We
have discussed
the judgment of the Supreme Court in Swastik Gases on the
construction of jurisdiction clauses. Its conclusion there is no rule of law
that a clause cannot confer exclusive jurisdiction unless it uses words of
exclusion (“only”, “exclusive” etc) is plainly correct. But this gives rise to
a further question: how should the courts actually decide whether a particular
clause does or does not confer exclusive jurisdiction? This is, of course, a
question of construction, but there is a large body of case law on this topic
that is of assistance. These cases were reviewed by the Court of Appeal earlier
this year in its important judgment in Hin-Pro v Compania
Sud Americana De Vapores SA.
have discussed
the judgment of the Supreme Court in Swastik Gases on the
construction of jurisdiction clauses. Its conclusion there is no rule of law
that a clause cannot confer exclusive jurisdiction unless it uses words of
exclusion (“only”, “exclusive” etc) is plainly correct. But this gives rise to
a further question: how should the courts actually decide whether a particular
clause does or does not confer exclusive jurisdiction? This is, of course, a
question of construction, but there is a large body of case law on this topic
that is of assistance. These cases were reviewed by the Court of Appeal earlier
this year in its important judgment in Hin-Pro v Compania
Sud Americana De Vapores SA.
Hin-Pro
was a freight forwarder registered in Hong Kong. The respondent (‘CSAV’) was an international shipping
company. Bills of lading issued by CSAV contained the following jurisdiction
clause:
was a freight forwarder registered in Hong Kong. The respondent (‘CSAV’) was an international shipping
company. Bills of lading issued by CSAV contained the following jurisdiction
clause:
“23 Law
and jurisdiction
and jurisdiction
This Bill of Lading and
any claim or dispute arising hereunder shall be subject to English law and the
jurisdiction of the English High Court of Justice in London. If, notwithstanding
the foregoing, any proceedings are commenced in another jurisdiction, such
proceeding shall be referred to ordinary courts of law.”
any claim or dispute arising hereunder shall be subject to English law and the
jurisdiction of the English High Court of Justice in London. If, notwithstanding
the foregoing, any proceedings are commenced in another jurisdiction, such
proceeding shall be referred to ordinary courts of law.”
Notably,
clause 23 did not say that the English High Court was to have exclusive jurisdiction.
clause 23 did not say that the English High Court was to have exclusive jurisdiction.
In
2012, Hin-Pro commenced a number of actions in the Chinese courts for damages
alleging that CSAV had released its cargo without the production of the
original bills of lading. CSAV commenced an action in the English court. A
number of orders restraining Hin-Pro from continuing the Chinese proceedings
were passed but these were ignored. Andrew Smith J found Hin-Pro to be in
contempt and committed its sole director to prison. Evidently not deterred by
this, Hin-Pro commenced a further 23 actions in China; CSAV then sought a
declaration in the English court that Hin-Pro was bound by the jurisdiction
clause in the bills of lading to sue in England only. Cooke J made this
declaration and granted a permanent injunction restraining Hin-Pro from pursuing
the Chinese litigation. In the Court of Appeal, Hin-Pro argued that Cooke J was
wrong to have made this order because clause 23 of the bills of lading was a non-exclusive jurisdiction clause; so
Hin-Pro was not in breach of contract in commencing proceedings in China.
2012, Hin-Pro commenced a number of actions in the Chinese courts for damages
alleging that CSAV had released its cargo without the production of the
original bills of lading. CSAV commenced an action in the English court. A
number of orders restraining Hin-Pro from continuing the Chinese proceedings
were passed but these were ignored. Andrew Smith J found Hin-Pro to be in
contempt and committed its sole director to prison. Evidently not deterred by
this, Hin-Pro commenced a further 23 actions in China; CSAV then sought a
declaration in the English court that Hin-Pro was bound by the jurisdiction
clause in the bills of lading to sue in England only. Cooke J made this
declaration and granted a permanent injunction restraining Hin-Pro from pursuing
the Chinese litigation. In the Court of Appeal, Hin-Pro argued that Cooke J was
wrong to have made this order because clause 23 of the bills of lading was a non-exclusive jurisdiction clause; so
Hin-Pro was not in breach of contract in commencing proceedings in China.
In
the English case law on this point, a distinction has been drawn between ‘transitive’
and ‘intransitive’ jurisdiction clauses: this is the difference between saying “the
parties agree to submit to the
jurisdiction of the English courts” and that “the parties agree to submit disputes to the jurisdiction of the
English courts”. It was suggested that the latter (transitive) clause was obligatory while the former (intransitive)
was non-obligatory, that is, the agreement was merely that English jurisdiction
would be recognised if proceedings were started there, not that proceedings had to be started there. This
distinction may strike those attracted by Lord Hoffmann’s approach in Fiona Trust as
uncommercial; there is, however, a substantial body of case law that draws it. In
Hin-Pro, Christopher
Clarke LJ came the conclusion that clause 23 of the bill of lading was an
exclusive jurisdiction clause partly for this reason. He also gave six other
reasons, some of which are of general importance. First, he rejected Hin-Pro’s
submission that the clause should be construed in the light of the fact that a
recipient of the bill of lading was unlikely to be English: “[i]n agreeing in English to an English law
contract the parties must be taken to have agreed that it shall be interpreted
with all the nuances of the English language and in the way that a speaker
whose first or only language was English would do so.”
the English case law on this point, a distinction has been drawn between ‘transitive’
and ‘intransitive’ jurisdiction clauses: this is the difference between saying “the
parties agree to submit to the
jurisdiction of the English courts” and that “the parties agree to submit disputes to the jurisdiction of the
English courts”. It was suggested that the latter (transitive) clause was obligatory while the former (intransitive)
was non-obligatory, that is, the agreement was merely that English jurisdiction
would be recognised if proceedings were started there, not that proceedings had to be started there. This
distinction may strike those attracted by Lord Hoffmann’s approach in Fiona Trust as
uncommercial; there is, however, a substantial body of case law that draws it. In
Hin-Pro, Christopher
Clarke LJ came the conclusion that clause 23 of the bill of lading was an
exclusive jurisdiction clause partly for this reason. He also gave six other
reasons, some of which are of general importance. First, he rejected Hin-Pro’s
submission that the clause should be construed in the light of the fact that a
recipient of the bill of lading was unlikely to be English: “[i]n agreeing in English to an English law
contract the parties must be taken to have agreed that it shall be interpreted
with all the nuances of the English language and in the way that a speaker
whose first or only language was English would do so.”
Second,
Christopher Clarke LJ thought it significant that clause 23 clearly provided
for a mandatory choice of law:
English law. Although not conclusive, this makes it more likely that
the parties intended the English court’s jurisdiction to be exclusive, because not
all foreign courts would necessarily apply English law in accordance with the
choice of law clause.
Christopher Clarke LJ thought it significant that clause 23 clearly provided
for a mandatory choice of law:
English law. Although not conclusive, this makes it more likely that
the parties intended the English court’s jurisdiction to be exclusive, because not
all foreign courts would necessarily apply English law in accordance with the
choice of law clause.
Third,
the phrase ‘notwithstanding the foregoing’ in the second sentence only made
sense on the basis that the first sentence created an obligation to sue in
England rather than merely an option to do so. As a matter of ordinary language, saying “if C does X despite Y…”
suggests that the effect of Y is that “X should not be done”.
the phrase ‘notwithstanding the foregoing’ in the second sentence only made
sense on the basis that the first sentence created an obligation to sue in
England rather than merely an option to do so. As a matter of ordinary language, saying “if C does X despite Y…”
suggests that the effect of Y is that “X should not be done”.
Fourth,
Christopher Clarke LJ rejected Hin-Pro’s attempt to invoke the contra proferentem rule, that is, the
argument that any ambiguity in the bill of lading should be resolved against
CSAV as the proferens of the clause. The
usual consequence of applying this rule is to choose a construction of a
clause that is adverse to the proferens (eg pay more, accept less) compared to an alternative construction (eg pay less, accept more). Christopher Clarke
LJ made the important point that, even if the rule applies, it is
impossible to tell at the time the contract is made which construction of a
jurisdiction clause is adverse to one
party. How could either CSAV or Hin-Pro have known in 2010 whether it would be
to their advantage to sue in England or in China with respect to disputes that
had not yet arisen? Which jurisdiction was advantageous would depend entirely
on the nature of the dispute, the applicable limitation period, and many other
factors that could have had no purchase on the date of conclusion of the
contract. As a Canadian judge put it in a passage that Christopher Clarke LJ
cites with approval, “[t]he proper
interpretation of the contract must exist at the time it is made, and not
change. It cannot come and go as the parties’ fortunes wax and wane. It cannot
be unknowable and shrouded in fog until after the event. For example one
interprets an insurance contract the same way before and after a fire, and
it has meaning before any fire”.
Christopher Clarke LJ rejected Hin-Pro’s attempt to invoke the contra proferentem rule, that is, the
argument that any ambiguity in the bill of lading should be resolved against
CSAV as the proferens of the clause. The
usual consequence of applying this rule is to choose a construction of a
clause that is adverse to the proferens (eg pay more, accept less) compared to an alternative construction (eg pay less, accept more). Christopher Clarke
LJ made the important point that, even if the rule applies, it is
impossible to tell at the time the contract is made which construction of a
jurisdiction clause is adverse to one
party. How could either CSAV or Hin-Pro have known in 2010 whether it would be
to their advantage to sue in England or in China with respect to disputes that
had not yet arisen? Which jurisdiction was advantageous would depend entirely
on the nature of the dispute, the applicable limitation period, and many other
factors that could have had no purchase on the date of conclusion of the
contract. As a Canadian judge put it in a passage that Christopher Clarke LJ
cites with approval, “[t]he proper
interpretation of the contract must exist at the time it is made, and not
change. It cannot come and go as the parties’ fortunes wax and wane. It cannot
be unknowable and shrouded in fog until after the event. For example one
interprets an insurance contract the same way before and after a fire, and
it has meaning before any fire”.
The
upshot of this analysis is not just that a jurisdiction clause can be exclusive even if it does not use
words of exclusion: it is that it usually will
be exclusive as a matter of construction. One interesting difference
between English and Indian law is, however, this: if a contract is governed
by English law or contains an English jurisdiction clause (whether exclusive or
non-exclusive), an English court has jurisdiction under the CPR even if no part
of the cause of action arose in England. Contrary to what has been suggested in
some cases, an Indian court does not: the Indian CPC does not recognise
jurisdiction by agreement alone. This means that there is always a logically
prior question to be answered in this country before turning to the jurisdiction clause: does
the Indian court have jurisdiction under its own procedural rules? But the
construction of the clause may still matter: for example, if a small part of
the cause of action arose in India or the property is located in India (so that
the Indian court has jurisdiction under the CPC/Letters Patent), and one of the
parties seeks an anti-suit injunction in the Indian court restraining the other
party from pursuing English proceedings, it is important to decide whether the
jurisdiction clause in favour of the Indian court is exclusive or
non-exclusive. So the question of construction is just as important in this
country although one must be careful to not overlook these differences relating
to underlying jurisdiction.
upshot of this analysis is not just that a jurisdiction clause can be exclusive even if it does not use
words of exclusion: it is that it usually will
be exclusive as a matter of construction. One interesting difference
between English and Indian law is, however, this: if a contract is governed
by English law or contains an English jurisdiction clause (whether exclusive or
non-exclusive), an English court has jurisdiction under the CPR even if no part
of the cause of action arose in England. Contrary to what has been suggested in
some cases, an Indian court does not: the Indian CPC does not recognise
jurisdiction by agreement alone. This means that there is always a logically
prior question to be answered in this country before turning to the jurisdiction clause: does
the Indian court have jurisdiction under its own procedural rules? But the
construction of the clause may still matter: for example, if a small part of
the cause of action arose in India or the property is located in India (so that
the Indian court has jurisdiction under the CPC/Letters Patent), and one of the
parties seeks an anti-suit injunction in the Indian court restraining the other
party from pursuing English proceedings, it is important to decide whether the
jurisdiction clause in favour of the Indian court is exclusive or
non-exclusive. So the question of construction is just as important in this
country although one must be careful to not overlook these differences relating
to underlying jurisdiction.