Two recent decisions have shed light on the tricky issue of where proceedings should be brought in international employment law disputes.
In Ravisy v (1) Simmons & Simmons LLP (2) Mr C Taylor the EAT considered whether multiple defendants to different actions who were located in different jurisdictions could be sued in the Employment Tribunal in the UK. In Bosworth and anor v Arcadia Petroleum Ltd and others the ECJ considered whether two directors were truly engaged under "individual employment contracts" requiring them to be sued in their country of domicile, rather than the English Courts where proceedings had been issued.
The Brussels Recast Regulation (Brussels) governs jurisdiction and the recognition and enforcement of judgments in civil and commercial matters for EU Member States. The Lugano Convention (Lugano) covers broadly the same ground as Brussels, but is of relevance to disputes between a party based in an EU Member State and a party based in either Switzerland, Norway or Iceland.
The general rule under both Brussels and Lugano is that the Court where the defendant is domiciled will have jurisdiction, regardless of the defendant's nationality. However, there are various exceptions to this general rule, which may allow a defendant to be sued in a state where he or she is not domiciled. One such exception is made for disputes involving multiple defendants based in different jurisdictions. Here, the position is that a Court is able to exercise special jurisdiction over another Member State's defendant who is not domiciled within their own Member State, provided that there is a defendant who is domiciled within that Court's jurisdiction. The purpose of this exception is to avoid the risk of irreconcilable judgments on the same issue.
Special rules apply in disputes involving "individual employment contracts", where the rules are adjusted with a view to putting the employee in the position which is most favourable to his or her interests. One aspect of these special rules is that an employee can only be sued where they are domiciled.
Can multiple defendants located in different jurisdictions be sued in the same jurisdiction?
In Ravisy v (1) Simmons & Simmons LLP (2) Mr C Taylor the Claimant was a French lawyer based in Paris and an equity partner of the defendant LLP, which was registered in the UK.
Under Brussels, an employee is entitled to sue the employer either in the state that the employer is domiciled, or in the state in which the employee habitually worked. The Claimant brought claims against the LLP in the Employment Tribunal in the UK. It was conceded that the Claimant was an employee for the purposes of Brussels and that the Tribunal had international jurisdiction to hear the claim against the LLP.
However, the Claimant also brought a claim in the UK against a French colleague. At a Preliminary Hearing, the Employment Tribunal said that Brussels did not prevent it having international jurisdiction over that claim, since the multiple defendants' exception applied meaning it was able to exercise special jurisdiction.
On appeal, the second defendant, Mr Taylor, argued that the exception did not apply because the claims had been brought separately against him and the LLP. Even though the claims were closely linked, his position was that the exception as to special jurisdiction should only apply where there are multiple defendants to the same action.
The EAT dismissed the second defendant's appeal on this point, concluding that the Tribunal had applied the exception correctly. The second respondent's interpretation of the rule would require additional words to be read into Brussels. The EAT concluded that the correct reading of the exception is that where defendants are party to a claim or claims raising issues in the same factual matrix, the rule will apply. The procedural mechanics operating in a particular Member State should not determine whether the rule applied.
However, the Claimant was ultimately prevented from pursuing her claims of discrimination and equal pay on the basis that they fell outside the territorial scope of the Equality Act 2010. The Claimant worked in France and had not been able to demonstrate a sufficiently strong connection with Great Britain. The EAT held that to decide otherwise would be to give disproportionate weight to the ownership structure of the LLP and the extent of the control and supervision from London.
Are directors engaged under "individual employment contracts" meaning they should be sued in the country in which they are domiciled?
In Bosworth and anor v Arcadia Petroleum Ltd and others Mr Bosworth and Mr Hurley (the Directors) were directors of both Arcadia Group and various other Arcadia companies. Both were British nationals domiciled in Switzerland, which meant that Lugano was relevant.
Claims of unlawful means conspiracy and breach of fiduciary duties were brought in the English Courts against the Directors in relation to fraudulent transactions involving the Arcadia group of companies. However, the Directors challenged the jurisdiction of the English Courts on the grounds that the exception concerning individual contracts of employment in Lugano applied. This would mean they would have to be sued in Switzerland where they were domiciled.
The issue was ultimately appealed to the Supreme Court, who stayed proceedings pending a reference to the ECJ. The key question for the ECJ was whether the employment exception applied in circumstances where the Directors had determined the terms of their own contracts of employment and had day-to-day control over the operation of the business, but where their employment could ultimately be terminated by the shareholders of the company.
The ECJ noted that the essential feature of an employment relationship is the existence of a hierarchical relationship between employer and worker. Here, the Directors had an ability to influence Arcadia that was "not negligible" and this was inconsistent with a relationship of subordination. The fact that the Directors were ultimately answerable to the shareholders was not sufficient to indicate a relationship of subordination. Accordingly, the Directors in this case were not employees for the purposes of Lugano and could not rely on the employment exception to force proceedings to be issued in Switzerland. The claims brought before the English Courts will now proceed.
The Ravisy decision is reassuring for claimants bringing proceedings against multiple defendants based in different jurisdictions. It clarifies that the special jurisdiction rule will apply even to separate claims brought against multiple defendants, provided that the claims concern the same issues and arise out of the same facts. In other words, it is a question of substance rather than form.
The Bosworth decision will be of interest to companies considering a claim against a director and weighing up where to sue. The decision does not mean that a director can never be an employee for the purposes of Lugano or Brussels - an assessment will have to be made on the particular facts. However, it suggests that where a director has a material degree of control over the company (which will frequently be the case) this will undermine the notion that they are in a relationship of subordination.