13 AUG 2015
Petter v EMC: Employment Share Schemes, Choice of Forum and Anti-Suit Injunctions - did the CA take a step too far?
In granting the anti-suit injunction against EMC Corporation in Petter v (1) EMC Europe Limited (2) EMC Corporation  EWCA Civ 828, the CA considered that it was upholding the policy in section 5 of Regulation (EU) 1215/2012 for the protection of employees from being sued other than in the courts of their domicile. But was it exceeding the limits of its jurisdiction to regulate the lawful conduct of foreigners, and interfering in the process of justice in the court of a friendly foreign state?
EMC Corporation ('EMC Corp') is based in Massachusetts. Mr Petter was employed by its English subsidiary, EMC Europe, in a senior role. In that role, he was party to a share distribution scheme known as a 'Stock Plan', under which awards of common stock of EMC Corp were made available by EMC Corp as part of his total remuneration on a deferred basis.
The Stock Plan contained an express choice of Massachusetts law and an exclusive submission to the jurisdiction of the Massachusetts courts.
Mr Petter left EMC Europe and took up employment with a local subsidiary of a competitor American company.
EMC Corp started proceedings against Mr Petter in Massachusetts seeking declarations that it was entitled under the terms of the Stock Plan and related agreements to rescind the most recent awards of stock to him.
Mr Petter responded by starting proceedings against EMC Europe and EMC Corp in the English High Court seeking declarations that the restrictive covenants in his contract of employment were unenforceable as being an unreasonable restraint or trade, that the provisions of the Stock Plan under which EMC Corp purported to rescind awards of stock were unenforceable and that he had not acted in breach of his contract of employment. He also sought an interim injunction prohibiting EMC Corp from pursuing the proceedings against him in Massachusetts.
Mr Petter served EMC Corp out of the jurisdiction, in Massachusetts, on the basis that it was his employer and party to a contract of employment within Article 20 of the Recast Brussels Regulation 1215/2012.
EMC Corp challenged the jurisdiction of the English court on the grounds that the Stock Plan contained a contractual choice of the Massachusetts forum.
The Massachusetts court dismissed Mr Petter's challenge to its jurisdiction, declaring that it had jurisdiction to determine EMC Corp's claims based on the contractual choice of forum in the Stock Plan.
The case bore close similarities to Samengo-Turner v J&H Marsh & McLennan (Services) Ltd  EWCA Civ 723.
At first instance -  EWHC 1498 (QB) - Cooke J upheld the English court's jurisdiction against EMC Corp on the basis, following Samengo-Turner and Duarte v Black & Decker  EWHC 2720 (QB) that the Stock Plan with EMC was part of the contract of employment and the provisions of s 5 of the Recast Brussels Regulation in matters relating to individual contracts of employment applied to the dispute and overrode the jurisdiction agreement in the Stock Plan.
Cooke J nevertheless declined to grant an anti-suit injunction to restrain EMC Corp from pursuing its proceedings in Massachusetts, as a matter of discretion, for reasons of comity and because the Massachusetts proceedings were not vexatious or oppressive by reason of them being in the forum of contractual choice. Despite a natural aversion to parallel proceedings, he regarded it to be unlikely that EMC Corp would submit to the English jurisdiction and that parallel proceedings in both courts were therefore inevitable with the losing party in each jurisdiction likely to resist enforcement in the other jurisdiction and to succeed in doing so because of the perceived lack of jurisdiction of the other court.
The CA allowed Mr Petter's appeal against the refusal of the anti-suit injunction and dismissed EMC Corp's appeal on jurisdiction, holding that the case was indistinguishable from Samengo-Turner and the result ought to be the same.
The CA held that the effect of the Regulation was that the English court was bound to disregard the Massachusetts exclusive jurisdiction clause and to assume jurisdiction. The judge had been in error in making an assumption that EMC Corp would not submit to the English jurisdiction and would continue the Massachusetts proceedings. The principle emerging from Samengo-Turner was that, in such a case, where there were parallel proceedings in a foreign forum outside the Member States, the English court could not do nothing and an anti-suit injunction should ordinarily be granted to restrain proceedings in order to protect the employee's rights. The public policy of the English forum to be found in the provisions of the Regulation overrode party autonomy and the principle that agreements must be kept.
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The CA's approach was to exercise a jurisdiction beyond the limits of its territoriality, which was always likely to encourage rather than quell disorder, as Cooke J below had rightly foreseen.
Even before the CA's Order had been perfected, EMC had moved the Massachusetts court to grant an injunction restraining Mr Petter from taking any further steps in the proceedings in this country and had applied for summary judgment on its claim there. This flurry of activity naturally led to a further judgment of the CA -  EWCA Civ 828 - in which it deprecated EMC Corp's conduct and granted, in addition to the anti-suit injunction, mandatory injunctive relief requiring EMC Corp to withdraw its motion for summary judgment in Massachusetts.
The CA's grant of the ASI against EMC Corp cannot be reconciled with proper adherence to the doctrine of international jurisdiction, the doctrine which fetters the exercise of a national court's jurisdiction beyond the limits of its territoriality.
EMC Corp was not resident within the English jurisdiction. It was served with the English court's process outside the jurisdiction pursuant to the Regulation, there was no territorial limit on the things which it could order EMC Corp to do. So, it felt able to order EMC Corp to refrain from doing things abroad and to positively do things abroad even when the conduct it was seeking to regulate was lawful in the country where it was being performed.
This was a flawed approach. As the late Dr Francis Mann observed in a leading article: 'The Doctrine of Jurisdiction in International Law', (1964) 111 Recuil des cours 146:
"The mere fact that a state's judicial or administrative agencies are internationally entitled to subject a person to their personal or 'curial' jurisdiction does not by any means permit them to regulate by their orders such person's conduct abroad. This they may do only if the state of the forum also has substantive jurisdiction to regulate conduct in the manner defined in the order. In other words, for the purpose of justifying, even in the territory of the forum, the international validity of an order, not only its making, but also its content, must be authorised by substantive rules of legislative jurisdiction."*
Although the English court here was entitled by the Regulation to subject EMC Corp to its curial jurisdiction, that Regulation did not provide it with the substantive jurisdiction to require EMC Corp to desist from asserting its legal rights in Massachusetts.
Indeed, so far as the Regulation is concerned, the power of the English court to order an ASI is inconsistent with the Regulation, see the decision of the European Court in Turner v Grovit. It does not matter for these purposes that Turner's ratio only applies where the proceedings to be restrained are proceedings in another Member State rather than in the US. The point is that the Regulation cannot be relied on as the basis of any substantive rule of English legislative jurisdiction to grant an ASI regulating the conduct of a non-submitting foreigner abroad.
The substantive jurisdiction to grant ASIs is contained in SCA 1981, s 37 which, of course, gives the court the discretion to order any form of injunction when it appears to the court to be just to do so. But whether it is just or not to do so in any particular case includes a consideration of territoriality under the doctrine of international jurisdiction. The CA did not undertake that consideration.
The case law shows that the power to grant the particular form of injunction called an ASI is also confined to where it is appropriate to avoid injustice because pursuit of the foreign action would be oppressive or vexatious: Aerospatiale. The court must consider both the injustice to the claimant in England if he is subjected to suit abroad and injustice to the defendant in restraining his foreign suit.
Little consideration appears to have been given in the CA to whether or not the proceedings pending in Massachusetts, which it was being asked to interfere in and restrain, were in any way vexatious or oppressive in nature. This was perhaps because the CA regarded itself bound by Samengo-Turner. If the CA had considered that question, the answer must surely have been 'no' because the assumption of jurisdiction by the Massachusetts was plainly not manifestly exorbitant on English or international law principles. Mr Petter had made a contractual choice of that forum, in relation to disputes under the Stock Plan, exclusive to any other. As the CA acknowledged, English law has always attached considerable importance to upholding and giving effect to exclusive jurisdiction clauses. The English court could hardly therefore criticise the basis of jurisdiction on which the Massachusetts appears to have been plainly arguable and not made in bad faith or doomed to failure. What then court justify interference by the English court with the process of justice in the court of a friendly foreign state? As we have seen, it was certainly not the Regulation.
The CA would have been wise to take into consideration that restraining a person from pursuing a remedy in a foreign court where - if he proves the necessary facts - he has a clause of action is (however it is disguised as being directed at the litigant personally) an interference with the process of justice in that foreign court, see British Airways v Laker. For this reason, the grant of the ASI remedy always requires caution. There must be demonstrated a good reason why the decision to stop the foreign proceedings should be made in England rather than in the foreign court, see Re Maxwell Communications (No 2). The normal situation facing the English court being asked to grant the injunction is that it is being asked to pre-enmpt or override the foreign court's decision whether or not to allow the proceedings before it to continue. It has been said that the English court should normally assume that the foreign judge is the best person to decide whether an action in his own court should proceed: Barclays Bank v Homan and that the English court should respect his competence to do so and his decision: Aerospatiale; Airbus. The CA undertook no such consideration in Petter.
*See also by Dr. Mann, “The Doctrine of International Jurisdiction Revisited after Twenty Years,” (1984) 196 Recueil des cours 9, 19. Dr. Mann’s influential articles were referred to by Hoffman J in Mackinnon v Donaldson, Lufkin and Jenrette Securities Corporation and Others  Ch. 482 and by Mance LJ in Societe Eram Shipping Company Ltd v Compagnie Internationale De Navigation  CP 112 who explained that the theme of the passage from Dr Mann’s article which Hoffmann J had cited, was that a state’s exercise of its power to regulate the conduct of persons abroad required the state to have not merely personal jurisdiction over that person, but also substantive jurisdiction to regulate conduct in the manner undertaken.