforcement is sought to apply the rules concerning the action on that territory of the authorities responsible for enforcement.”

It would appear that very much the same considerations of principle, comity and convenience as underlie the English law are reflected in the jurisprudence on the Brussels and Lugano Conventions also.

7. I would accordingly allow the appeal and make the order which Lord Hoffmann proposes.

LORD NICHOLLS OF BIRKENHEAD

My Lords,

8. I have had the opportunity of reading in draft the speeches of my noble and learned friends Lord Bingham of Cornhill and Lord Hoffmann. I agree that, for the reasons they give, this appeal should be allowed.

LORD HOFFMANN

My Lords,

9. Mr Qabazard conspired with others to defraud the Kuwait Oil Tanker Company SAK and Sitka Shipping Inc (“KOTC”) of large sums of money. On 16 November 1998 Moore-Bick J gave judgment against him for over US$130m. An appeal was dismissed in May 2000. Since then, KOTC have been trying to find assets of Mr Qabazard against which to execute. By December 2000 they had found and recovered a mere £140,000.
10. Ten years earlier Mr Qabazard, in his own name and also under an alias, maintained accounts with UBS AG (“UBS”, formerly Union Bank of Switzerland) in London and Geneva. Documents obtained by KOTC showed that in November 1990 he transferred $US34.5m from his London account to his Swiss account. KOTC suspected that he might still have money in accounts at one or other of the branches of UBS. On 19 December 2000 KOTC issued an application under RSC, Ord 49, r 2 for a garnishee order in respect of all debts due from UBS to Mr Qabazard. On 21 December 2000 Tomlinson J made an order nisi under r 1(2) calling upon UBS to show cause as to why the order should not be made absolute. The order nisi was served upon UBS at its branch office in London. UBS responded with a witness statement by its Legal Counsel saying that (1) the London branch held no account in the name of Mr Qabazard or his alias and (2) UBS was prohibited by Swiss law from disclosing whether he had an account at a branch in Switzerland.
11. The application to make the garnishee order absolute was heard by Langley J on 23 March 2001. The judge said that it was clear that the relevant accounts, if any, were in Switzerland. Nothing had been found in England. So the question was whether an English court should make a garnishee order in respect of money held by the judgment debtor in a Swiss bank account.
12. UBS argued that the court had no jurisdiction to make such an order because article 16(5) of the Lugano Convention, to which Switzerland and the United Kingdom are parties, provides that “in proceedings concerned with the enforcement of judgments, the courts of the Contracting State in which the judgment has been or is to be enforced” shall have exclusive jurisdiction. The attachment of money in a Swiss bank account was enforcement of the judgment in Switzerland and therefore within the exclusive jurisdiction of the Swiss courts.
13. In the alternative, UBS said that it would be inequitable to make a garnishee order which had the consequence of requiring it to pay KOTC any money which might be standing to the credit of Mr Qabazard in Switzerland because UBS would be at risk of having to pay twice. RSC, Ord 49, r 8 provides that payment by a garnishee under an order absolute is a valid discharge of his liability to the judgment debtor. But, under general rules of private international law, the discharge cannot affect a debt which (like money in a Swiss bank account) is neither situate in England nor governed by English law. It would not provide UBS with a defence to a claim by Mr Qabazard in a Swiss court.
14. Langley J said that, “on balance”, he did not think that the Lugano Convention deprived him of jurisdiction. A garnishee order against UBS in London would not infringe Swiss sovereignty by applying a foreign enforcement procedure within its jurisdiction. It operated only indirectly on the Swiss account. But he accepted that on the evidence of the Swiss conflict of laws and its banking laws, there was a real risk that UBS would be exposed to proceedings by Mr Qabazard and to other sanctions under Swiss law. He therefore dismissed the application to make the garnishee order absolute and discharged it.
15. By the time the case came before the Court of Appeal, a different constitution had decided Société Eram Shipping Co Ltd v Compagnie Internationale de Navigation [2001] 2 All ER (Comm) 721, which is the subject of the other appeal in which your Lordships are giving judgment today. Following that decision, Longmore LJ, who gave the judgment of the court, held that the place where the garnishee order was being enforced was England. It was there that UBS was being required to pay. Article 16(5) was therefore no obstacle to the exercise of jurisdiction. On the contrary, it conferred exclusive jurisdiction upon the English court. On the question of whether UBS was likely to have to pay twice, the Court of Appeal remitted the matter to the judge for further consideration as to whether Swiss law would recognise a restitutionary claim such as the court in the Eram case had considered that the garnishee would be able to set off against a claim for payment of the debt.
16. My Lords, I think it is clear that neither of these reasons can stand with the judgments which have been given today in the Eram case. It is not correct to characterise the garnishee or third party debt order as a claim in personam made against the third party in England. It is enforcement of the judgment in rem against the debt, which in this case is situated in Switzerland. Article 16(5) therefore confers exclusive jurisdiction on Switzerland and it is understandable that UBS’s Swiss law expert should have said that a Swiss court would regard the order as an infringement of its sovereignty. Indeed, the judgment of the Court of Appeal produces the extraordinary result that the courts of any member state in which UBS maintains a branch have exclusive jurisdiction under article 16(5) to make a garnishee or similar order in respect of a debt in Switzerland – a strange form of exclusivity.
17. The other point is also governed by your Lordships’ judgment in the Eram case. The Swiss debts, if any, are foreign debts and will not be discharged by compliance with the English order. So even without article 16(5), Langley J was right not to make the order.
18. I would therefore allow the appeal and restore the order of Langley J discharging the garnishee order.

LORD HOBHOUSE OF WOODBOROUGH My Lords,

19. For the reasons given by my noble and learned friends Lord Bingham of Cornhill and Lord Hoffmann, I too would allow the appeal and make the order proposed.

LORD MILLETT

My Lords,

20. I have had the advantage of reading in draft the speeches of my noble and learned friends, Lord Bingham of Cornhill and Lord Hoffmann. I agree with them, and for the reasons they give I too would allow the appeal.
21. The case is governed by the decision of your Lordships in Société Eram Shipping Co Ltd v Hong Kong and Shanghai Banking Corporation Ltd, but is a fortiori. The debt is situate in Switzerland, like the United Kingdom a party to the Lugano Convention. The case is therefore governed by article 16(5) of the Convention, which is given the force of law in the United Kingdom by section 3A of the Civil Jurisdiction and Judgments Act 1982. In the present case, therefore, the limits of the court’s jurisdiction to enforce its judgments are not a matter of self-restraint, but are imposed from without by Convention and statute. Since the judgment creditor is seeking to execute a judgment against the property and not the person of the judgment debtor, and the property in question is situate in another Convention state, the court is bound to decline jurisdiction.