Brussels Jurisdiction and Judgments Regulation - Semtech Corporation and others v Lacuna Space Ltd and others
This was a challenge to the court's jurisdiction by two former employees of the third claimant under art 22.1 of Regulation (EU) No 1215/2012 of the European Parliament and of the Council of 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters OJ L 351, 20.12.2012, p. 1–32 ("the Brussels Recast Regulation). That article provides that an employer may bring proceedings against its employee only in the courts of the Member State in which the employee is domiciled. The application came on before Mr Iain Purvis QC sitting as a deputy judge of the High Court on 30 April 2021. At para [75] of his judgment in Semtech Corporation and others v Lacuna Space Ltd and others [2021] EWHC 1143 (Pat) (5 May 2021), the learned deputy judge found that he had no jurisdiction over the claims against those defendants. They could only be sued in France.
The Allegations
The first defendant, Lacuna Space Ltd., was a customer of the claimant companies which was founded and is controlled by the second and third defendants to this action. Lacuna plans to set up a constellation of small low earth orbit satellites, so-called "cubesats" to host network gateways to which devices on earth may transmit messages using LPWAN (low power wide area network) technology that had been developed by the claimants. The fourth and fifth defendants, Nicolas Sornin and Francois Sforza, had founded a company called Cycleo SAS which was acquired by Semtech France SAS, a wholly-owned subsidiary of the Semtech Corporation which is the first claimant. Messieurs Sornin and Sforza became employees of Semtech France.
It had been the job of Messieurs Sornin and Sforza to assist Lacuna to use Semtech's technology. The problem was that those employees had been allotted shares in Lacuna that they failed to disclose to their employer and that they imparted information to Lacuna which was confidential to the Semtech companies. That information included emails from the claimants' in-house legal advisor expressing concerns over a letter supporting Lacuna's application for funding from the European Space Agency, information about Lacuna's customers who were also Semtech customers and the source code for its products. On learning of its employees' shareholdings in Lacuna Space and alleged disclosures, the third claimant dismissed Messieurs Sornin and Sforza. The claimants started these proceedings alleging copyright infringement, breach of confidence and conspiracy.
Messieurs Sornin and Sforza for their part have denied any wrongdoing. They say that everything they did for Lacuna was to the benefit of their employer. They have started proceedings in France alleging wrongful dismissal and breaches of the agreement by which Semtech France SAS acquired Cycleo SAS.
Messieurs Sornin and Sforza for their part have denied any wrongdoing. They say that everything they did for Lacuna was to the benefit of their employer. They have started proceedings in France alleging wrongful dismissal and breaches of the agreement by which Semtech France SAS acquired Cycleo SAS.
The Law
I have already referred to art 22.1 of the Brussels recast. Para 18 of the recitals to the regulation states:
"In relation to insurance, consumer and employment contracts, the weaker party should be protected by rules of jurisdiction more favourable to his interests than the general rules"
"In relation to insurance, consumer and employment contracts, the weaker party should be protected by rules of jurisdiction more favourable to his interests than the general rules"
Thus, art 20 provides:
"In matters relating to individual contracts of employment, jurisdiction shall be determined by this Section, without prejudice to Article 6, point 5 of Article 7 and, in the case of proceedings brought against an employee, point 1 of Article 8."
"In matters relating to individual contracts of employment, jurisdiction shall be determined by this Section, without prejudice to Article 6, point 5 of Article 7 and, in the case of proceedings brought against an employee, point 1 of Article 8."
Mr Purvis noted at para [3] of his judgment:
"There is no dispute that Sornin and Sforza were employees of C3 and that they are and were at all material times domiciled in France. The only issue before me is therefore whether these proceedings 'relate to' their contracts of employment within the meaning of the RBR. It is common ground that to resolve this question of jurisdiction, the proper test is whether the Claimant or the 4th and 5th Defendants have the 'better argument' on the evidence before me."
"There is no dispute that Sornin and Sforza were employees of C3 and that they are and were at all material times domiciled in France. The only issue before me is therefore whether these proceedings 'relate to' their contracts of employment within the meaning of the RBR. It is common ground that to resolve this question of jurisdiction, the proper test is whether the Claimant or the 4th and 5th Defendants have the 'better argument' on the evidence before me."
In determining this point, Mr Purvis referred to the Court of Appeal's judgments in Alfa Laval Tumba AB v Separator Spares International Ltd [2013] ICR 455, [2013] 1 WLR 1110, [2013] CP Rep 9, [2013] 2 All ER 463, [2013] FSR 22, [2012] EWCA Civ 1569, [2013] ILPr 10, [2013] 2 All ER (Comm) 177, [2012] WLR(D) 263 and Bosworth & Hurley v Arcadia Petroleum Ltd and others [2016] EWCA Civ 818. At para [67] of Bosworth, Lord Justice Gross had said:
"As a matter of reality and substance, do the conspiracy claims relate to the Appellants' individual contracts of employment? Is there a material nexus between the conduct complained of and those contracts? Can the legal basis of these claims reasonably be regarded as a breach of those contracts so that it is indispensable to consider them in order to resolve the matter in dispute?"
"As a matter of reality and substance, do the conspiracy claims relate to the Appellants' individual contracts of employment? Is there a material nexus between the conduct complained of and those contracts? Can the legal basis of these claims reasonably be regarded as a breach of those contracts so that it is indispensable to consider them in order to resolve the matter in dispute?"
Conclusion
The deputy judge said at [52] that the case plainly fell within arts 20 and 22.1 of Regulation 1215/2012 for the following reasons. He explained at [54]:
"First, the entire context of Sornin and Sforza's acts complained of in this case lies in their positions as senior employees within Semtech through which they had access to the confidential and copyright materials and the ability to provide those materials to customers such as Lacuna."
He added at [55]:
"Second, the real nub of the dispute in this case, looked at broadly, concerns Sornin and Sforza's authority to deal with customers under their contracts of employment, and the extent to which their authority to deal with Lacuna was vitiated by the undisclosed information about their shareholdings."
"Second, the real nub of the dispute in this case, looked at broadly, concerns Sornin and Sforza's authority to deal with customers under their contracts of employment, and the extent to which their authority to deal with Lacuna was vitiated by the undisclosed information about their shareholdings."
He noted at [59]:
"Third, the employment contracts are not merely relevant to Sornin and Sforza's putative defence. The Claimants' own pleaded case puts allegations of breach of those contracts at the heart of its case, as can be seen from the analysis below."
He then analysed the particulars of claim. His analysis was challenged by the claimants as a misreading of their pleading. He rejected that analysis on the basis that every act of wrongdoing implied a breach of the defendants' contract of employment.
"Third, the employment contracts are not merely relevant to Sornin and Sforza's putative defence. The Claimants' own pleaded case puts allegations of breach of those contracts at the heart of its case, as can be seen from the analysis below."
He then analysed the particulars of claim. His analysis was challenged by the claimants as a misreading of their pleading. He rejected that analysis on the basis that every act of wrongdoing implied a breach of the defendants' contract of employment.
Finally, Mr Purvis held at [72]:
"Fourth, the 'reality check' suggested by Gross LJ in Bosworth at [71] supports my view that this is a case falling within Articles 20 and 22.1. Sornin and Sforza have a genuine and close connection with France as life-long citizens and residents. Their bargaining power is lower than that of the Claimant and they had not drafted their own contracts of employment. They answered to line managers at the companies they worked for. They clearly fall within the category of person Articles 20 and 22.1 were intended to protect and they could reasonably expect to have that protection in the case of an action brought by their employer. The result of the reality check here is the opposite from that in Bosworth, where the Defendants were essentially in control of the Claimant companies, had written their own contracts, and had decided on their own country of domicile for tax reasons."
"Fourth, the 'reality check' suggested by Gross LJ in Bosworth at [71] supports my view that this is a case falling within Articles 20 and 22.1. Sornin and Sforza have a genuine and close connection with France as life-long citizens and residents. Their bargaining power is lower than that of the Claimant and they had not drafted their own contracts of employment. They answered to line managers at the companies they worked for. They clearly fall within the category of person Articles 20 and 22.1 were intended to protect and they could reasonably expect to have that protection in the case of an action brought by their employer. The result of the reality check here is the opposite from that in Bosworth, where the Defendants were essentially in control of the Claimant companies, had written their own contracts, and had decided on their own country of domicile for tax reasons."
He concluded at [74] that
"all three of Gross LJ's questions asked in [67] of Bosworth are answered in favour of Sornin and Sforza's case on this Application:
(i) As a matter of reality and substance, the claims relate to the Appellants' individual contracts of employment.
(ii) There is a material nexus between the conduct complained of and those contracts.
(iii) The legal basis of the claims can reasonably be regarded as deriving from an alleged breach of those contracts such that it is indispensable to consider them in order to resolve the matter in dispute."
Brexit
It is important to note that Regulation 1215/2012 ceased to apply to the UK upon the expiry of the transition or implementation period provided by art 126 of the withdrawal agreement at 23:00 on 31 Dec 2020. He said at para [2] of his judgment:
"It is common ground that the RBR applies to this case, since the proceedings were instituted prior to 1 January 2021. Having briefly considered the provisions of the relevant legislation implementing the Withdrawal Agreement between the UK and the European Union, I am satisfied that this is correct."
"It is common ground that the RBR applies to this case, since the proceedings were instituted prior to 1 January 2021. Having briefly considered the provisions of the relevant legislation implementing the Withdrawal Agreement between the UK and the European Union, I am satisfied that this is correct."
The British government has applied to rejoin the Lugano Convention on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters OJ L 339, 21.12.2007, p. 3–41 which extends the rules in the Brussels recast to the EFTA and EEA countries. Accession to the Convention requires the consent of all the current members and by a Communication dated 4 May 2021 the European Commission advised the European Council and Parliament to reject the British application. The Member States do not have to follow that advice but it would be surprising if they all failed to do so (see Jane Lambert EU Commission rejects the UK's Application to rejoin Lugano 6 May 2021 NIPC Brexit).
Further Information
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