Key Issues - TransAtlantic Litigation
Europe and the US have long been key to each other’s economic health. According to the Centre for Transatlantic Relations, the transatlantic economy is the largest and wealthiest market in the world: over 50% of world GDP in terms of value and 40% of GDP in terms of purchasing power (The Transatlantic Economy 2014). This high level of transatlantic commercial activity inevitably generates a substantial number of commercial disputes, bringing the complex issue of jurisdiction into play. All well and good where the contract contains an effective and explicit jurisdiction clause; but where it doesn’t, the question of which legal jurisdiction a claim falls under could be a matter of choice (or indeed debate).
In England, if a non-EU domiciled defendant is physically in England or Wales and is validly served with process, the English court has jurisdiction, whether or not he is an English national and however temporarily he may be there. However, a claimant must seek the court’s permission to serve a non-EU defendant outside the jurisdiction (Civil Procedure Rules 6.36 (“CPR”)), unless they submit to the English court's jurisdiction. Permission will only be granted where the claim falls within certain categories (Practice Direction 6B.3.1); has a reasonable prospect of success, and England is the proper place to bring the claim.(Any mention of “England” or the “English” courts is in reference to the legal jurisdiction of England and Wales.)
The federal structure of the US, with its scores of overlapping jurisdictions, has given rise to a jurisprudence in which extraterritoriality is the norm. US courts have an extremely long reach. Unsurprisingly perhaps, a corporation can almost always be sued in the state where it is incorporated or has its principal place of business (Daimler AG v Bauman (2014)). But if a corporation has business contacts with a particular US jurisdiction, any lawsuit concerning that business can also be brought there. Accordingly, a company with its principal place of business in England that exports product directly to customers in the United States can be sued by those customers in the US rather than England (World Wide Volkswagen Corp v Woodson (1980)).
There may therefore be situations where the parties have a choice of jurisdiction as between the English and the US courts. Whilst both systems are common law systems, their different procedural rules (the CPR and Federal Rules of Civil Procedure (FRCP) respectively) and approach to litigation impacts massively on a potential litigant’s chances of success. So which jurisdiction should you choose?
In England, the CPR has the “overriding objective” of enabling the court to deal with cases justly and at proportionate cost. As part of this regime, parties must follow pre-action protocols before commencing a claim in order to allow the parties every opportunity to settle the claim once the details of the dispute have been identified. Failure to comply with the pre-action protocols may result in a party being penalised as to costs at a later stage. No such requirements exist in the US.
A claim is commenced in England by the claimant issuing and serving a claim form and particulars of claim. Similarly, a civil action in the federal court is commenced by filing a complaint, although the complaint need not be ‘particularised’ in as much detail as is required in England. It is also easier to amend the complaint after filing in the US than it is to amend statements of case (once served) in England; technically speaking, there are no ‘causes of action’ in the US, which provides greater flexibility in bringing a claim. In most US jurisdictions, all that is required is that the underlying transaction be set out. Whether the transaction sounds in contract, or tort, or equity can be sorted out later.
The English courts are required to limit disclosure to that which is strictly necessary to deal with the case justly. Disclosure is not automatic; it requires a court order. An order for standard disclosure will require each party to disclose only the documents on which he relies; which adversely affect his own case or another party's case; which support another party's case, or which he is required to disclose (CPR 31.6).
By contrast FRCP 26(b)(1) provides that "parties may obtain discovery regarding any nonprivileged matter that is relevant to any party's claim or defense". ‘Relevant’ in this context is anything “reasonably calculated to lead to the discovery of admissible evidence.” (Perry v Schwarzenegger (2009)). Discovery in the US is much broader than in England but also more costly.
Depositions are live pre-trial testimony provided by a witness, which is carried out in a similar manner to that at trial. Lawyers from both sides will usually be present, the witness will swear an oath and the evidence will be recorded. No judge will be present, however, and the evidence may or may not be used in court. This process offers flexibility if there are geographical restraints involved, providing the opportunity for live cross-examination of witnesses outside the trial courtroom. It also allows the parties to analyse the strengths and weaknesses of their case at a relatively early stage in proceedings. The English courts have no such process, relying instead on written witness statements which are submitted to court. At trial, direct and re-direct examination is limited to confirmation of the content of the witness statements and the scope of cross-examination only. This can vastly reduce the amount of time the witness spends testifying at trial, although it can also potentially limit the scope of the testimony given.
COMPLIANCE WITH DEADLINES
The last couple of years have seen the English legal system become much more rigid in terms of compliance with court orders, directions and the CPR. The consequences of missing a deadline, even by a matter of minutes, can be catastrophic to a civil case. In any event, failure to comply can increase costs due to the need for additional applications or a negative costs award to penalise poor conduct.
In the US, a failure to comply with the rules does not usually carry consequences in and of itself. The usual practice is to submit a motion to the court asking it to order the offending party to remedy its failure. If the party disobeys the subsequent court order, it can then be sanctioned, not so much for breaking the rules, but for disobeying the court. Broadly speaking US courts are not as rigid as their English counterparts, and are extremely reluctant to bring litigation to an end or make costs awards. However, a continuous and wilful failure to comply with the rules will eventually lead to sanctions against the non-complying party or even involuntary dismissal of the case.
One of the biggest differences between English and US litigation is the ability to have a trial by jury in civil cases in the US. This is upon election from either party and will consist of a minimum of six members and a maximum of twelve. The number of jurors is ultimately at the court’s discretion. The decision will depend on a number of factors, including cost, the complexity of the case, the need for a diverse jury, and the parties’ preference.
What are the advantages of a jury trial? A jury trial should encourage in-depth discussion of the issues and therefore lead to a more considered verdict. Any decision reached will be based on the jury’s view of what is socially acceptable behaviour, arguably leading to a ‘fairer’ verdict than a case which is decided simply on the legal merits.
On the other hand, jurors can easily be influenced by a myriad of factors, including the likeability of the lawyer and any personal biases they may have. There is also the issue that any decision must be unanimous and thus there is the possibility of a re-trial.
There are many different types of damages available as a legal remedy in both jurisdictions. The purpose of punitive (or exemplary) damages is to punish the defendant as opposed to compensating the claimant. Punitive damages tend to be much more limited in England, only being used in cases of particularly oppressive or unconstitutional action.
The US legal system has a less reserved approach to awarding punitive damages, often in large amounts. Federal juries nowadays tend to consider less whether or not to award punitive damages, focusing more on how much to award. For example, last year a Louisiana federal court jury awarded $6 billion in punitive damages against Takeda Pharmaceutical Co Ltd and $3 billion against Eli Lilly and Co. This was on top of compensatory damages of $1.475 million. It should be borne in mind, however, that punitive damages are usually awarded for tortious violations. Punitive damages for breach of contract are much more circumscribed.
One of the benefits of litigation in England is the ‘loser pays’ principle: the winning party will ordinarily recover most of their litigation costs (including solicitors’ and barristers’ fees and any disbursements) from the other side. The amount recoverable, if not agreed between the parties, will be assessed by the court and will usually be reduced in line with what is considered to be ‘reasonable and proportionate’.
In recent years, depending on the size of the claim, there has also been a requirement for parties to submit a costs budget to the court at the start of proceedings. There may be a costs management conference between the court and the parties to discuss and agree the budget in line with what is considered to be ‘reasonable and proportionate’ to the size and complexity of the case. The budget can be amended (on application) if required. Following determination of liability, if the costs sought exceed the budget by more than 20% the receiving party is unlikely to recover the excess without good reason. Costs which are not considered by the courts to be proportionate in amount may be disallowed or reduced, even where they have been reasonably or necessarily incurred (CPR 44.3(2)(a)).
There are no such limitations on legal costs in the US. Further, because US courts believe it discourages people from making use of the court system, there is no ‘loser pays’ principle. Each party usually has to cover their own legal fees, regardless of the outcome of a trial. A successful party will usually be able to recover costs of disbursements, such as court fees, and those of non-attorney professionals. Multi-nationals reported that US litigation costs on average four to nine times more than non-U.S. litigation, despite the fact that FRCP 1 requires “the just, speedy and inexpensive determination of every action and proceeding”.
In the US, the right to appeal is automatic and must be filed within 30 days of the initial judgment date. Parties are also able to file a motion for reconsideration to the judge in interlocutory applications who provided the judgment although, for obvious reasons, these are rarely successful.
In England, the right to appeal is not automatic. There must be grounds for appeal and an appeal can only be brought with the court’s permission. The appellant must file a notice of appeal with the appeal court within 21 days of the decision against which it is wishing to appeal (although the lower court has discretion to amend this time limit).
Commercial litigation is diverging more rapidly than previously between the US and England. The consequences of not knowing the vagaries of the system can be fatal to a civil litigation claim, particularly in the current climate of compliance and proportionality in England. Some cases will benefit from the stricter procedural confines of the English system; other cases will be better suited to the broader scope of discovery and the front-loaded nature of depositions in the US. In order to maximise their chances of success, potential litigants should seek the advice of local counsel or lawyers who are well-versed in operating transatlantic litigation proceedings.