Supreme Court dismisses appeal on lis pendens, upholding stay due to Italian court's jurisdictional deference.

THE SUPREME COURT

[Appeal No: 38/2013]

Clarke J.

MacMenamin J.

Dunne J.

Between/

Websense International Technology Limited

Plaintiff/Appellant

and

ITWAY SpA

Defendant/Respondent

Judgment of Mr. Justice John MacMenamin delivered the 14th day of February, 2014.

1. Recital 15 of the preamble to Council Regulation (EC) No. 44/2001 on jurisdiction and the recognition and enforcement of judgments

in civil and commercial matters (“the Regulation”) recites:

“In the interests of the harmonious administration of justice it is necessary to minimise the possibility of concurrent

proceedings and to ensure that irreconcilable judgments will not be given in two Member States. There must be a

clear effective mechanism for resolving cases of lis pendens and related actions and for obviating problems flowing

from national differences as to the determination of the time when a case is regarded as pending. For the purposes

of this Regulation that time should be defined autonomously.”

2. Section 8 of the Regulation is headed “Examination as to jurisdiction and admissibility”. Under that rubric, Article 28 provides:

“1. Where related actions are pending in the courts of different Member States, any court other than the court first

seized may stay its proceedings.

2. Where these actions are pending at first instance, any court other than the court first seized may also, on the

application of one of the parties, decline jurisdiction if the court first seized has jurisdiction over the actions in

question and its law permits the consolidation thereof.

3. For the purposes of this Article, actions are deemed to be related where they are so closely connected that it is

expedient to hear and determine them together to avoid the risk of irreconcilable judgments resulting from separate

proceedings.” (emphasis added)

The close interlinking between the words “closely connected” and “expedient” lies at the centre of this case. Once a close connection

is established between two such cases in different jurisdictions, a court will require strong reasons to persuade it why it will not be

expedient to hear the two cases together.

The appeal

3. The matter which comes before this court is an appeal against the decision of the High Court (McGovern J.), dated the 6th

November, 2012, Websense International Technology Ltd -v- ITWAY S.P.A [2012] IEHC 446. The High Court, applying Article 28 of

the Regulation, stayed summary proceedings brought in Ireland by the plaintiff/appellant, Websense International Technology Ltd

(“Websense International”) on the ground that there were “related proceedings” in Italy. Websense International submits now that

the Italian proceedings are not “related proceedings” within the meaning of Article 28, and that the Irish and Italian proceedings did

not have, as McGovern J. observed in the High Court, “striking similarities”.

The issues

4. At the outset of the appeal, it was agreed that it was necessary for this Court to determine two issues. These were:

(1) Whether the Irish and Italian actions are “related” within the meaning of Article 28 of the Brussels Convention;

and

(2) Even if they are related, whether this was an occasion where the court should exercise its discretion under

Article 28 to nonetheless allow Websense International’s action to proceed in this jurisdiction despite the existence

of the Italian proceedings?

5. The issues for determination have given rise to significant jurisprudence before the CJEU, the courts of the neighbouring

jurisdiction, and our own courts. It will be necessary to consider that jurisprudence in a little detail later in this judgment. At the

outset, however, it is necessary to consider the factual background of the case in order to determine the extent to which the two

actions are, in fact, “related”.

The parties

6. Websense International is an Irish registered company. It is part of a multinational technology group. Websense Italia S.r.L.

(“Websense Italia”), Websense B.V., and Websense U.K. Ltd. are the Italian, Dutch and UK elements of the group. Where appropriate,

the worldwide organisation is referred to herein as “the Websense group”.

7. The defendant/respondent, Itway SpA (“Itway”), is an Italian company which heads a group which also operates internationally in

the information technology sector. It distributes e-business solutions and technologies, and includes, inter alia, a Turkish branch

(Itway Turkyie), and a Greek operation (Itway Hellas) respectively. Where necessary, these will be referred to collectively hereafter

as “the Itway Companies”.

8. The Websense group supplied information technology products to Itway. In turn, Itway distributed these products to resellers in a

range of countries. Websense International says that Itway has failed to pay for products and services provided to it, and that as a

consequence, the Irish company had to bring proceedings in this jurisdiction to recover the moneys due and owing on foot of a series

of invoices. In this case, Websense International pleaded, no doubt on insufficient available evidence, that there was no other related

claim in any proceedings in another Member State; and, for that reason, that it was entitled to bring proceedings here. The Irish

proceedings were brought on the 19th April, 2012. However, Itway’s Italian proceedings were actually initiated almost one month

earlier, on the 22nd March, 2012. The Italian courts were already, therefore, the courts “first seized” under Article 28.

The distribution agreement

9. The starting point to this litigation is a distribution agreement, concluded on the 26th April, 2010. By its terms, the Itway

Companies became the non-exclusive distributor of Websense products in Italy, Greece and Turkey. Following an internal

reorganisation of the Websense group in December 2010, the benefit of the distribution agreement was transferred to Websense

International, the Irish company, in which was vested the right to receive payments owed pursuant to that distribution agreement.

10. Clauses 3 and 18 of the distribution agreement required the Itway Companies to independently develop a “Value Added Reseller”

(“VAR”) network, using the necessary financial and human resources. The Itway Companies were required to pay for products

delivered by the Websense companies within 45 days of the invoice issue date. The parties later executed a side-letter by which the

terms of payment were varied, so that the Itway Companies were afforded a further 15 days of credit, with payments not falling due

until 60 days after the invoices were issued.

11. The distribution agreement operated in the following way. First, Itway and its associated companies purchased products from the

Websense group in accordance with the terms of the distribution agreement. Second, through separate contractual agreements, the

Itway Companies distributed these products to its VAR network. Third, as the value added distributor, the Itway Companies

guaranteed regularity of payments to Websense International, notwithstanding any obligations of the VAR network to the Itway

Companies. The Itway Companies’ status can, therefore, be seen as something analogous to both a conduit and guarantor of

payments to Websense International.

The Italian proceedings

12. In the Italian proceedings, the Itway Companies pleaded that, following the creation of a broad VAR network in Italy, Turkey and

Greece, the Websense group began to exploit its allegedly superior commercial power to interfere in Itway’s contractual relationships

with each VAR. The Itway Companies contend that Websense Italia directed those respective companies to use a company called

Astel S.r.L. (“Astel”) as a VAR. Allegedly, pursuant to this direction, the Itway Companies sold products to Astel, but they say that,

since 2008, Astel has defaulted on payment.

13. The Itway Companies plead that, in or about December 2010, after they had complained to the Websense group about the

difficulties in payment, and actual insolvency, they ceased supplying Astel. They then received orders from two other Italian “VARs”

outside its network, namely Redco Telematica SpA (“Redco”) and Amelia Informatica S.r.L. (“Amelia”). The Itway companies say that

neither Redco nor Amelia paid invoices at the agreed due dates.

14. The Itway Companies now claim that they sustained serious losses through what they claim was a series of somewhat byzantine

manoeuvres. They contend that the Websense group induced Redco and Amelia to act as a “front”, and to order Websense products

from Itway Companies, but that these consignments were actually intended for Astel. The Itway Companies say that the two VAR

companies were induced to sell on to Astel despite its poor financial condition. Neither received payments from Astel. As a

consequence, both companies suspended payments to the Itway Companies. As a result of all these actions, the Itway Companies

say that they sustained direct losses of some €930,000 due from the three VAR companies, Astel, Redco and Amelia. They also claim

for indirect losses. As a result, the Itway Companies say they suspended all payments to the Websense group in July 2011.

The “October Agreement”

15. Itway say that it negotiated and concluded a further agreement on the 20th October, 2011 (“the October agreement”). The

Websense group do not accept that any such agreement is binding on it. The Itway Companies contend that, as a result of this new

arrangement, the Websense group would be required to fulfil the orders from the Itway Companies; that Websense International

would not request payment of the overdue invoices up to the amount of €465,000, being a sum equal to approximately half the total

amount claimed by the Itway Companies from Websense Italia; that relations between the Websense group and the Itway Companies

would then recommence on the basis of their previous commercial relations, whereby the Websense group would leave the Greek and

Italian VARs free to choose their own distributor. The Itway Companies contend that, as a term of this variation in the agreement,

they would continue their legal initiatives against Redco and Amelia to recover the sums outstanding, and thereby reduce the

outstanding debt of €930,000, said to be due to Websense International. Once Itway’s credit with Redco and Amelia had been

satisfied, Websense International would then demand payment of the overdue invoices up to the amount resulting from the difference

between the total sum of €930,000 and the amount actually recovered from Redco and Amelia. Thereafter, the parties would, in good

faith, negotiate on a figure for the remaining disputed amount of approximately €500,000 being a sum approximately equal to the

Itway Companies’ credit with Astel for supplies made to it.

16. In the Italian proceedings, the Itway Companies contend that, as a consequence, there was an agreement that it would suspend

payment of the sum of €930,000 due to Websense, until it had received in full the amounts due from Redco and Amelia; and that

commercial relations between the parties would continue as usual.

17. The Itway Companies claim that they fulfilled the terms of the October agreement and continued with legal proceedings against

Redco and Amelia, ultimately obtaining a judgment against the former in the sum of €178,942. They claim that Websense Italia’s

subsequent refusal to continue to supply them on credit constituted a breach of the settlement allegedly entered into in October

2011. The Itway Companies allege that by refusing to supply them on credit, and other unlawful conduct, Websense Italia excluded

the Itway companies from the market in breach of the Italian Civil Code, which prohibits “boycotting”, thereby causing the Itway

Companies to suffer economic losses in an estimated sum of €3 million, which they seek to recover against Websense Italia.

The Irish Proceedings

18. In the Irish summary proceedings, Websense International pleads that the distribution agreement, made on 26th April 2010,

granted the Itway Companies, as distributor, a non-exclusive, non-transferable right to market and distribute Websense proprietary

software applications. Websense International pleads that the right to distribute its products was granted to VAR companies for Italy,

Turkey, Greece and Cyprus, for an initial term of 12 months, thereafter, automatically renewable. It says the agreement made

between the companies stipulated credit terms, and that all Itway Companies were to be jointly and severally responsible for such

credit arrangements.

19. Websense International pleads that a choice of jurisdiction clause in the distribution agreement stipulated that the agreement was

to be governed by, and construed in accordance with, the laws of Ireland, and that Ireland had exclusive jurisdiction, a point to

which I will return later in this judgment. It is said that, as a result of reorganisation, the benefit of the agreement was transferred to

Websense International in December 2010, and that, by an addendum to the agreement of the 12th April, 2011, a clause stipulating a

credit period of 45 days was extended to 60 days. Websense International pleads that the Websense group provided its products for

distribution in Italy, Greece and Turkey to the Itway companies, issued corresponding invoices which it has failed to pay, and that the

total amount now due and owing is €1,351,198.12, including €171,925.34 for products supplied for further distribution in Greece;

€709,724.06 for products supplied for further distribution in Italy; and €469,548.72 for products supplied for further distribution in

Turkey.

20. Clearly, if Itway’s narrative is correct, the Irish proceedings must be seen as part of a larger, more complex and multi-faceted

“contractual nexus” and, in that sense, a “subset” of the Italian proceedings.

The present motion

21. By notice of the 17th September, 2012, Itway brought a motion seeking to set aside the service of the notice of Websense

International’s summary summons of the 19th April, 2012, on the basis inter alia of Articles 27 and 28 of the Regulation. The motion

was heard by McGovern J. on the 17th October, 2012. He delivered judgment soon after, on the 6th November, 2012.

22. At the hearing of the appeal, it was clear that only Article 28 of the Regulation was engaged, as there could be no question that

these cases came within the terms of Article 27 of the Regulation, which concerns the same cause of action between the same

parties. Furthermore, although the motion sought to set aside service of the proceedings, the primary relief actually sought was a

stay on the Irish proceedings. As a consequence, this judgment addresses only the issue of a stay under Article 28(1) of the

Regulation.

The judgment of the High Court

23. McGovern J. pointed out that the Italian courts were first seised. He determined that the Italian and Irish proceedings were

“related actions” within the meaning of the Article 28 of the Regulation. Accordingly, he stayed the Irish proceedings until such time

as the Italian court decided whether or not it would accept jurisdiction. Websense International had argued that because of the

exclusive jurisdiction clause in the distribution agreement, Ireland was the place in which all disputes arising out of, or having a

connection with, the distribution agreement should be dealt with. The High Court judge accepted that the distribution agreement

should be governed by, and construed in accordance with, the laws of Ireland, and that the clause came within the ambit of Article

23(1) of the Regulation, which provides:

“If the parties, one or more of whom domiciled in a Member State, have agreed that a court or the courts of a

Member State are to have jurisdiction to settle any disputes which have arisen or which may arise in connection

with a particular legal relationship, that court or those courts shall have jurisdiction. Such jurisdiction shall be

exclusive unless the parties have agreed otherwise…”

The judge found, however, that the only relevance of this clause was that it would be necessary for the Italian court, as the court

first seised, to decide whether or not it could accept jurisdiction.

24. Counsel for Websense International now makes the point that the Italian court has, in fact, decided to try the question of

jurisdiction at the same time as the substantive hearing, so there will be no preliminary hearing on jurisdiction. Websense International

now contends that the trial judge erred in failing to take account the exclusive jurisdiction clause in any way. I deal with this point

later.

25. The High Court judge held that the Italian proceedings involved (a) a claim against Websense Italia for breach of the distribution

agreement of the 26th April, 2010; (b) a claim for breach of the October agreement; and (c) a non-contractual claim. Websense

International points out, correctly, that, in fact, there is no claim by the Itway Companies for breach by the Websense group of the

distribution agreement in the Italian proceedings, and that this claim is made only in the Irish proceedings. Despite this, the

distribution agreement is unavoidably a backdrop to the entire claim.

26. Counsel for Websense International submits that the judge’s conclusion that there were “striking similarities” between the two

sets of proceedings is unjustified. Counsel says that this conclusion is derived from the fact that both sets of proceedings arose out

of the distribution agreement, and that the parties in the Irish proceedings would have included some part of these issues in the

Italian suit, were it not for the transfer of the benefit of the distribution agreement to the appellant in December 2010 as a

consequence of Websense’s global reorganisation. In my view, these are distinctions which make no difference to the main points of

relationship.

27. It has been established, at minimum, that there is a significant overlap of issues between the Italian and Irish proceedings. Both

emanate from the distribution agreement entered into in 2010. Both must ultimately address whether that agreement was varied in

October 2011. There is a degree of overlap between the parties involved. There must be an overlap of witnesses. The object of each

proceeding is to identify liabilities said to arise from transactions in 2010 and 2011. Itway’s indebtedness, as Websense International

claims in the Irish proceedings, is said to derive from the latter’s alleged wrongful collateral actions as outlined earlier.

28. The binding nature of the choice of jurisdiction clause will, of necessity, have to be litigated in the Italian proceedings, even

though it has been subsumed in the substantive hearing. As an ancillary submission, Websense International contend that in the

event of the Italian proceedings being permitted to proceed, they will suffer prejudice, in that the Italian proceedings will take longer

to proceed to hearing than those initiated in Ireland.

The Regulation and its purpose

29. It is clear that, pursuant to Article 30 of the Regulation, the Italian court must be “deemed to be seised” at the time when the

document instituting the proceedings was lodged with the court. It is not suggested that the Itway Companies, the Italian plaintiffs,

subsequently failed to take steps necessary to have service affected on the Websense defendant in the Italian proceedings. Thus,

the Italian courts continue to be those first seised.

30. The primary objective of the Regulation is certainty. This is to be achieved by the provisions of rules which enable:

“ … the claimant to identify easily the court in which he may sue and the defendant reasonably to foresee the court

in which he may be sued” (Case C-168/02 Kronhofer v Maier [2004] E.C.R. I-6009).

In order to ensure predictability and legal certainty, the Court of Justice has endorsed the concept of autonomous interpretation of

the Regulation. This not only provides for uniform application, but ensures the achievement of the objective of avoiding multiple bases

of jurisdiction in relation to one dispute in the same legal relationship. A further objective of the Regulation is to enhance the legal

protection of defendants by preventing the phenomenon of forum shopping.

31. Of course, the purpose of Article 28 of the Regulation is, where possible, to avoid cases in which a judgment given in one

contracting state is liable to conflict with a judgment given by another contracting state. The first question is whether it can be said

the two cases at hand are “related” causes of action under Article 28. The test, which is set out in the Regulation itself is that

actions are “deemed to be related” where they are so closely connected that it is “expedient to hear and determine them together to

avoid the risk of irreconcilable judgments resulting from separate proceedings”. However, Article 28(1) vests a discretion in the

national court which “may stay its proceedings” where it is found proceedings may be deemed to be related in the sense of a close

connection referred to earlier. The second question, assuming both proceedings to be related, is as to whether any discretion arising

could or should or should be exercised against a stay.

32. The fact that the term “related action” has an autonomous meaning derives from the undoubted fact that it will not have the

same interpretation in all Member States in their national laws. As a consequence, in Case C-406/92 The Tatry v Maciej Rataj [1994]

ECR I-5439, the Court of Justice held that:

“In order to achieve proper administration of justice, that interpretation [of related action] must be broad and cover

all cases where there is a risk of conflicting decisions, even if the judgments can be separately enforced and their

legal consequences are not mutually exclusive.” (para. 52)

This broad statement of principle is clearly intended to forestall any possibility that national courts might feel constrained to engage in

a minute or piece by piece analysis of the similarities and distinctions between two cases in two different Member States. No such

approach is warranted.

33. There is a strongly expressed persuasive authority to this effect from the neighbouring jurisdiction. In Sarrio SA v Kuwait

Investment Authority [1997] 1 Lloyd’s Rep. 113, the Court of Appeal concluded that the issues which must be considered in order to

decide whether or not there was a risk of irreconcilable judgments included the issues of fact and law which had to be decided in

order that the court could reach its judgment in a particular case. That Court described these as “primary” issues “limited to those

facts which were necessary to establish a cause of action”. Evans L.J. considered that these “primary issues” represented “the

process of reasoning” upon which a court’s judgment is based, but they did not include “other issues of fact which the court may or

may not decide and which are not essential to its conclusion in this way”. The Court concluded that the “primary issues of fact” in

the Sarrio proceedings were distinct from those in related Spanish proceedings, and that there was no risk of irreconcilable judgments.

34. Any such “close analysis” approach was decisively, and unanimously, rejected by the House of Lords (Sarrio SA v Kuwait

Investment Authority [1999] 1 A.C. 32). In the single speech, Lord Saville, speaking for the panel, pointed out that, in Maciej Rataj,

the Court of Justice had been at pains to emphasise that the phrase “irreconcilable judgments” should not be given a limited meaning.

In the quotations which follow now, the Article number referred to relates to the Regulation’s predecessor. There is no material

difference in content. Lord Saville put matters this way:

“Indeed, to limit the application of article 22 [now Article 28] to cases where there is a potential conflict between

so-called "primary" issues, so far from giving the article a broad interpretation, comes dangerously close to the

argument rejected in The Maciej Rataj.”

He continued:

“If there are only to be irreconcilable judgments where one or more of "the facts which are necessary to establish a

cause of action" are potentially in conflict, then at least in cases where the parties are the same, the article will be

likely to be confined to situations where there is a risk that the legal consequences will be legally exclusive.”

35. But, he observed, the “wide words” of that Article were:

“designed to cover a range of circumstances, from cases where the matters before the courts are virtually identical

… to cases where although this is not the position, the connection is close enough to make it expedient for them to

be heard and determined together to avoid the risk in question.” (emphasis added)

He added this:

“These words are required if "irreconcilable judgments" extends beyond "primary" or "essential" issues, so as to

exclude actions which, though theoretically capable of giving rise to conflict, are not sufficiently closely connected

to make it expedient for them to be heard and determined together. The words would hardly be necessary at all if

the article was to be confined as suggested. Indeed, in that event, it seems to me that quite different words would

have been used.”

36. He went on to make the following broad statement of principle, with which I entirely agree:

“ …I take the view that to attempt to analyse actions so as to distinguish between different kinds of issues would

be likely to add to the complexity of applications under article 22 and thus to the expense and delay in dealing with

them. Instead of simply considering whether the actions were so closely connected that it was expedient that they

should be heard and determined together to avoid the risk of conflicting decisions, the parties and the court would

have to embark upon a sophisticated and difficult exercise of legal analysis, made more complicated by the fact

that the court would be dealing not with actual judgments, but with what judgments yet to be given would be likely

to contain.” (emphasis added)

Two further passages from that speech merit repetition. The first is:

“It must be borne in mind that article 22 is concerned not with the substantive rights and obligations of the parties,

but with the ancillary and procedural question as to where in the Community those rights and obligations should be

heard and determined. There is nothing in the Convention that suggests that it is in the interests of the Community

that litigation on this question should be made more expensive and time-consuming than is necessary.”

Later, having rejected the possibility of what has been described as a “peculiarly complicated” kind of “satellite litigation”, that judge

concluded:

“For these reasons, I am of the view that there should be a broad commonsense approach to the question whether

the actions in question are related, bearing in mind the objective of the article, applying the simple wide test set

out in article 22 and refraining from an over-sophisticated analysis of the matter.” (emphasis added)

37. In Gonzalez v Mayer [2004] 3 I.R. 326, Kelly J. expressly adopted the principles identified in the Sarrio case. He endorsed the

“broad commonsense approach”. I think he was entirely correct in this.

38. When one asks oneself the first question - is there a connection between these two set of proceedings - the answer must

undoubtedly be “yes”. The next question is whether there must inevitably be a significant overlap between the witnesses in the two

cases? The answer must be “yes” also. Finally, one might ask whether a determination in one case would have a significant bearing on

the ultimate outcome of the two cases, having regard to claims and potential counterclaims? Here, the answer is “yes” again. The

real issue then is, whether on these transactions, Websense owes Itway money or vice versa? To my mind, the answers to the three

key questions above point one way. They lead inexorably to the conclusion that it is expedient that the actions should be heard and

determined together by the same court. This conclusion does not, of course, detract from the fact that it will be necessary for the

Italian Court to make an initial determination on the choice of jurisdiction clause contained in the contract. But it is impossible to

escape the conclusion that the issues, and the source of the inter partes litigation, emanate from the distribution agreement. This

conclusion gains traction from, what I will term, the “confluence” of further matters in dispute arising from what is said to have

transpired in October 2011. When viewed in this way, the answers to the critical questions posed are almost self-evident.

39. In The Tatry, the Court of Justice specifically directed attention to the fact that the objective of the law then embodied in the

Convention was to improve coordination in the exercise of judicial functions within the then Community, and to avoid conflicting and

contradictory decisions even where the separate enforcement of each of them was not precluded. Where does the dividing line lie?

The judgment in The Tatry held that an action brought in a contracting state by one group of cargo owners against a ship owner

seeking damages for harm caused to a part of the cargo carried in bulk under separate but identical contracts, and a second action in

damages brought in another contracting state against the same ship owner by the owner of another part of the cargo shipped under

the same conditions, and under contracts which were separate but identical to those between the first group and the ship owner,

were sufficiently close. The Court of Justice, as it then was, nonetheless held that a separate trial and judgment would involve the

risk of conflicting decisions, albeit not necessarily involving the risk of giving rise to mutually exclusive legal consequences. The

connection between the two claims here is surely as close, if not even closer.

The exclusive jurisdiction clause

40. It is now necessary to turn the focus on the exclusive jurisdiction clause. As was recently pointed in Irish Bank Resolution

Corporation Limited v Higgins and Anor [2013] IEHC 178, the term “exclusive jurisdiction” is somewhat misleading, insofar as it might

convey the impression that such a clause could permit a court second seised to treat a proceeding pending before a court first seised

in another Member State as non-existent and, therefore, capable of being ignored. This issue was settled by the judgment of the

Court of Justice in Case C-116/02 Erich Gasser GmbH v MISAT srl [2003] ECR I-14721.

41. Gasser concerned the approach to be adopted by a national court secondly seised where its jurisdiction was invoked upon the

basis of a choice of jurisdiction clause in a contract, while the case before the court first seised was based upon the primary rule of

the defendant’s domicile. Albeit in the context of what is now Article 27 of the Regulation, the Court of Justice held in such

circumstances that the court secondly seised is not entitled to ignore the existence of the prior proceedings between the same

parties. The fact that the prior proceeding had apparently been commenced in disregard of the choice of jurisdiction clause did not

oust the jurisdiction which might be exercised by the court first seised, and did not remove the obligation of the court secondly seised

to permit the issue of jurisdiction to be “established” by the court having seisin of the prior proceedings. Referring to the now

superseded Article to the same effect, the Court of Justice observed:

“48. Moreover, the court second seised is never in a better position than the court first seised to determine

whether the latter has jurisdiction. That jurisdiction is determined directly by the rules of the Brussels Convention,

which are common to both courts and may be interpreted and applied with the same authority by each of them

(see, to that effect, Overseas Union Insurance, para. 23).

49. Thus, where there is an agreement conferring jurisdiction within the meaning of Article 17 of the Brussels Convention, not only, as

observed by the Commission, do the parties always have the option of declining to invoke it and, in particular, the defendant has the

option of entering an appearance before the court first seised without alleging that it lacks jurisdiction on the basis of a choice-of-

court clause, in accordance with Article 18 of the Convention, but, moreover, in circumstances other than those just described, it is

incumbent on the court first seised to verify the existence of the agreement and to decline jurisdiction if it is established, in

accordance with Article 17, that the parties actually agreed to designate the court second seised as having exclusive jurisdiction.”

Thus, here, although there is, on the face of the agreement, a choice of jurisdiction clause, it is nonetheless necessary for the Italian

court to establish whether its jurisdiction can be properly exercised as a preliminary issue.

42. It is finally necessary to turn to the question of discretion. Mr. Brian Kennedy S.C., on behalf of Websense International, made a

persuasive and succinct submission. He sought to persuade us that we should adopt an approach to be found in a number of

decisions of the Court of Appeal of England and Wales, where these courts had declined the grant to stay notwithstanding

proceedings found to be related, albeit in very specific circumstances.

43. One such circumstance was said to be the state of actual, or likely, progress in proceedings in both jurisdictions. In Cooper Tire

Europe Limited v Bayer Public Co Limited [2010] Bus L.R. 1697, the English High Court considered the stage which the proceedings had

reached in its jurisdiction as being “one factor” upon which he should exercise his discretion. In doing so he relied on para. 78 of

Advocate General Lenz’s opinion in Case C-129/82 Owens Bank Limited v Bracco [1994] QB 509. The Court of Appeal, per Longmore

L.J., commented that the High Court Judge had engaged in a carefully considered balancing exercise. But then he said:

“we are certainly not persuaded that the fact that the Italian court was first seised of “the claim” can operate as a

sort of a trump card or even as a primary factor where there was as much care and deliberation on the part of [the

respondent] in starting proceedings for negative declaratory relief as there was in the Claimants’ decision to make

their substantive claim in England”.

It is difficult to avoid the inference that the Court of Appeal considered the institution of the first, Italian, proceedings seeking

“negative declaratory relief” as being something of a stratagem. The Court of Appeal drew attention to risks of adopting “sweeping

submissions” in the area of Article 28 of the Regulation. Clearly in circumstances such as the initiation of “negative declaration

proceedings” designed solely to forestall proceedings elsewhere, careful scrutiny might possibly be warranted; but one cannot ignore

the clear tenor of the CJEU jurisprudence, or indeed, the need for a “broad commonsense approach”. It is hard to conceive of

something meriting outright refusal of a stay; but that is not to say that it would be impossible. Perhaps, proven gross mala fides or

evidence of abuse of process in the initiation of proceedings elsewhere might be sufficient. But this must be seen in light of the

observations in Gasser quoted below.

44. Counsel drew our attention to JP Morgan Europe Limited v Primacom AG and Another [2005] EWHC 508 (Comm), where Cooke J. in

the English High Court had to consider two sets of proceedings, which to his mind raised “no possibility of consistent or irreconcilable

judgments”, and where a strong degree of connection had not been established.

45. Insofar as any observation in JP Morgan might be interpreted to the effect that the Gasser decision is not of weight in the

consideration of Article 28 applications, I am unable to agree. Although the Court of Justice was dealing with what was then an

Article 21 application in Gasser, it nonetheless observed:

“53. Finally, the difficulties of the kind referred to by the United Kingdom Government, stemming from delaying

tactics by parties who, with the intention of delaying settlement of the substantive dispute, commence proceedings

before a court which they know to lack jurisdiction by reason of the existence of a jurisdiction clause are not such

as to call in question the interpretation of any provision of the Brussels Convention, as deduced from its wording

and its purpose.”

The Court went on to state:

“54. In view of the foregoing, the answer to the second question must be that Article 21 of the Brussels Convention

must be interpreted as meaning that a court second seised whose jurisdiction has been claimed under an agreement

conferring jurisdiction must nevertheless stay proceedings until the court first seised has declared that it has no

jurisdiction.”

46. Later in the judgment, the Court of Justice cited an argument put to it by counsel for the Commission to the following effect that:

“68. It is not compatible with the philosophy and the objectives of the Brussels Convention for national courts to be

under an obligation to respect rules on lis pendens only if they consider that the court first seised will give judgment

within a reasonable period. Nowhere does the Convention provide that courts may use the pretext of delays in

procedure in other contracting States to excuse themselves from applying its provisions”.

The Advocate General’s opinion is to similar effect. To this, the Court responded:

“70. As has been observed by the Commission and by the Advocate General in points 88 and 89 of his Opinion, an

interpretation of Article 21 of the Brussels Convention whereby the application of that article should be set aside

where the court first seised belongs to a Member State in whose courts there are, in general, excessive delays in

dealing with cases would be manifestly contrary both to the letter and spirit and to the aim of the Convention.”

To my mind, Gasser remains strong authority on the manner in which the Court of Justice would approach this question, not just in

relation to Article 27 but also, even though there may be a discretion, in relation to Article 28.

47. I say this having regard to the views of Advocate General Lenz in Owens Banks Limited v Bracco, where he observed:

“75. The decision required in the context of Article 22 of the Convention is a discretionary decision. It goes without

saying that the circumstances of each individual case are particularly important here. The national courts must bear

in mind that the aim of this provision is "to prevent parallel proceedings before the courts of different Contracting

States and to avoid conflicts between decisions which might arise therefrom", as the Court stated in its judgment in

Overseas Union Insurance. It would therefore be appropriate in case of doubt for a national court to decide to stay

its proceedings under Article 22.” (emphasis added)

In short, the second seised court is to err on the side of caution. The Advocate General’s opinion contains a footnote referring to a

decision of the English High Court in the case of Virgin Aviation Services Limited v CAD Aviation Services [1991] International

Litigation Procedures 79, in which that Court held that there was a strong “presumption” in favour of allowing an application for a

stay.

48. That said, however, the Advocate General went on to identify three factors which may “be relevant” to the exercise of the

discretion vested in national courts. These were, first, the extent of the relatedness and the risk of mutually irreconcilable decisions;

second, the stage reached in each set of proceedings, and, third, the proximity of the courts to the subject matter of the case.

49. But, nonetheless, as a general rule, I think a stay should be granted by the second court. For a case to be clear, the facts would

have to very clearly indeed point to a refusal of a stay. The Advocate General’s observations must be seen in light of the judgments

of the Court of Justice.

50. Even were I persuaded that there was not a high degree of “relatedness” in this case, I am not persuaded on the available

information that any of the other factors identified in submissions is in any way of sufficient significance in order to show that the trial

judge exercised his discretion in an incorrect way. It is true that there is a degree of dispute between the lawyers on both sides as to

the speed at which the Italian proceedings will progress, but that must be seen in light of the Court of Justice’s observations in

Gasser. The differentiation of time is not such as would warrant an interference with a judge’s discretion.

51. It should be emphasised that, for the reasons which I have sought to address, the jurisprudence of CJEU emphasises the

importance of certainty in determining jurisdiction under the Regulation. It does, however, have to be acknowledged that certainty

can give rise to a significant risk of impracticality if the rules are insufficiently nuanced to prevent procedural disruption. This Court is,

of course, obliged to comply with the Regulation (which forms part of the law of this jurisdiction) as interpreted by the CJEU.

However, the practical consequences for the facts of this case are worth noting.

52. There is a dispute between the parties as to whether Italy has jurisdiction to deal with the issues which arise between the

Websense group and the Itway Companies. That dispute arises not least because of the question of the applicability of the choice of

jurisdiction clause to which reference has already been made. There is no doubt that, in accordance with the Regulation, it is for the

Italian court, as the court first seised, to decide on the question of whether the courts of Italy have been deprived of any jurisdiction

which they might otherwise have by virtue of that choice of jurisdiction clause. However, unless and until an Italian court determines

that question against Italy having jurisdiction, then, in the absence of the exercise of the discretion conferred on the Irish courts by

Art. 28, no related proceedings in Ireland can progress. Where, as here, the Italian courts have, as this Court has been informed,

decided to defer determining the question of jurisdiction until a full hearing of all of the issues between the parties, there is no

prospect of the Irish courts being able to progress these proceedings (even if the Italian courts deem the choice of jurisdiction to be

applicable) until the related Italian proceedings have concluded. Thus, the vista appears of the Irish courts being asked, at some

point in the future when the Italian proceedings have concluded, to reactivate these proceedings on the basis that the Italian courts

may have decided that they do not have jurisdiction to deal with any issues which would overlap with those which arise in these

proceedings. That is potentially a most unsatisfactory state of affairs. To move away from the undoubted value of certainty which

the Regulation brings would be impermissible in the light of the jurisprudence of the CJEU and may well not be desirable in any event.

However, it seems to me that there are strong grounds for suggesting that a more nuanced approach to the rules contained within

the Regulation is necessary if the commitment to certainty is not to lead to impractical situations being mandated. This Court can do

no more than suggest that, for reasons such as those identified not only in this case but in other cases which have come before the

Irish courts, a review of the rules in respect of jurisdiction contained within the Regulation is highly desirable.

Conclusion

53. In all the circumstances, therefore, I would dismiss the appeal and affirm the decision of the learned High Court judge.