|
HOUSE OF LORDS |
SESSION 2002-03
[2003] UKHL 31
on appeal from: [2002] EWCA Civ 34 |
OPINIONS
OF THE LORDS OF APPEAL
FOR JUDGMENT IN THE CAUSE
Kuwait Oil Tanker Company SAK and others (Respondents)
v.
UBS AG (Appellants)
ON
THURSDAY 12 JUNE 2003
The Appellate Committee comprised:
Lord Bingham of Cornhill
Lord Nicholls of Birkenhead
Lord Hoffmann
Lord Hobhouse of Woodborough
Lord Millett
HOUSE OF LORDS
OPINIONS OF THE LORDS OF APPEAL FOR JUDGMENT
IN THE CAUSE
Kuwait Oil Tanker Company SAK and others (Respondents)
v. UBS AG (Appellants)
[2003] UKHL 31
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. | 
