Akcil & Ors v Koza Ltd & Anor [2019] UKSC 40

The Supreme Court held that article 24(2) of the Brussels I Recast Regulation must be interpreted strictly. English courts had no jurisdiction over the authority claim challenging the Turkish trustees' appointment, as that claim's principal subject matter concerned a Turkish company's internal affairs.

Facts

Koza Altin, a publicly listed Turkish gold mining company, is the sole shareholder of Koza Ltd, an English subsidiary. Following a criminal investigation in Turkey against Mr Ipek (the former controller of the Koza Ipek Group) and his family, Turkish courts appointed trustees to manage Koza Altin in place of its existing management. Prior to those appointments, Mr Ipek had caused Koza Ltd’s articles to be amended to introduce article 26 and a new class of ‘A’ shares, purportedly preventing changes to directors without ‘A’ shareholder consent.

In July and August 2016, the trustees caused Koza Altin to serve notices under sections 303 and 305 of the Companies Act 2006 to convene a meeting to remove Koza Ltd’s directors. Mr Ipek and Koza Ltd obtained an injunction and brought two claims: (i) the ‘English company law claim’ – that the notices were void under article 26; and (ii) the ‘authority claim’ – that the English courts should not recognise the trustees’ authority to act on behalf of Koza Altin, on grounds including breach of Turkish law, the ECHR and public policy.

Asplin J and the Court of Appeal held that article 24(2) of the Recast Regulation conferred jurisdiction on the English courts over both claims, on the basis that the authority claim was inextricably linked with the English company law claim and the proceedings, viewed overall, principally concerned Koza Ltd’s internal affairs.

Issues

The Supreme Court had to decide:

• Whether article 24(2) of the Recast Regulation conferred exclusive jurisdiction on the English courts to determine the authority claim as against Koza Altin;
• Whether article 24(2) conferred exclusive jurisdiction on the English courts to determine either claim as against the Turkish trustees.

Arguments

Appellants (Koza Altin and trustees)

The appellants argued that the Court of Appeal’s broad evaluative approach impermissibly widened article 24(2). The authority claim principally concerned the validity of decisions of the organs of a Turkish company, and any exclusive jurisdiction would lie with Turkish courts (tested hypothetically as if Turkey were a member state). The claims were distinct and not inextricably bound together, and a mere link between the claims was insufficient.

Respondents (Koza Ltd and Mr Ipek)

The respondents defended the reasoning of the courts below, maintaining that the proceedings viewed overall were principally concerned with Koza Ltd’s internal affairs, such that article 24(2) conferred exclusive jurisdiction on the English courts over all claims and parties.

Judgment

Lord Sales (with whom Lord Reed, Lord Hodge, Lady Black and Lord Briggs agreed) allowed the appeal.

Interpretation of article 24(2)

The Court held that article 24(2) creates exclusive jurisdiction, meaning only one member state can have such jurisdiction for a given claim. This militates against the broad evaluative approach adopted by the courts below, since predictability is a key objective of the Regulation (recital 15).

Reviewing CJEU jurisprudence — Hassett v South Eastern Health Board, the BVG case, Schmidt v Schmidt, and EON Czech Holding AG v Dědouch — Lord Sales confirmed that article 24(2) must be interpreted strictly (narrowly). The provision covers only proceedings whose ‘principal subject matter’ comprises the validity of the constitution, nullity, dissolution, or the validity of the decisions of the organs of a company. A mere link between a claim falling within article 24(2) and another claim is insufficient to bring the latter within the provision.

Application to the authority claim

The English company law claim and the authority claim, though connected, were distinct and not inextricably bound together. Each could be brought and made good on its own terms. Assessed as a distinct set of proceedings, the authority claim’s principal subject matter comprised the validity of decisions of the organs of a company seated in Turkey. Testing hypothetically by treating Turkey as a member state (e.g. Greece), exclusive jurisdiction would plainly lie with Turkish (Greek) courts, not English ones. The Court of Appeal’s reasoning impermissibly reversed the approach in the BVG case, which narrowed rather than widened article 24(2).

Application to the trustees

Since article 24(2) did not cover the authority claim, the English courts had no jurisdiction over the trustees under that provision in respect of that claim. The proceedings against the trustees were principally concerned with the authority claim, and the trustees were not necessary parties to the English company law claim. A strict interpretation of article 24(2), considered separately for each claim, led to the conclusion that it did not cover the trustees in relation to either claim.

Consequence of Turkey’s non-member status

Lord Sales noted that because Turkey is not an EU member state, Turkish courts do not enjoy exclusive jurisdiction under the Recast Regulation. Accordingly, the inapplicability of article 24(2) does not preclude the English courts from assuming jurisdiction over the authority claim on some other basis under the Civil Procedure Rules, though that question did not arise on the appeal.

Implications

The decision reinforces a strict, narrow interpretation of article 24(2) of the Recast Regulation consistent with settled CJEU authority. It clarifies that where proceedings contain multiple distinct claims, the court must assess each claim separately, rather than applying an overall evaluative judgment to determine whether article 24(2) applies to the proceedings as a whole. A mere link between a claim falling within article 24(2) and another distinct claim is insufficient to pull the latter within the exclusive jurisdiction regime.

For corporate litigators, the case confirms that disputes concerning the validity of decisions of the organs of a foreign company (including the authority of those appointed to manage it) are, as a matter of jurisdictional principle under the Recast Regulation, to be tried where that company has its seat — particularly because that jurisdiction is best placed to apply the relevant law and to avoid conflicting judgments across member states.

The judgment also confirms that the interpretation of article 24(2) does not vary according to whether the relevant foreign state is an EU member state. However, where the foreign state is non-EU (as with Turkey), the inapplicability of article 24(2) to vest jurisdiction in the English courts does not prevent jurisdiction being established under the domestic rules on service out, leaving a potentially significant residual avenue unresolved on the appeal.

More broadly, the case underscores the priority given to predictability and certainty in EU jurisdictional rules and the narrow compass of the exclusive jurisdiction provisions in article 24, which cut across the general rule of defendant domicile and principles of party autonomy.

Verdict: The Supreme Court allowed the appeal. It held that (i) the English courts have no jurisdiction under article 24(2) of the Recast Regulation over the trustees in relation to any part of the claims; (ii) the English courts have jurisdiction under article 24(2) over Koza Altin in respect of the English company law claim; and (iii) the English courts have no jurisdiction under article 24(2) over Koza Altin in respect of the authority claim.

Source: Akcil & Ors v Koza Ltd & Anor [2019] UKSC 40