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	England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Durbeck GmbH v Den Norske Bank ASA [2003] EWCA Civ 147 (03 February 2003) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2003/147.html Cite as: [2003] QB 1160, [2003] ILPr 27, [2003] 2 All ER (Comm) 411, [2003] EWCA Civ 147, [2003] 4 All ER 543, [2003] 2 WLR 1296

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IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT
COMMERCIAL COURT DIVISION
(MR NIGEL TEARE QC)

		Royal Courts of Justice Strand London, WC2
		3 February 2003

1. LORD PHILLIPS, MR: This is an appeal by a German company ("the claimants") from the judgment of Mr Nigel Teare QC, sitting as an additional judge of the Queen's Bench Division, dated 13 June 2002. The judge held that the court had no jurisdiction to entertain the claim which the claimants seek to bring against a Norwegian company ("the defendants").
2. The appeal raises two issues of general importance on which the judge gave permission to appeal. The first is whether the provisions of Article 5(5) of the 1988 Lugano Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters ("the Convention") confer jurisdiction on the English court. The second is whether, if the English court has jurisdiction under Article 5(5), it has jurisdiction to stay the proceedings under the doctrine known in the jurisprudence of private international law as "forum non conveniens". The judge gave a negative answer to the first question. We have to decide whether he was right to do so. Had he not done so, he indicated he would have stayed the proceedings on the ground that Panama and not England was the convenient forum.
3. The claimants would wish to challenge his jurisdiction to stay the proceedings if they were properly founded under the Convention. They accept, however, that binding authority precludes them from doing so in this court. If they win on the first point, they accept that they must lose on the second, but will seek permission to appeal to the House of Lords.
4. I wish at the outset to pay tribute to the admirable clarity of the judgment below. I could not improve upon, and will gratefully incorporate, some of the early passages of the judgment.

The claim

5. The claim which the claimants seek to bring against the defendants is an action in tort based on the line of authorities, ending with the Myrto [1977] 1 Lloyd's Rep 243. It is alleged that the defendants, who were mortgagees of the vessel TROPICAL REEFER, wrongly interfered with the claimants' contracts for the carriage of a cargo of bananas by arresting the vessel in Panama in or about July 2001. The defendants contend that the principle set out in the Myrto conflicts with the principle that a secured creditor is entitled to enforce his security without regard to the effects on third parties. On that account the Myrto is not to be followed. They rely on Edwin Hill v First National Plc [1989] 1 WLR 225 and The Nazezhda Krupskaya [1997] 2 Lloyd's Rep 35. As the judge observed, the merits of this dispute do not need to be considered at this stage.

The facts

6. By a loan agreement dated 1 December 1997, the defendants, who are a Norwegian bank with a branch in London, agreed to provide a loan of US$6 million to three borrowing companies for the purchase or refinancing of three vessels, SPRING REEFER, BLUE REEFER and TROPICAL REEFER. The security for the loan included mortgages on each vessel. The ultimate beneficial owners of the vessels and the managers of the vessels were Cuban. The loan was entered into by, and administered from, the London branch of the defendants. The loan agreement was governed by English law. The mortgages and the deeds of covenant which regulated them were subject to the law of Cyprus.
7. Between 10 and 16 July 2001 a cargo or bananas was loaded on board TROPICAL REEFER in Guayaquil and Puerto Bolivar, Ecuador, for shipment to Europe. The bananas were to be delivered to the claimants who purchased them for US$1,192,013.
8. On 24 July 2001 TROPICAL REEFER was arrested in Panama in an action in rem against the vessel commenced by the defendants on the instructions of their London branch, having received approval from head office in Oslo. The defendants claim that over US$2 million is outstanding on the loan.
9. On 10 December 2001 the claimants considered that the cargo of bananas was a constructive total loss and on 12 September 2001 it was discharged overboard at sea. On 16 October 2001 the vessel was sold by order of the Panamanian court. On 22 November 2001 the claimants commenced proceedings in rem in Panama against the proceeds of sale claiming damages for breach of the contract of carriage.
10. On 19 December 2001 the defendants applied in Panama to commence an action for a declaration that they were not liable to the claimants. On 20 December 2001 the claimants issued the claim form in the present action in this court and served it on the London branch of the defendants. On 20 March 2001 the Panamanian court gave permission to the defendants to bring their claim for a declaration of non-liability.

The Convention

11. The Convention is incorporated into the domestic law of the United Kingdom by section 3(A)(1) of the Civil Jurisdiction and Judgments Act 1982, as amended ("the 1982 Act"). The following provisions of the Convention are relevant:

"Section 1 - General Provisions.

Article 2

Subject to the provisions of this Convention, persons domiciled in a Contracting State shall, whatever their nationality, be sued in the courts of that State.

Article 3

Persons domiciled in a Contracting State may be sued in the courts of another Contracting State only by virtue of the rules set out in Sections 2 to 6 of this Title.

......

Section 2 - Special Jurisdiction

Article 5

A person domiciled in a Contracting State may, in another Contracting State, be sued:

1 in matters relating to a contract, in the courts for the place of performance of the obligation in question; in matters relating to individual contracts of employment, this place is that where the employee habitually carries out his work, or if the employee does not habitually carry out his work in any one country, this place shall be the place of business through which he was engaged;

2 in matters relating to maintenance, in the courts for the place where the maintenance creditor is domiciled or habitually resident or, if the matter is ancillary to proceedings concerning the status of a person, in the court which, according to its own law, has jurisdiction to entertain those proceedings, unless that jurisdiction is based solely on the nationality of one of the parties;

3 in matters relating to tort, delict or quasi delict, in the courts for the place where the harmful event occurred;

4 as regards a civil claim for damages or restitution which is based on an act giving rise to criminal proceedings, in the court seised of those proceedings, to the extent that that court has jurisdiction under its own law to entertain civil proceedings;

5 as regards a dispute arising out of the operations of a branch, agency or other establishment, in the courts for the place in which the branch, agency or other establishment is situated."

The approach to the interpretation of Article 5 of the Convention

12. Section 3(B)(2) of the 1982 Act provides that the Report on the Convention by Mr P Jenard and Mr G Möller shall be given such weight as is appropriate when interpreting the Convention. The material provisions of Article 5 of the Convention are, as is most of the Convention, in the same terms as those of the earlier Brussels Convention. They fall to be interpreted in the same manner. Thus, decisions of the European Court of Justice on Article 5 of the Brussels Convention apply, and reference may be made to the report of Mr Jenard on the Brussels Convention (see the observations of Lord Hope of Craighead in Agnew v Lansforsakringsbolagens [2000] 2 WLR 497 at pp 516-7).
13. Jenard and Möller set out a number of fundamental principles that apply to the two Conventions. The third of these begins with the statement that a defendant's domicile is the point on which the rules on jurisdiction hinge. The fourth principle states that the provisions of Article 5 relate to "proceedings which can be considered as having a particularly close link with the court before which the proceedings are brought". It describes the provisions of Article 5 as special in that both Conventions directly specify which court has jurisdiction.
14. Jenard and Möller have a specific commentary on Article 5(5) to which I shall revert when I outline the submissions made by Mr Parsons on behalf of the defendants.
15. In his report on the Brussels Convention Jenard remarks of Article 5 that adoption of the special rule of jurisdiction is justified by the fact that there must be a close connection factor between the dispute and the court with jurisdiction to resolve it. This proposition is echoed by an observation of the European Court in Martin Peters Bauunternehmung GmbH v Zuid Nederlandse Aannemers Vereniging (case 34/82) [1983] 987 at 1001. In Kleinwort Benson Limited v Glasgow City Council [1999] 1 AC 153 at page 164, Lord Goff of Chieveley cited the same case in support of the proposition that:

"...it is clearly recognised that article 5 is in derogation from the basic principle of domicile in article 2....and as a result the provisions of article 5 are to be construed restrictively (see Kalfelis v Bankhaus Schroder, Munchmeyer, Hengst and Co (Case 189/87) [1088] ECR 5565, 5585, para 19)."

The judge's findings in relation to Article 5(3)

16. In the court below the claimants argued that they could establish jurisdiction under Article 5(3) on the ground that England was the place where the harmful event occurred. The basis of this submission was that the loan and mortgage were transactions of the London branch of the defendants and that the decision of the London branch to enforce the mortgage by arresting the vessel was the event which gave rise to the damage. The judge gave the following reasons for rejecting this submission:

"In one sense the decision of the branch of the Defendants in London can be said to have given rise to and to be the origin of the damage because the arrest is executed pursuant to that decision. However, it can also be said that the arrest is the event which gives rise to the damage and is the origin of the damage because, without the arrest, there would be no interference with the contracts of carriage. Having regard to the principles adumbrated in Kleinwort Benson v Glasgow City Council the court should adopt a restrictive approach to the application of Article 5 bearing in mind that the defendant can always be sued in his place of domicile. To conclude that the place where the decision is taken to commit a tort is the place where the event which gives rise to the damage occurs rather than the place where the first component of the tort occurs is to adopt a broad approach to Article 5(3) rather than a restrictive approach. Further, I do not consider that the place of the decision to arrest can be said to be a 'particularly close connecting factor' between the dispute and the English court. It is a connecting factor between the dispute and the English court but in circumstances where the contract of carriage is interrupted in Panama by an arrest in Panama it is not a particularly close connecting factor between the dispute and the English court. For those reasons it seems to me that Panama, rather than London, is the place where the event which gave rise to the damage occurred."

There is no appeal against this part of the judgment.

The judge's findings in relation to the stay application

17. The following findings of the judge in relation to the stay application have some relevance to this appeal.

"Where the tort was committed.

The interference with the contracts of carriage occurred in Panama where the arrest took place and was maintained. The bananas became a constructive total loss by reason of being detained in Panama. I consider that the substance of the tort was committed in Panama."

18. Under the Private International Law (Miscellaneous Provisions) Act 1995 the judge held that the proper law of the tort was the law of Panama.
19. While some evidence, including evidence as to the state of the loans secured by the vessel, when it was in default and to what extent, would emanate from London, this was not, on the judge's analysis, likely to be a significant factor.

The judge's findings in relation to Article 5(5)

20. It was and is common ground that the defendants' London branch was "a branch, agency or other establishment" within the meaning of Article 5(5). The issue was whether the fact that it was a decision taken by the London branch that led to the arrest of the TROPICAL REEFER in Panama meant that the dispute was one arising out of the operations of the branch. The judge summarised the claimants' submissions as follows:

"In circumstances where the loan documentation referred to the Defendants as acting through their branch in London, where the notices of default were sent out from London, where correspondence concerning the default was with the branch and its London solicitors, where the instructions to arrest came from London and where the decision to maintain the arrest was taken in London, the action plainly arose from the activities of the Defendants' London branch."

In rejecting the claimants' submissions the judge said:

"In one sense the dispute can fairly and realistically be said to arise out of the decision to arrest which wish taken by the branch of the Defendants' in London. However, in another and more restrictive sense the dispute can be said to arise out of the arrest in Panama rather than out of the decision to arrest in London because it is the arrest which causes the interference with the contracts of carriage and hence gives rise to the dispute. Without that interference there would be no dispute. The Court is required to give Article 5(5) a restrictive construction. Strictly, it is the arrest which gives rise to the dispute. The arrest is an 'activity' of the branch but it is an activity in which the branch is 'engaged' in Panama rather than in London where the branch is established on behalf of the Defendants (using the phraseology of Somafer). Furthermore, the connection between the dispute and London, though real, is not as close as that between the dispute and the place of arrest. I do not consider that the connection between the dispute and London can be said to be a 'particularly close connecting factor'. For these reasons I prefer the submission made on behalf of the Defendants."

The decision to which the judge referred is Somafer v Saar Fern Gas AG [1978] ECR 2183.

Submissions made to us

21. For the claimants, Mr Meeson QC repeated the submissions which had not found favour before the judge. He submitted, in essence, that the words of Article 5(5) fell to be given their natural meaning. He accepted that there had to be a link between the activities carried on by the branch and a dispute so that it could properly be said that the dispute was one arising out of the activities of the branch. He submitted, however, that on the facts of this case this requirement was clearly satisfied. The arrest arose out of a London branch loan. It was the London branch which decided to arrest the vessel and it was the London branch which gave power of attorney to the Panamanian lawyers to enable them to arrest the vessel.
22. For the defendants, Mr Parsons submitted that the judge's analysis was correct. What had to be demonstrated was a link between the dispute and the English court, not merely with the English branch of the bank. To establish such a link, it was necessary that the activities of the branch should constitute an element in the cause of action. Where a claim was brought in tort, the activities of the branch had to have produced the harmful event within the jurisdiction if the link was to be established. Mr Parsons submitted that in the present case there was no link at all between the dispute and the English court. He relied upon the findings made by the judge in relation to the place where the tort was committed and the proper law of the tort to which I have referred.
23. In support of his submissions Mr Parsons relied heavily on the decision in Somafer. He accepted that part of the reasoning in that case had not survived the subsequent decision of the European Court in Lloyd's Register of Shipping v Society Campenon Bernard [1995] ECR I-961. That part, however, related to claims in contract. So far as claims in tort were concerned, the observations of the court in Somafer remained authoritative.
24. Counsel's submissions call for a careful analysis of the effect of Somafer and of the Lloyd's Register case. The issue in Somafer was whether a company which had its principal place of business in France had a "branch, agency or other establishment" in Germany within the meaning of Article 5(5). The questions referred to the European Court related to the tests to be applied in resolving that issue.
25. The findings of the court appear from the following paragraphs of their judgment:

"11. Having regard to the fact that the concepts referred to give the right to derogate from the principle of jurisdiction of Article 2 of the Convention their interpretation must show without difficulty the special link justifying such derogation. Such special link comprises in the first place the material signs enabling the existence of the branch, agency or other establishment to be easily recognized and in the second place the connexion that there is between the local entity and the claim directed against the parent body established in another Contracting State.

12. As regards the first issue, the concept of branch, agency or other establishment implies a place of business which has the appearance of permanency, such as the extension of a parent body, has a management and is materially equipped to negotiate business with third parties so that the latter, although knowing that there will if necessary be a legal link with the parent body, the head office of which is abroad, do not have to deal directly with such parent body but may transact business at the place of business constituting the extension.

13. As regards the second issue the claim in the action must concern the operations of the branch, agency or other establishment. This concept of operations comprises on the one hand actions relating to rights and contractual or non-contractual obligations concerning the management properly so-called of the agency, branch or other establishment itself such as those concerning the situation of the building where such entity is established or the local engagement of staff to work there. Further it also comprises those relating to undertakings which have been entered into at the above-mentioned place of business in the name of the parent body and which must be performed in the Contracting State where the place of business is established and also actions concerning non-contractual obligations arising from the activities in which the branch, agency or other establishment within the above defined meaning, has engaged at the place in which it is established on behalf of the parent body. It is in each case for the court before which the matter comes to find the facts whereon it may be established that an effective place of business exists and to determine the legal position by reference to the concept of 'operations' as above defined."

26. Paragraph 13 appears to be addressing the question of what it is necessary to establish in order to demonstrate the necessary nexus between the operations of the branch and the claim. The court had not been asked to provide guidance on this, but may have been influenced by the opinion of the Advocate General that part of the test of a branch was whether the branch carried out operations that were independent of its parent.
27. The observations of the court in paragraph 13 appeared severely to circumscribe the effect of Article 5(5). It was not enough that the branch should have entered into an undertaking in favour of the claimant if the undertaking was not one which had to be performed in the country where the branch was established. It would seem to follow that, if the claim was in tort, jurisdiction would not lie under Article 5(5) unless the activities of the branch constituted or directly brought about the harmful event. It seems to me that, were the observations in paragraph 13 of Somafer to represent the law, they would provide unshakeable support for the conclusion reached by the judge.
28. In the Lloyd's Register case Advocate General Elmer observed that what the court had to say about "operations" had been the subject of criticism both in academic writings and in the opinion of the Advocate General, Sir Gordon Slynn, in SAR Schotte v Parfums Rothschild [1987] ECR 4905. In that opinion Sir Gordon stated at page 4914:

"For my part, but for paragraph 13 of the judgment, I would have given 'dispute arising out of the operations of a branch' a wider meaning. Equally, but for that paragraph, I would find it difficult to spell out of Article 5(5) the limitation that undertakings entered into 'must be performed in the Contracting State where the place of business is established'."

29. I turn to the facts of the Lloyd's Register case. Lloyd's Register of Shipping is an English registered charity established in London. It maintained a branch in France. Campenon Bernard, a French company, contacted the French branch in order to arrange for the testing of concrete reinforcing steel which it was to use in the construction of a motorway in Kuwait. Following negotiations, in a letter of 3 December 1985, Campenon Bernard placed the order with the French branch of Lloyd's Register. That letter specified that inspection would take place in Spain and would be carried out by the Spanish branch of Lloyd's Register. It also stated that payment would be effected in pesetas. On 9 December 1985 the French branch communicated its acceptance.
30. Although the Spanish branch of Lloyd's Register issued certificates of compliance, the Kuwait Ministry of Public Works, for whom the concrete was being produced, refused to accept the concrete reinforcing steel on the ground that it did not comply with the United States technical standard.
31. On 2 February 1988 Campenon Bernard paid the invoice issued by the Spanish branch of Lloyd's Register, having been pressed to do so by the French branch, but without prejudice to its rights. Alleging that Lloyd's Register had wrongly stated that the steel complied with the United States technical standard, it then brought a claim for damages in the Tribunal de Commerce in Paris. Lloyds Register challenged the jurisdiction.
32. The Cour d'Appel held that the Tribunal had jurisdiction, pursuant to Article 5(5). The Cour de Cassation referred to the European Court the question of whether the application of Article 5(5) was restricted to cases where the dispute concerned obligations to be performed in the state in which the branch, agency or other establishment was situated. This put in issue the correctness of paragraph 13 of the judgment in Somafer.
33. In his opinion, Judge Advocate Elmer observed that the geographical limit imposed by the court in Somafer was in the nature of an obiter dictum. He went on to express his own view:

"16 ...decisive importance must be attached to the fact that Article 5(5) would to all intents and purposes be devoid of independent content if it were applicable only to disputes regarding obligations which must be performed in the Contracting State in which the branch, agency or other establishment is situated. The courts for the place of performance of the obligation already have jurisdiction under Article 5(1) in matters relating to a contract and the courts for the place where the harmful event occurred already have jurisdiction under Article 5(3) in matters relating to tort, delict or quasi-delict. As emphasized by Campenon Bernard, the United Kingdom, the Greek Government and the Commission, with such a limitation of Article 5(5) would actually be reduced to cases of choice between several jurisdictions within the individual Contracting State.

17 ...

18 Rather than creating clarity, a geographical limitation such as that at issue raises a series of problems and thus gives rise to legal uncertainty.

Furthermore, Article 5(5) serves two purposes:

-Partly to make it easier for the plaintiff to take proceedings in cases in which there is 'a place of business which has the appearance of permanency, such as the extension of a parent body, has a management and is materially equipped to negotiate business with third parties so that the latter, although knowing that there will if necessary be a legal link with the parent body, the head office of which is abroad, do not have to deal directly with such parent body but may transact business at the place of business constituting the extension' (Somafer judgment, paragraph 12); and

-Partly, as mentioned in the United Kingdom's observations, to approximate the situation just described to the point of departure of the first paragraph of Article 2 of the Convention regarding general jurisdiction arising from the domicile of the defendant. For agencies such as those listed in Article 5(5) - non-legal persons - there is by definition no such jurisdiction arising from domicile.

Article 5(5) should therefore, in my view be interpreted according to its clear wording, which entails no geographical limitation."

34. The decision of the court echoed the opinion of the Advocate General:

"16. First, the actual wording of Article 5(5) of the Convention in no way requires that the undertakings negotiated by a branch should be performed in the Contracting State in which it is established in order for them to form part of its operations.

17. Secondly, the interpretation put forward by the appellant in the main proceedings would render Article 5(5) almost wholly redundant. Since Article 5(1) already allows the plaintiff to bring an action in contract in the courts for the place of performance of the obligation in question, Article 5(5) would duplicate that provision if it applied solely to undertakings entered into by a branch which were to be performed in the Contracting State in which the branch was established. At the very most it would create a second head of special jurisdiction where, within the Contracting State of the branch, the place of performance of the obligation in question was situated in a judicial area other than that of the branch.

18. Thirdly, it should be noted that an ancillary establishment is a place of business which the appearance of permanency such as the extension of a parent body, has a management and is equipped to negotiate business with third parties so that the latter, although knowing that there will if necessary be a legal link with the parent body, whose seat is in another Contracting State, do not have to deal directly with such parent body (see Somafer, cited above, at paragraph 12).

19. A branch, agency or other ancillary establishment within the meaning of Article 5(5) is therefore an entity capable of being the principal, or even exclusive, interlocutor for third parties in the negotiation of contracts.

20. There does not necessarily have to be a close link between the entity with which a customer conducts negotiations and places an order and the place where the order will be performed. Accordingly, undertakings may form part of the operations of an ancillary establishment within the meaning of Article 5(5) of the Convention even though they are to be performed outside the Contracting State where it is situated, possibly by another ancillary establishment.

21. That interpretation is, moreover, in conformity with the objective of the special rules of jurisdiction. As the Jenard Report (OJ 1979 C 59 at p22) makes clear, those rules allow the plaintiff to sue the defendant in courts other than those of his domicile because there is a specially close connecting factor between the dispute and the court with jurisdiction to resolve it.

22. In the light of the foregoing considerations, the answer to the question referred by Cour de Cassation must be that the expression 'dispute arising out of the operations of a branch, agency or other establishment' in Article 5(5) of the Convention does not presuppose that the undertakings in question entered into by the branch in the name of its parent body are to be performed in the Contracting State in which the branch is established."

35. Mr Parsons made the following submissions in relation to these two cases. First, he drew our attention to certain passages in chapter 6 of the Jenard and Möller report under the heading "Judgments of the Court of Justice of the European Communities Concerning the Interpretation of the Brussels Convention of 27 September 1968". Under the heading "General" is this paragraph:

"As stated in the comments on Protocol 2 (see points 112 and 116) in the negotiations on the Lugano Convention it was agreed that the provisions of the Brussels Convention should be construed as interpreted by the Court of Justice and that the report would mention the various judgments handed down by the Court.

This chapter meets the latter stipulation."

36. Mr Parsons submitted that the effect of this was that the findings in relation to the Brussels Convention of the European Court, as interpreted in the report, should be treated as definitive of the meaning of similar provisions in the Lugano Convention, unless expressly overruled by subsequent decisions of the European Court.
37. Next, Mr Parsons referred us to this commentary of the Report on Somafer:

"The Court has given an autonomous interpretation to the concepts of 'operations of a branch, agency or other establishment--

(a) the concept of branch, agency or other establishment implies a place of business which has the appearance of permanency, such as the extension of a parent body, has a management and is materially equipped to negotiate business with third parties so that the latter, although knowing that there will if necessary be a legal link with the parent body, the head office of which is abroad, do not have to deal directly with such parent body but may transact business at the place of business constituting the extension;

(b) the concept of 'operations' comprises-

(1) actions relating to rights and contractual or non-contractual obligations concerning the management properly so-called of the agency, branch or other establishment itself such as those concerning the situation of the building where such entity is established or the local engagement of staff to work there,

(2) actions relating to undertakings which have been entered into at the above mentioned place of business in the name of the parent body and which must be performed in the Contracting State where the place of business is established,

(3) actions concerning non-contractual obligations in which the branch, agency or other establishment has engaged at the place in which it is established on behalf of the parent body."

38. Mr Parsons submitted that this passage made it plain that paragraph 13 of Somafer was intended to be the definitive and exclusive definition of "operations of a branch, agency or other establishment" that were capable of giving rise to a dispute that fell within the jurisdiction accorded by Article 5(5). The adverse comment on the geographical limitation in paragraph 13 made by Advocate General, Sir Gordon Slynn, in Schotte was made in relation to a contract case. Advocate General Elmer only described the geographical limit in paragraph 13 as obiter dictum in so far as it was made in relation to contract disputes in a case concerned with non-contractual obligations. Somafer remained authority for the proposition that, in a non-contractual claim, the activities of the branch had to bring about the harmful event giving rise to the dispute within the jurisdiction of the court if Article 5(5) were to be engaged.
39. I consider this argument to be over-sophisticated and unsound. The effect of decisions of the European Court on provisions which are common to the Brussels and Lugano Conventions should not be artificially circumscribed in the manner suggested by Mr Parsons. They must be given their natural effect.
40. In my judgment, the decision in the Lloyd's Register case robs the geographical limit in paragraph 13 of Somafer of such authority as it might otherwise have had, bearing in mind that it was an obiter dictum on a matter not referred to the court and in respect of which no submissions had been made to it. This must be true of claims in tort as well as claims in contract. What the Lloyd's Register case demonstrates is that there must be such nexus between the branch and the dispute as to render it natural to describe the dispute as one which has arisen out of the activities of the branch. Where the claim is in contract, that nexus can be derived from the negotiations between the claimant and the branch which gave rise to the contractual obligation, the alleged breach of which is the subject of the dispute. Where the claim is in tort or delict, there will be no such nexus.
41. The events which give rise to liability in tort can vary widely - compare the liability of the publishers of a defamatory book with the vicarious liability of a company for the negligent driving of an employee in the course of his employment. In these circumstances, I do not think it desirable to attempt to formulate any test to determine whether a dispute has arisen out of the activities of a branch. The answer to that question must depend on the facts of the individual case. I would, however, venture some general observations.
42. As Lord Justice Laws observed in the course of argument, paragraph 5 of Article 5 differs from the other paragraphs of that Article. The other paragraphs address different specific causes of action. Paragraph 5 is of general application. It would seem designed to cover situations where the connection of the claim with the activities of the branch, agency or other establishment is such to make it appropriate in the interests of the due administration of justice to permit suit to be brought in the State where the branch, agency or other establishment is situated.
43. I would endorse the conclusions of the Advocate General in the Lloyd's Register case that one purpose of Article 5(5) is to approximate the place where a branch carries on business with third parties to the point of departure of the first paragraph of Article 2. Article 5(5) provides a quasi defendant's domicile basis for jurisdiction. Once the existence of an entity which qualifies as a "branch, agency or other establishment" of the defendant is established in a State, it accords with the due administration of justice from the view point of the defendant, the claimant and the court to permit suit to be brought in that State in relation to disputes which arise out of the activities of the branch, agency or establishment, regardless of where those activities take effect.
44. I have set out positive reasons for giving Article 5(5) a meaning which is not subject to the geographical limitation suggested by the court in Somafer. There are, however, powerful negative reasons which point in the same direction. In the Lloyd's Register case, which was a case involving contract, the court observed that the Somafer interpretation would render Article 5(5) almost wholly redundant having regard to the provisions of Article 5(1). Advocate General Elmer made a similar observation in relation to matters relating to tort, delict or quasi-delict, having regard to the provisions of Article 5(3). The only such claim that Mr Parsons could suggest in respect of which, on his interpretation, Article 5(5) would make a difference was a claim in restitution.
45. In considering the application of Article 5(5), the judge considered it pertinent to compare the connection between the dispute and London with the connection between the dispute and Panama. Mr Neeson suggested that this was not a helpful comparison. Rather, the judge should have compared the connection between the dispute and London with the connection between the dispute and Norway. Had he done so, he would have reached the conclusion that this was a case in which it could properly be said that the dispute arose out of the activities of the defendants' London branch.
46. I think that Mr Neeson is correct. The actions giving rise to the dispute arose out of London banking business, conducted by the defendants' London branch. The loan in respect of which the security over the vessel was taken was negotiated in London. The decision to enforce the security was taken in London. The London branch gave instructions to enforce the security and the power of attorney to enable it to be done. Giving the words of Article 5(5) their natural meaning, the dispute in this case has arisen out of the activities of the London branch. It is true that in this case these factors do not point to London as the most convenient forum. If the jurisdiction to stay is soundly based, the action will be fought in Panama and not here. It seems to me, however, that if considerations of, or akin to, domicile are to govern the available forum, it makes good sense and accords with the due administration of justice that London should be available to the parties as an alternative to Norway.
47. For these reasons I would allow the first limb of the appeal.
48. That leaves the judge's alternative decision that the decisions should be stayed in favour of Panama. No attack has been made on that decision on the merits. It is not open to the claimants to challenge that decision in this court on the basis it was made without jurisdiction. It is common ground that we are bound by the decision in Ace Insurance Company v Zurich Insurance Company [2001] 1 Lloyd's Rep 618, to hold that the judge had jurisdiction to stay the proceedings.
49. Accordingly, I would replace the judge's order with one staying the action. If my Lords, or at least one of them, are in agreement, it will remain to consider the application that I anticipate will follow for permission to appeal to the House of Lords against the imposition of a stay.
50. LORD JUSTICE BROOKE: I agree.
51. LORD JUSTICE LAWS: I also agree.

Order: Appeal allowed with costs.

Leave to appeal to the House of Lords granted.