Exclusive Jurisdiction for Company Law Claims under Article 24 (2) of the Brussels I (Recast) Regulation: Akçil and others v Koza Ltd and another [2019] UKSC 40

On 29 July 2019, the Supreme Court handed down its decision in Akçil and others v Koza Ltd and another [2019] UKSC 40 (see Supreme Court judgment) unanimously overturning the decision of the Court of Appeal ([2017] EWCA Civ 1609) regarding the interpretation of the the exclusive company law jurisdictional provisions in Article 24(2) of the Brussels I (Recast) Regulation (1215/2012).

Article 24 (2)

Article 24 (2) establishes that:

"The following courts of a member state shall have exclusive jurisdiction, regardless of the domicile of the parties:

"(2)      in proceedings which have as their object the validity of the constitution, the nullity or the dissolution of companies or other legal persons or associations of natural or          legal persons, or the validity of the decisions of their organs, the courts of the      Member State in which the company, legal person or association has its seat. In order    to determine that seat, the court shall apply its rules of private international law".

The claims

The case concerned a Turkish company Koza Altin ("The Turkish parent") which operates a gold mining business. It is part of group of Turkish companies known as Koza Ipek Group ("the Group") which is a large Turkish-based mining and media conglomerate that was formerly controlled by the second respondent to the appeal, Mr Ipek and his family.

The first respondent was Koza Ltd, an English company which was a wholly owned subsidiary of the Turkish parent ("the English subsidiary").

Following a police raid on the Group's headquarters in Ankara, allegations were made by the Turkish authorities that the Group was involved in the financing of terrorism. An Ankara Criminal Peace Judge made an order under Art. 133(1) of the Turkish Criminal Procedure Code replacing the existing boards of various companies within the Group, including the Turkish parent, with trustees who were required to manage those companies pending further investigations.

Mr Ipek claimed that both he and the Group have been targeted unfairly by a hostile government in Turkey. Such targeting has included making them the subject of an investigation into alleged criminal activity. In order to defend himself as regards control of the English subsidiary, Mr Ipek had caused a number of changes to be made to that company's constitution and share structure. A new class of "A" shares was created, and the English subsidiary's articles of association were amended to introduce a new article which purported to preclude any further changes to the articles of association or any change of directors unless the prior written consent of the holders of the "A" shares had been given. Two "A" shares had been issued: one to Mr Ipek and the other to his brother.

The validity and effect of these changes were at issue in the case.

Meanwhile, back in Turkey, the court appointed trustees caused the Turkish parent to serve notices on the directors of the English subsidiary under s.303 of the English Companies Act 2006 (the 2006 Act)  requiring those directors to call a general meeting to consider resolutions for their removal and replacement with three of the Turkish court appointed trustees. The directors of the English subsidiary refused.

Following this refusal, the Turkish parent served a notice under s.305 of the 2006 Act requiring the English subsidiary to convene a meeting.

To stop this happening, Mr Ipek and the English subsidiary made a without notice application seeking to an injunction to prevent the meeting. The relief sought was on two bases: (1) that the two notices were void under s.303(5)(a) of the 2006 Act ("the English company law claim"), and (2) that the notices were void because the English courts should not recognise the authority of the trustees to cause the Turkish parent to do anything as a shareholder of the English subsidiary, since these trustees were only interim appointees and were acting contrary to Turkish law, human rights and natural justice ("the authority claim").

Initially, Mr Ipek and the English subsidiary were successful and interim relief was obtained by Snowden J.  The Turkish parent and the trustees filed an acknowledgment of service and then a Part 11 jurisdiction challenge to the authority claim, while filing a defence and counterclaim to the English company law claim. In response, the Respondents issued a strike out application alleging lack of authority.

At first instance, Asplin J dismissed the jurisdiction challenge. The parties had agreed that the English company law claim fell within the provisions of Article 24(2). However, Asplin J. considered that the authority claim was inextricably linked to the English company law claim and, which she considered to be the principal subject matter as a whole. The Court of Appeal (Floyd and Flaux LLJ) upheld that decision.

The Supreme Court's decision

The Supreme Court have unanimously disagreed concluding that the interpretation of Article 24(2) adopted by the Court of Appeal could not be sustained.

Applying the principles set out in by the CJEU in:

  • Hassett v South Eastern Health Board(Case C-372/07) [2008] ECR I-7403;
  • Berliner Verkehrsbetriebe (BVG), Anstalt des öffentlichen Rechts v JP Morgan Chase Bank NA (Case C-144/10) [2011] 1 WLR 2087 ("the BVG case");
  • ON Czech Holding AG v Dědouch(Case C --560/16), [2018] 4 WLR 94,
the Supreme Court concluded that the provisions of Article 24(2) were to be strictly (i.e. narrowly) interpreted. This had implications for how multiple claims should be evaluated.

The Court of Appeal were found to have misunderstood the BVG case, and erroneously concluded that the court has to undertake "an exercise in "overall classification" and make an "overall judgment" to see whether the proceedings are "principally concerned" with one of the matters set out in" the article: the BVG case at [87].

Instead, where, as in this case, there were two distinct claims, one, by itself falling within Art. 24(2) and the other, by itself, not falling within Art. 24(2), it was not legitimate to maintain that, by an overall evaluative judgment as to both claims taken together, that the second claim also falls within Art. 24(2), thereby conferring exclusive jurisdiction on the English courts. A mere link between the two claims was not sufficient.

The Supreme Court considered that while both the English company law claim and the authority claim were connected in a sense, they were, in fact distinct claims which were not "inextricably bound up together". Each could be brought and made good on their own terms without regard to the other claim. Assessing the authority claim as a distinct set of proceedings, the principal subject matter clearly did not comprise the validity of the decisions or the organs of a company with its seat in England. The English court thus lacked Art. 24(2) jurisdiction over the Turkish parent and the Turkish trustees in relation to that claim.

As to the English company law claim, although this claim fell within the material scope of Art. 24(2) that did not confer jurisdiction over the trustees, who were not necessary parties to that claim.

The appeal by the Turkish parent and the Trustees was allowed.

Michael McParland QC