How Do English Courts Deal with the Problem of “Forum Shopping”?

In some situations, the place where a lawsuit should be determined is the most significant factor in a case. Selecting the appropriate place where a particular case should be decided is referred to as forum shopping. A forum can be regarded as a territory with specific systems of laws. In nearly all countries earth wide, there exists only a single law system that functions over a country. However, the United States has a federal system of government whereby each state has its law system and law courts and as such each state can be regarded as forum. Forum shopping is thus, how a forum is selected from a variety of likely forums, which could put into consideration, a legal application, and come up with a legally-binding judgement in the suit.

How English courts deal with the problem of ‘forum shopping’

The English courts have been in the fore front in championing the prevention of forum shopping. In the course of dealing with the problem of forum shopping, the English courts have set up guidelines and policies that govern cases involving transnational insolvency proceedings. The English courts have created a broad body of case law around the idea of establishing the forum for transnational insolvency proceedings. English courts have primarily focused on the correct meaning of “the centre of a debtor’s main interests” (COMI), as the basis on which cross-border jurisdiction for the starting of such proceedings is determined.

Under provision 3 of European Regulations on insolvency proceedings (ERIP), a debtor company’s COMI is assumed to be located at the place where it has registered office “in the absence of proof to the contrary”. But the English courts in their effort to prevent problem of ‘forum shopping’ in cases involving transnational insolvency ignore this assumption so that, the forum can still be chosen to their satisfaction to commence key proceedings in accordance to the ERIP, hence overruling the registered office assumption.

The English courts have set up the UNCITRAL Model Law specifically for cases involving transnational Insolvency. In this new model of law the difference between main and non-main proceedings is given more significance. Under this new model law, the English courts have added three bases of transnational collaboration and help in insolvency cases. One of such bases is that which is hinged on the principle of comity, is the common law principles of recognition and assistance. The other two are the ERIP regime and a special statutory procedure under provision 426 of the Insolvency Act 1986 which allows international judicial collaboration between English courts and other courts in selected foreign countries and regions.

In the recent past English courts adopted a new law that clarifies that only business entities as provided in provision 735 of the companies act 1985 and some others can be subject to English law system, a move that has completed their use of ERIP and such putting many business entities under the scrutiny of the English law.

The case of Re SAS Rover France (2005) EWHC 874 is a good example where a member of the MG Rover group of France was put under scrutiny of English law. in this case he English court decided that the debtor company’s COMI was in UK and that the application process was the major proceedings for ERIP purposes.

In my opinion, the English system is not effective at preventing forum shopping in cases involving transnational insolvency. This is because it is against the ERIP regulations which were enacted for the aims of averting problems in forum shopping, especially in cases involving cross-border insolvency. The English courts have put in place a judicially inventive approach to jurisdiction over foreign registered business entities under the ERIP. This approach is against the tenets of ERIP and it has led to increase in cases and bad comment from other territories. A good example is the decision the ECJ arrived in Eurofood.

Greater convergence of laws affects the use of anti-suit injunctions. This is because it affords of uniformity in court proceedings. Owusu v Jackson and Others Case shed some light on the scope of the English laws within EC in relation to chapter 2 of the Brussels Convention. This case was before the ECJ. In this Case English Court questioned the ECJ, if it can retain an issue issued to it under chapter 2 in the Brussels Convention in accordance with English laws. In this case, it was held that the convection was an obligatory system of laws that operate in the EU. It was argued that if a country fails to follow the Brussels Convention and employs its local rules of civil proceedings, it may not produce fair judgement in respect to forum selection.

The other case that provides some insight on the relation between the English law and European law is that of Turner vs. Grovit. The main issue in this case was whether in accordance with European law, anti-suit injunctions can exist in English law. In this case it was held that the European Court of Justice had opportunity to examine England’s anti-suit injunctions.

However, other scholars claim that the English system of laws may be applicable in foreign proceedings but this not clear. What is known is that English system of law court can insist on its court processes in support of its courts.

The English courts does not affect the furtherance of the court processes in a foreign country, and when the English court declines to stay the court processes in England, there may exists two identical sets of court processes running concurrently. This can lead to duplication of the outcome.

Reference list

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