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Clear and precise wording needed to incorporate jurisdiction clauses by reference

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10 February 2010

Case Summary: Africa Express Line Ltd v Socofi SA and Plantations Dam SA [2009] EWHC 3223 (Comm)

In Africa Express Line Ltd v Socofi SA and Plantations Dam SA the claimant was unable to demonstrate clearly and precisely that for the purposes of Article 23(1) in the Brussels Regulation the clause conferring jurisdiction on the English Court had been accepted by the first defendant.

Accordingly, the Court declared it had no jurisdiction to hear the claimant’s claim on the ground that the jurisdiction clause relied on by the claimant was not clearly incorporated into the contract between the parties. The decision highlights how difficult it is to incorporate jurisdiction clauses by reference to an entirely separate contract.

Key facts

The first defendant and applicant, Socofi, a French fruit importer, had entered into an agreement in 2005 with the second defendant (DAM), a fruit grower, to buy its entire fruit production. In April 2007, DAM contracted with Africa Express Line Ltd (AEL), an English company operating refrigerated vessels between West Africa and Europe, to ship all of its produce with AEL. This contract contained a jurisdiction clause providing that claims worth more than US$125,000 were to be submitted to the English High Court.

AEL carried DAM’s fruit by sea to Europe where a third party, LV Fruits (LV), provided freight forwarding services. LV then invoiced Socofi for both its own services and those provided by AEL. In July 2007 the relationship between Socofi and LV broke down, and Socofi and AEL (through its French group companies) negotiated a new agreement (the Agreement) which was contained in an email exchange between AEL and Socofi. AEL wrote: “We are prepared to offer you transport services [...] This offer includes [...] maritime transport under the conditions of the aforementioned charter agreement between AEL and DAM”. Socofi replied: “We acknowledge receipt of your mail sent today, and confirm our acceptance of the following points: 1) The maritime transport service under the conditions of the contract of affreightment between AEL and DAM”.

AEL later commenced proceedings in the English High Court against Socofi and DAM for outstanding payments in respect of certain shipments. Socofi sought a declaration that the court had no jurisdiction to hear AEL’s claims since the exclusive jurisdiction clause on which AEL sought to rely was not clearly incorporated into the Agreement. AEL argued that its email exchange with Socofi incorporated the terms of the earlier agreement between AEL and DAM including the jurisdiction clause.

The decision

Clarke J found that AEL had failed to establish, clearly and precisely, Socofi’s consent to the jurisdiction clause for the purposes of Article 23(1) of the Brussels Regulation, which provides that parties to a contract can agree amongst themselves that the courts of a particular Member State are to have jurisdiction over any disputes which may arise under the contract. The Judge noted that, according to the jurisprudence of the ECJ, “‘real consent’ to, or ‘actual acceptance’ of, a jurisdiction clause, which must be ‘clearly and precisely demonstrated’” is required for the purposes of Article 23(1).

Clarke J accepted Socofi’s submission that the authorities (and in particular those concerning Article 23) tend to distinguish between (a) the incorporation of a jurisdiction clause which is contained in a set of standard terms and conditions and (b) the incorporation of a jurisdiction clause contained in an existing contract with a third party. In cases of the first type, a jurisdiction clause contained within a set of standard terms and conditions may be incorporated into a contract so long as that contract makes an express reference to the standard terms and conditions in question.

In contrast, for cases of the second type (such as the present), the law has been built up by analogy with that of the incorporation of arbitration clauses into a bill of lading from a charterparty, where there tends to be a much stricter approach. In AIG Europe SA v QBE International Insurance Ltd it was noted that the incorporation of the terms of one contract into another wholly separate contract between different parties raises different questions to those posed when considering the incorporation of a set of standard terms and conditions. This is because it is unlikely that all of the terms of the first contract will be relevant to the second and the parties must therefore decide which terms they wish to incorporate and which to ignore.

General language of incorporation will therefore usually only cover such terms from the previous agreement as are directly relevant to the instant agreement between the parties and the starting point is that this does not include the jurisdiction clause. Language such as “wording as original”, “[a]ll terms, clauses and conditions as original and to follow the original in all respects including settlements” and “all the terms whatsoever of the said charter apply to and govern…” have all been found to be insufficiently clear and precise for the court to permit the incorporation of a jurisdiction clause.

Clarke J concluded that “[w]hile everything must depend on the precise terms of the communications between the parties and the intention which must, objectively, be attributed to them in the light of these communications, [the authorities show that] an incorporation of conditions by general wording is usually inapt to incorporate an ancillary arbitration or jurisdiction clause”. He also stressed the importance of commercial context in determining whether an arbitration or jurisdiction clause is to be treated as incorporated by general words of incorporation.

Clarke J felt that the emphasis of the correspondence by which the Agreement was made was to negotiate the key provisions with which the parties were concerned, namely the services which were to be provided and their cost. He did not consider that the Agreement was left without meaningful content if the jurisdiction clause was not incorporated. Nor did he consider that the commercial context permitted an inference that the parties intended English courts to determine potential disputes since the initial negotiations were conducted in French between French companies and the correspondence which led to the Agreement was also in French.

Comment: The decision contains a useful summary of the law on incorporation of arbitration or jurisdiction clauses by reference. In general, it is much easier to incorporate such clauses by reference to a set of standard terms and conditions than by reference to an entirely separate contract. Although this principle had developed primarily in the context of charterparty and insurance cases where specific concerns exist, the same principle extends to other contracts between different parties. The position is the same in relation to arbitration clauses (which are excluded from the application of the Brussels Regulation) for the purposes of s6 of the Arbitration Act 1996, which rather cryptically provides that a reference to an arbitration clause or a document containing an arbitration clause constitutes an arbitration agreement if the reference is such as to make that clause part of the agreement. Interestingly, Clarke J indicated that he would be prepared to adopt a more lenient approach in cases other than charterparties and insurance, but was not persuaded that, judged objectively, the parties had intended to confer jurisdiction on English courts in this particular case. As such, when parties wish to incorporate ancillary provisions such as a jurisdiction or arbitration clause into an agreement by reference to a separate contract, they are advised to make this abundantly clear by express reference to the arbitration or jurisdiction clause in question and by expressly consenting to its incorporation.

Further information

This summary is part of the Allen & Overy Litigation Review , a monthly update on interesting new cases and legislation in commercial dispute resolution. For more information please contact Sarah Garvey, or tel +44 (0)20 3088 3710.