Court of Appeal accepts that “Bosworth” provides subordination test for Lugano Convention employee protection provisions

16/05/21

The Court of Appeal has dismissed an appeal by two Defendants (the “First and Second Defendants”) in the long-running jurisdiction tussle in the Arcadia v Bosworth litigation. It accepted the Respondent/Claimants’ submissions that the decision of the Court of Justice of the European Union (“CJEU”) in the reference in that case (C-603/17 Bosworth and Hurley v Arcadia Petroleum Ltd) provides the test for whether a relationship of subordination between a putative employer and employee under the Lugano Convention exists. Such a relationship is a necessary condition for application of the employee protection provisions in Articles 18–20 of the Lugano Convention.

Arcadia Petroleum Limited (now known as Alta Trading UK Limited – “Arcadia London”), Arcadia Energy (Suisse) SA (“Arcadia Switzerland) and Arcadia Energy (PTE) Ltd (“Arcadia Singapore”), the First to Third Claimants, are companies in the Arcadia Group of companies, which is wholly owned by Farahead Holdings Limited, the Fourth Claimant, a company ultimately owned by trusts settled by John Fredriksen, the Norwegian-born shipping billionaire. The First and Second Defendants were the Group CEO and CFO of the Arcadia companies.

In February 2015, the Claimants commenced proceedings against 10 defendants, including the First and Second Defendants, in respect of an alleged fraud that the Claimants say had been perpetrated on them by the Defendants, They bring claims including for unlawful means conspiracy and breach of fiduciary duty. In March 2015, the First and Second Defendants challenged the jurisdiction of the English Court on the basis that the claims against them were “matters relating to individual contracts of employment” under Article 18 of the Lugano II Convention, and hence that the claims against them were required to be brought in the court of their domicile (Switzerland). The Claimants argued, at that stage, that the claims in question did not relate to any individual contract of employment.

In April 2015, Burton J dismissed that challenge, save in relation to claims for breach of fiduciary duty brought by the First and Third Claimants against the First and Second Defendants in respect of those periods when they were employed by that Claimant. The Court of Appeal upheld this in 2016.

However, the Supreme Court gave permission to appeal and heard full oral argument. The Claimants had previously accepted before the English Court that the First and Second Defendants were employees within the meaning of the Lugano Convention, but during the course of argument in the Supreme Court, in light of questions from the Court, the Claimants changed their position and disputed whether the First and Second Defendants were employees. The Supreme Court referred various questions to the CJEU including whether the First and Second Defendants were in a relationship of subordination. 

The CJEU handed down judgment in April 2019, answered only the question relating to subordination and stated that it appeared, on the material before it, that the First and Second Defendants did not have the requisite “relationship of subordination”.

However, on the return to the Supreme Court, the First and Second Defendants argued that, because of the Claimants’ withdrawal of their concession that the First and Second Defendants were employees, the reference to the CJEU had not proceeded on the correct basis and there was further material to consider before the English Court could determine whether the First and Second Defendants were in a relationship of subordination. In March 2020, the Supreme Court allowed the First and Second Defendants’ appeal but only to the extent of remitting the case to the Commercial Court to hear further evidence and submissions on the meaning of subordination in the sense set out in the CJEU judgment.

As reported here, Sir Michael Burton GBE, after a three-day hearing in October 2020, held that the Claimants had a good arguable case that there was no relationship of subordination between the Arcadia Group companies and the First and Second Defendants, so that their jurisdiction challenge should be dismissed. However, he granted the First and Second Defendants permission to appeal to the Court of Appeal.

On appeal, the First and Second Defendants pursued grounds of appeal to the effect that the test for a relationship of subordination as set out in the CJEU judgment relied upon its previous decision in Case C‑47/14 Holterman Ferho Exploitatie BV v Spies von Büllesheim to which the CJEU had referred and that the Judge’s decision meant that the provisions in Articles 18–20 would provide insufficient protection of employees, including senior employees and directors.

The Court of Appeal dismissed the appeal. It accepted the Claimants/Respondent’s submissions that the test for a relationship of subordination is to be found in the CJEU’s decision in Bosworth, and is that there will be no relationship of subordination where the putative employee has a non-negligible ability to influence the employer’s business and the performance of their own duties. Accordingly, the Claimants/Respondents had a good arguable case that there was no relationship of subordination.

The judgment is here.