Dispute arising from operations of the branch, agency or establishment

It is not enough that the branch or agency satisfies the tests of apparency and permanence and the power to make contracts which bind the principal. The dispute must itself arise out of the operations of that branch or agency. In Somafer SA v Saar-Ferngas AG, it was explained that Article 5(5) applied to proceedings concerning the running or management of the agency, and actions relating to business contracted in the name of the parent, and non-contractual cases arising from the activities of the agency. The judgment in ZX v Ryanair DAC,™ refined this, explaining that ‘the dispute must concern either acts relating to the operations of a branch, or commitments entered into by such a branch on behalf of the parent body, if those commitments areto be performed[1] in the State in which that branch is situated’. So, for example, if the local branch has played no part in the creation of the contractual relationship which has given rise to the dispute, the Article will not apply. Where it is alleged that there is special jurisdiction in respect of a tort committed by the defendant, it is necessary to show that the branch ‘actually and significantly’ played a part in the commission of the wrong, for example by itself offering flights at predatory prices. It follows that the mere fact that a defendant has carried on business in a particular Lugano State does not, without more, expose it to the special jurisdiction of the courts of that State. The fact that the defendant owns property and that as a consequence owes obligations in respect of maintenance of common parts, and so forth, does not bring the claim for payment within the Article, as the ownership does not amount to an ‘operation’ of the branch.

It is not a requirement that the activity undertaken by the branch must be implemented or carried out in the Lugano State in which the branch is situated. A suggestion that there was such a further limiting condition was clearly present in obiter dicta in the judgment in Somafer,M and echoed in the later cases which simply referred back to the Somafer judgment. But it was rejected, surely correctly, in Lloyd’s Register of Shipping v Soc Campenon Bernard. In that case, the French branch of the defendant, a classification society domiciled in the United Kingdom, contracted to provide services which would actually be performed for, and delivered to, the claimant by the defendant’s sub-contractor in Spain. It was held that Article 5(5) gave the French courts special jurisdiction over the defendant, even though the actual work was to be performed in Spain, because the claim arose out of the operations of the French branch. Had this not been held there would, in contractual claims at least, have been such an overlap between Articles 5( 1) and 5(5) that the latter would have been deprived of significant effect. The Court of Appeal examined the issues closely before coming to the view that Somafer was, on this point, wrong; and the point should now be taken as resolved.

International jurisdiction in the English court

As Article 5(5) gives international jurisdiction to the courts for the place where the branch, agency or other establishment is situated, it will give international jurisdiction to the English courts, rather than to those of the United Kingdom. Accordingly, there is neither room nor need for a further rule of internal United Kingdom law to allocate jurisdiction within the United Kingdom.

Special jurisdiction over a trustee, beneficiary or settlor sued as such: Article 5(6)

Article 5(6) of the Lugano Convention provides that:

A person domiciled in a State bound by this Convention may, in another State bound by this Convention, be sued: (6) as settlor, trustee or beneficiary of a trust created by the operation of a statute, or by a written instrument, or created orally and evidenced in writing, in the courts of the State bound by this Convention in which the trust is domiciled.

When the United Kingdom first acceded to the Brussels Convention, Article 5(6) was added to the original text, for the original Contracting States had not needed a special jurisdictional rule for proceedings relating to trusts. The rule of special jurisdiction applies in relation to trusts created by operation of statute, or created by a written instrument, or created orally but evidenced in writing.[2] In respect of all such trusts, special jurisdiction is available for actions against a trustee, beneficiary or settlor, who is sued as such and who is domiciled in a Lugano State, in the courts of the Lugano State in which the trust is domiciled. The rule applies, of course, only if the dispute falls within the material scope of the Convention in the first place: in this respect it is of particular significance that wills, matrimonial property and bankruptcy fall outside it. Professor Schlosser was of opinion that the trust created by (or arising on the conclusion of) a contract for the sale of land does not fall within the provision, although, as the contract must itself be made in writing in order to have any legal effect, it is not certain that this is correct.

According to Article 60(3), the domicile of a trust is ascertained by reference to rules of private international law of the Lugano State whose courts are seised of the case. In England, those rules were made in Civil Jurisdiction and Judgments Act 1982, Section 45. The effect of these provisions is that a trust is domiciled in the United Kingdom only if it is domiciled in a part of the United Kingdom; and Section 45(3) provides that a trust is domiciled in a part of the United Kingdom if and only if the law of that part is the system of law with which the trust has its closest and most real connection.

As a consequence, if the trust has its closest and most real connection with English law, the trust will be domiciled in the United Kingdom for the purposes of the Convention. When that is so, Article 5(6) will confer international jurisdiction upon the courts of the United Kingdom. It is therefore necessary for rules of internal United Kingdom law to specify the part of the United Kingdom which is to have special jurisdiction for the purpose of Article 5(6). These provide that the proceedings shall be brought in the part of the United Kingdom in which the trust is domiciled. The course of this rather elaborate path leads to the broad conclusion that trusts governed by English law are domiciled in England, and that no other trusts are.

The identification of the system of law with which a trust has its closest and most real connection will be straightforward if the settlor selected and expressed the law to govern the trust.[3] Where this was done, it is practically impossible to imagine that an express choice of a domestic law will not be the system of law with which the trust has its closest and most real connection. It was accepted in Gomez v Gomez-Monche Vives™ that it was theoretically possible to imagine a case in which an express choice of law would not have this effect, but such cases, if they exist at all, will be very rare indeed. It also follows that factual connections with a country other than that of the chosen law will be unlikely to displace the chosen law as the system of law with which the trust is most closely connected, as the required connection is with a system of law, not a country.

  • [1] It is submitted that ‘performed’ must be interpreted as ‘made and concluded’, and not as ‘acted out in performance of the commitment made’, for the reasons explained below. 2 C-154/11 Mahamdia v People's Democratic Republic of Algeria EU:C:2012:491, [2013] ICR 1, [48]; C-27/17 AB ‘flyLAL-Lithuanian Airlines’ as v Starptautiskä lidosta Riga' VAS, EU:C:2018:533, [2019] 1 WLR 669, [59]. 3 C-200/19 INA-Industrija Nafte dd v Ljubljanska Banka dd, EU:C:2019:985, [2020] ILPr 160. 4 At [13]. 5 C-154/11 Mahamdia v People’s Democratic Republic of Algeria EU:C:2012:491, [2013] ICR 1, [48]; C-27/17 AB flyLAL-Lithuanian Airlines' v Starptautiskä lidosta Riga' IMS, EU:C:2018:533, [2019] 1 WLR 669, [59]. 6 C-439/93, [1995] ECR 1-961. 7 Anton Durbeck GmbH v Den Norske Bank ASA [2003] EWCA Civ 147, [2003] QB 1160.
  • [2] Thereby excluding remedial constructive trusts, if such things really exist. For the problems which have arisen, see Williams v Central Bank of Nigeria [2014] UKSC 10, [2014] AC 1189. 2 Probably at the institution of proceedings, not at the date of the setting up of the trust: Chellaram v Chellaram [2002] EWHC 632 (Ch), [2002] 3 All ER 17. 3 [1979] OJC59/71, [117], [172]. 4 Law of Property (Miscellaneous Proceedings) Act 1989, Section 2. 5 Article 60(3). 6 Civil Jurisdiction and Judgments Act 1982, Sch. 4 r. 3(f).
  • [3] Recognition of Trusts Act 1987, enacting certain provisions of the Hague Convention on the Recognition of Trusts. 2 [2008] EWCA Civ 1065, [2009] Ch 245. 3 Not only has Spain not ratified the Hague Convention on the Recognition of Trusts, the Spanish Supreme Court had only the year before refused to recognise a foreign trust (governed by the law of an American State) on grounds little more sophisticated than that the institution was not known to Spanish law: Supreme Court (Section la) 30 April 2008, [2008] RJ 2685.
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