English executives employed by multinational companies often have a contract of employment with the company’s UK subsidiary, but may also participate in a separate bonus or share option plan that contains foreign (e.g., U.S.) law and jurisdiction clauses.

In matters relating to individual contracts of employment involving only EU Member States, EU law requires that employers bring suit only in the courts of the Member State where the employee is domiciled.  Similarly, EU law allows employers to be sued in the courts of the Member State where the employee habitually carries out his work. If an employer tries to sue in the courts of a different Member State, those courts will (or ought to) decline jurisdiction.

However, the rules are different when the courts of a non-Member State are involved. For example, if a stock option or bonus plan confers jurisdiction on a U.S. court, that U.S. court has no reason to apply EU law.  Instead, the U.S. court is likely to apply the U.S. plan’s jurisdiction clause and accept jurisdiction over the English employee.

It might be thought that there is not much that the employee can do about this.  However, in Samengo-Turner v J&H Marsh & McLennan (Services) Ltd [2007] EWCA Civ 723, [2008] ICR 18, the English Court of Appeal granted employees an anti-suit injunction to restrain proceedings brought against them in New York in connection with a bonus plan containing a New York jurisdiction clause, on the basis that the US parent company was an “employer” for purposes of EU law, and the employees had a right under EU law to be sued only in England.

And on July 27, 2015, the England and Wales Court of Appeal (Civil Division) followed Samengo-Turner in a hotly contested “race to the courthouse” attempt by EMC Corporation to obtain a motion for summary judgment in a Massachusetts District Court on a $2.3 million breach of contract claim against a former executive of EMC’s European subsidiary, before the English Court of Appeals could issue its judgment dismissing EMC’s challenge to the English court’s jurisdiction over the executive’s anti-suit injunction in the UK.  By following Samengo-Turner, the English Court denied EMC’s ability to assert U.S. jurisdiction over the contract dispute, despite the contract’s clear language requiring U.S. jurisdiction and choice of law.

The Facts

Mr. James Petter was a senior employee of the European subsidiary of EMC, a Massachusetts corporation providing information storage services. He was a member of EMC’s stock option plan, which contained a Massachusetts exclusive jurisdiction clause.

Mr. Petter left to join a competitor, arguably in breach of a provision in the stock option plan which prohibited him from working for a competitor for 12 months after the end of his employment with EMC. A dispute arose over whether EMC was entitled to cancel his stock options. EMC sued Mr. Petter in Massachusetts, and he responded by suing EMC in England. EMC brought an application in England challenging the English court’s jurisdiction, and Mr. Petter applied to the English court for an anti-suit injunction to restrain EMC from continuing the proceedings in Massachusetts.

The Decision of the Court of Appeal

In its judgment on July 27, 2015, the Court of Appeal (Moore-Bick, Vos and Sales LJJ) dismissed EMC’s jurisdiction appeal and overturned the lower court’s refusal to grant Mr. Petter’s anti-suit injunction, despite the court’s clear reluctance to violate the principles of comity by preventing the Massachusetts case from going forward. 

The court first upheld the lower court decision that, while EMC was not Mr. Petter’s “employer” in a domestic law sense, the claims were nevertheless “matters relating to individual contracts of employment” for the purposes of EU law. In “reality and substance” the dispute about the stock plan was “intrinsically bound up with his contract of employment,” because the stock units “were made available to him as an important employee and were intended to act as a reward for past efforts and an incentive to make efforts in the future,” and the dispute was “a dispute of a kind in which he is properly to be described as the weaker party” and therefore entitled to the protection of EU law.

The court went on to hold that the lower court was wrong in refusing to grant an anti-suit injunction, and that its reliance on considerations of comity provided no basis for distinguishing Samengo-Turner. All three members of the court agreed that the lower court was effectively bound by Samengo-Turner to grant an injunction. As Moore-Bick LJ put it, “If doing nothing was thought not to be an option in Samengo-Turner, it is difficult to see how it can be an option in this case.” The court’s decision was not affected by the fact that anti-suit injunctions cannot be granted to restrain proceedings in a Member State court, or by the fact that anti-suit injunctions are unknown in most Member States.

Although all three judges regarded themselves as bound by Samengo-Turner, Vos LJ added his voice to the criticisms of it: “The decision is… rather more nuanced and fact dependent than Samengo-Turner allows”. However, Sales LJ responded with a vigorous defense of Samengo-Turner: “[EU law] reflects and seeks to give expression to a clear public policy to protect employees … If the public policy and the rules are to be taken seriously, as presumably they are, and the means to do that are available, then there is strong reason to employ those means.”  The Court of Appeal refused EMC’s application for permission to appeal to the U.S. Supreme Court.

Petter thus makes it clear that Samengo-Turner cannot be dismissed as an aberration. English courts have little choice but to follow it and grant an anti-suit injunction if presented with similar facts, even if that requires disregarding an exclusive U.S. jurisdiction agreement.   As Tuckey LJ said in Samengo-Turner, the court in cases of this kind faces a choice “between an anti-suit injunction or nothing.”  The Court of Appeal has clearly chosen the former over the latter.

Multinational companies that sponsor employee benefit plans should therefore be on notice that non-EU exclusive jurisdiction clauses contained in those plans may not be enforceable against EU-based employees.  This means that the validity of the sponsor’s decisions in relation to the plan may be scrutinised by an EU court, which will consider local law inalienable rights and public policy, regardless of the choice of law contained in the plan.  Consequently, prudent employers should seek relevant local EU advice before making difficult decisions affecting EU-based employees under any such plan.  The full judgment can be read here.