The claimants were the subsidiaries of a multinational group and the limited company which owned the group. The defendants, British nationals domiciled in Switzerland, were at the material time, respectively, the chief executive officer and chief financial officer of the group. They were also directors of the claimant subsidiaries and were each party to a contract with one of those companies drafted by themselves or at their direction, so that they exercised control over the terms on which they were employed. Although the defendants were answerable to the group’s shareholders, they had significant power to influence the business of the group. The claimants brought proceedings against the defendants in the High Court, seeking compensation for the damage which the group had allegedly suffered as a result of fraudulent transactions. The claims were based on, inter alia, unlawful means conspiracy, breach of fiduciary duty and breach of contractual duties. The defendants challenged the English court’s jurisdiction on the ground that the claims were “matters relating to individual contracts of employment”, within article 18 of the Convention on Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial Matters (2007) (“the Lugano II Convention”), and that, accordingly, under article 20 the claims should have been brought before the courts of the state of the defendants’ domicile. The judge dismissed the defendants’ challenge to the jurisdiction, holding that the claimants had a good arguable case that the the defendants were not in a relationship of subordination to the claimant subsidiaries, in that they had a more than negligible ability to influence them, with the consequence that the defendants were not parties to” individual contracts of employment” with the claimant subsidiaries.
On the defendants’ appeal—
Held, appeal dismissed. The question of jurisdiction turned on whether the claims related to individual contracts of employment within article 18(1) of the Lugano II Covention. If they did, then by article 20(1) the claims had to be brought in the state where the employee was domiciled, in the present case, in Switzerland. To determine whether the defendants at the relevant time had individual contracts of employment with companies in the group of which they were chief executive officer and chief finance officer, that is, the claimant companies, the issue was whether they were in a relationship of subordination to their employing company or companies, which depended on all the factors and circumstances that characterised that relationship. To answer that question a two-stage test was not required but a simple test was to be applied, namely whether the defendants had more than a negligible ability to influence the claimant companies of which they were chief executive officer and chief finance officer. The judge had applied the correct test, set out by the Court of Justice of the European Union on a reference in the present case, taking into account all the rival evidence in the context of contemporaneous documents, and rightly concluded that the defendants had more than a non-negligible influence over those companies; they were therefore not in a relationship of subordination. Accordingly, the contracts between the defendants and claimants were not individual contracts of employment within article 18(1) of the Lugano Convention. The challenge to the jurisdiction was dismissed (paras 2–3, 51–57, 61–65, 80, 81, 82).
Richard Eschwege (instructed by Quinn Emanuel Urquhart & Sullivan UK LLP) for the defendants.
Fionn Pilbrow QC and David Heaton (instructed by Jones Day) for the claimant.