Which law applies to an international trade secrets dispute involving former employees
The High Court has recently provided guidance for employees in relation to the Recast Brussels Regulation. This guidance can be neatly summarised as: France 1 England 0.
The High Court has ruled in favour of two former employees in a case concerning Article 22.1 of the Recast Brussels Regulation (RBR). The judgment in Semtech Corporation & Ors v Lacuna Space Ltd & Ors clearly sets out the test to be applied in deciding whether disputes relate to contracts of employment.
The issue arose in a case between Semtech Corporation (and its subsidiaries) and Nicolas Sornin and François Sforza, who were employed by Semtech in Grenoble, France until 23 September 2020. Semtech alleges that both of them shared confidential information, trade secrets and (in the case of Sornin) source code with another company, Lacuna, of which they were shareholders. In Deputy Judge Iain Purvis QC’s words, they are alleged to have acted as a “Trojan horse” within Semtech.
Sornin and Sforza argued that the proceedings “relate to” their contracts of employment under Article 20 of the RBR and that therefore Article 22.1 applied. This states: “An employer may bring proceedings only in the courts of the Member State in which the employee is domiciled.” The two have also brought wrongful dismissal actions in the French courts. (The case pre-dated 1 January 2021 so the UK-EU Withdrawal Agreement was not relevant.)
The judge agreed with the former employees. He noted that Article 22.1 had been discussed by the Court of Appeal in Alfa Laval Tumba AB v Separator Spares International Ltd in 2013. The 2016 Court of Appeal judgment in Bosworth & Hurley v Arcadia Petroleum Ltd and others subsequently set out a three-part test:
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?”
In this case, said the judge, the answer to all three questions was yes, and the claims clearly related to the defendants’ contracts of employment. In support of this, he found that (i) they were senior employees within Semtech; (ii) their contracts provide the entire legal framework for resolving their defence; (iii) allegations of breach of those contracts are also at the heart of the claimants’ case; and finally (iv) they both have a lifelong connection with France and could reasonably expect to fall within the protection of Articles 20 and 22.1.