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Transcript

Well, good morning. I have a feeling that the shift between philosophy of criminal law and international commercial litigation is going to present you with something of a contrast.

It’s always very difficulty to know what to say in the ten minutes that we have available to us. It’s rather like these sort of student pranks, where students in Cambridge like to see how many students you can get into a telephone box or something. How much can you say about international commercial litigation in ten minutes? Well, not a lot, but let me start with three recommendations which I hope you will bear in mind if you’re thinking of taking this course. If you are thinking of taking this course, my first recommendation is that you should immediately after this lecture go down to the new commercial court building in Chancery Lane in London, go to court number 6 and witness the ongoing battle, which started on Monday, between Mr Berezovsky and Mr Abramovich, which is one of the largest, most highest value commercial disputes ever to be heard in the commercial court. Actually, I don’t seriously recommend it. A friend of mine who is involved in the trial (there are hundreds of lawyers involved) says that there is a rumour going around that the judge has to wear a bullet proof vest.

Anyway, more realistically I would just say two things. First of all, we have placed or I will shortly place on the website a prospectus for this course where you will find some information about what we do, some answers to frequently asked questions and you will also find a small, easy assignment for our first class, which is on Monday. So, if you’re interested in doing this, I would just urge you to go to the website. If you go to my webpage you will find it as something like “2011/2012 ICL 1 Prospectus”, you can’t miss it, which leads to my final recommendation. If you are thinking of taking this course, I think you can do no better than simply to come to our first class on Monday at 11 am. I think the best way to get a feel for this subject, or indeed any subject, is just to sample it. What we will do in that first class, without any technical knowledge being required, is talk through a hypothetical problem which exemplifies the main issues in international commercial litigation and you will find that hypothetical problem in our prospectus. Having said that, I think I’m duty bound to give you some kind of taste now for what the course is all about.

Let me then take for you a hypothetical dispute, though one which is increasingly common in its character and in its basic pattern. Let’s imagine that the UK subsidiary of a US bank has lent a substantial sum of money to a Utopian company. Of course, Utopia doesn’t exist, but I won’t offend anybody if I use an imaginary country, although I have to say the facts I am about to retell do actually involve a real country, which is not Utopia, but politeness and diplomacy forbids me from saying what that is. Imagine that a UK subsidiary of an American bank has lent some unimaginable sum of money to a Utopian company, of course this would have been some time ago because people don’t do that anymore. The contract is governed by English law (this contract shall be governed and construed in accordance with English law) and it is expressly subject to the exclusive jurisdiction of the English courts.

Rather topically, perhaps, the Utopian company can no longer service the interest, it simply is teetering on the edge of insolvency and it cannot pay the interest anymore. What does the bank do? Well, you might think the bank would commence legal proceedings against the borrower to recover any money which is owed, but as those of you (and I know there will be some of you in this room) who are familiar with this line of work will realise, the bank is actually not going to do that because if it does do that it will just tip the borrower into insolvency and it will be worse off. So, the nice, caring, gentle American bank says to the borrower, “Let’s talk about this. Let’s have a cup of tea and let’s negotiate”. Standard thing, you renegotiate the loan. These days, of course, borrowers are cleverer than that, so imagine in my hypothetical situation that the borrower, as soon as it realises that the bank wants to renegotiate the loan, immediately begins legal proceedings, not in England because we have a very bank-friendly legal regime and also the English court is bound to apply English law to determine the parties’ rights and liabilities. So, what does the Utopian party do? It commences proceedings in the courts of Utopia for a declaration that it is not liable for any of its obligations under the loan.

Now, you might think, surely the Utopian court is simply going to apply English law because the contract expressly says that the rights and liabilities of the parties are governed by English law, but, no, what the borrower has cleverly done is to invoke rules of public policy under the law of Utopia, which is not a bank-friendly regime, whereby the interest payment provisions in the loan will be declared to be contrary of the public policy. This happens all the time actually, you would be surprised how many cases look rather like this.

So, faced with this pre-emptive action in the courts of Utopia, what does the bank do? Well, obviously, it must defend the proceedings in Utopia because there is a risk that if it does not do so that the Utopian court will issue the declaration and it will say that the borrower is not liable under the loan agreement. That declaration would almost inevitably be recognised by an English court because we have very liberal rules about the recognition of foreign judgments and awards. So, one thing that the bank must do is defend in Utopia. It could also, of course, sue in England and it may very well be inclined do that because, after all, the contract says that the contract is subject to the exclusive jurisdiction of the English court, so you might have thought that the bank was on fairly safe ground, but there’s a problem. The problem is there are proceedings already in the courts of Utopia. What effect do those proceedings have on the agreement to the jurisdiction of the English courts? It is not clear at all that the bank would be able to bring proceedings in England. Again, if the bank does wish to bring proceedings, it’s going to have to do something to make sure that there is money available to satisfy any judgment debt should it win. So, if the bank sues in England it’s also going to have to commence proceedings in England for an injunction to freeze the assets of the borrower, which, incidentally in England, you can do on a worldwide basis. One of the things which always shocks people about the English approach to these matters is that our judges are very happy to freeze the assets of defendants in foreign countries. I find nothing wrong with that actually, but many of you may do. The final thing, of course, which the bank may do is to try to do something to stop the proceedings in Utopia.

Now, we have seen that the bank may defend the proceedings in Utopia, but they are in a position to do something which, again, you might find surprising. They could apply to the English court for an anti-suit injunction, an injunction to prevent the proceedings in Utopia. Anti-suit injunctions, injunctions granted by the courts of England to prevent proceedings in other countries, are very common indeed. If you find that surprising, if you find it shocking, you should certainly take the course and find out why we do it.

In microcosm, this little problem tells you something about what the international commercial litigation course is all about. First of all, it is not, my example was not, it is not about arbitration. This is a course about litigation. We only touch arbitration at all insofar as the parties might commence proceedings in the English courts ancillary to arbitration. It is about, as my example was about, high value, cross-border disputes in the commercial court in London. It is commercial litigation in a very particular sense – litigation in the commercial court in London. Like my example, this litigation invariably concerns cases where there are parallel proceedings in different countries and they often turn, as my example did, on the effect of jurisdiction agreements in the documentation. Like my example, these disputes are almost entirely about issues of jurisdiction and issues concerning the grant of injunctive relief. We almost never have international commercial disputes which involve choice of law questions. These cases never go to a determination of liability because, of course, they always settle first. Again, as in my example, the course is very much about how the law shapes tactics; it’s not just about the law itself.

If you remember the question I posed a moment ago, I didn’t say what is the law, I said what should the bank do, and that is very much the emphasis of the course. Of course, the answer to that question, although it is partly tactical, partly practical, partly commercial, is, of course, determined by the law, but nonetheless the orientation is practical.

The final thing to say before I close, because I can see that my successors are standing at the back, is that the kind of dispute that I’ve outlined for you has always been common, but it is increasingly common. The number of cases, for reasons which will be entirely obvious because of the current economic climate, in which banks are pursuing borrowers for non-payment or, alternatively, where borrowers are trying to pre-empt their liability by alleging, for example, mis-selling, are very common indeed. So, in a way, the subject matter of the course has taken on a whole new degree of topicality with the events of the downturn. I suppose, to put it crudely, international commercial litigation in the English courts is booming, law firms in England are not downsizing their litigation departments.

This is only a taste. As I say, if you want to find out more do two things: look at our prospectus on the website and do come on Monday at 11 am.

Added on 05/10/2011.

Last modified on 11/10/2011

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