Effect of non-exclusive English jurisdiction clause and forum non conveniens waiver on application to stay English proceedings
09 May 2016
Where a contract contains a non-exclusive English jurisdiction clause as well as a forum non conveniens waiver, a stay may nevertheless be granted if there are very strong or exceptional grounds, which were unforeseen and unforeseeable when the contract was made (Standard Chartered Bank (Hong Kong) Ltd & anr v Independent Power Tanzania Ltd & ors  EWHC 1640 (Comm)) confirmed on appeal  EWCA 411.
Standard Chartered Bank Hong Kong (SH) became a lender and Security Agent under a Facility Agreement (FA) for a secured loan to Independent Power Tanzania Limited (IPT). Standard Chartered Bank Malaysia Berhad (SM) was the Facility Agent.
VIP Engineering & Marketing Limited (VIP) was a 30% shareholder of IPT, and entered into a Shareholder Support Deed (SSD). Under the SSD, VIP was to use best endeavours to procure that IPT complied with its obligations under the finance documents, and covenanted not to dispose of its shares. VIP later purported to sell its shareholding to Pan African Power Solutions (T) Limited.
The FA, SSD and Security Deed (SD) were governed by English law and contained non-exclusive English jurisdiction clauses. Certain other finance documents were governed by Tanzanian law and contained non-exclusive jurisdiction clauses that were materially identical to those in the FA. Each of the finance documents contained a forum non conveniens (FNC) waiver (a waiver of any rights to argue that a particular forum is “non conveniens”), and expressly accepted the possibility of concurrent proceedings in different jurisdictions.
IPT defaulted, leading to lengthy proceedings in Tanzania between the parties. In what appeared to be a tactical move, VIP brought proceedings in New York, claiming that Standard Chartered Bank (SCB) falsely claimed to own VIP’s interest in IPT. A New York judge dismissed the case on FNC grounds, concluding that Tanzania was the appropriate forum for this claim. VIP commenced new proceedings in Tanzania on largely the same grounds as in the New York proceedings. SCB, SH, and SM objected, contending that Tanzania was not the correct forum for determination of these issues.
The claimants then commenced the English proceedings, seeking sums under the FA and SD, as well as declaratory and injunctive relief. The defendants applied for a stay of the English proceedings on the ground that Tanzania was the most appropriate forum (or alternatively, on case management grounds).
Flaux J acknowledged that where there is a non-exclusive English jurisdiction clause, a defendant must show strong grounds that England is not a convenient forum (which were not foreseeable when the agreement was made) before the court will say that the right to sue in the country specified should not be enforced.
Flaux J then examined the case law where there is both a non-exclusive English jurisdiction clause and a FNC waiver, which is less straightforward. In UBS AG v Omni Holding AG1, the court found this combination did not prevent it from being able to grant a stay on FNC grounds (although a defendant would need to show strong reasons to obtain such a stay).
However, in National Westminster Bank v Utrecht-America2, Clarke LJ considered that this combination prevented the defendant from obtaining a stay on FNC grounds. In Deutsche Bank AG v Sebastian Holdings Inc3, the court decided it retains the power to grant a stay on FNC grounds, even in the presence of a FNC waiver and a non-exclusive English jurisdiction clause, but subject to a heavy burden of proof (more easily met if the grounds for the stay were unforeseeable when the agreement was made).
Flaux J decided that the observation of Clarke LJ in Utrecht-America referred to above was not part of the ratio. He concluded that the analysis in Sebastian Holdings was correct, and the combined presence of a FNC waiver and a non-exclusive English jurisdiction clause does not preclude a stay on FNC grounds. Proceedings may be stayed if very strong or exceptional grounds are demonstrated, which can properly be described as unforeseen and foreseeable at the time the agreement was made. Flaux J considered that a defendant who enters into a contract with a FNC waiver agrees that he will not argue that a forum is not appropriate on FNC grounds which were foreseeable at the time that the agreement was made.
Flaux J held that, as in Royal Bank of Canada v Centrale Raiffeisen Boerenleenbank4, parallel proceedings in a jurisdiction other than England (and thus the possibility of inconsistent findings), were contemplated by the finance documents and clearly foreseeable at the time they were entered into. Therefore, the Tanzanian proceedings were not an unforeseen or unforeseeable ground for a stay. It did not matter that particular aspects of the Tanzanian proceedings were not foreseen, such as their convoluted course or the involvement of particular entities; it was enough that proceedings in Tanzania were foreseeable.
The defendants had also argued that the Tanzanian lawyers and judges had developed knowledge and expertise that made Tanzania a more suitable forum for the determination of the proceedings. However, Flaux J found that, despite their length and expense, the Tanzanian proceedings were at an early stage and none of the issues in the English proceedings had yet been determined in Tanzania. Furthermore, he emphasised that if parties have agreed a FNC waiver and contemplated (or sanctioned) parallel proceedings, they cannot later rely on the advanced stage of those proceedings as a very strong or exceptional reason for a stay.
As for the defendants’ application for a stay on case management grounds, Flaux J followed the approach taken in the Utrecht-America case, concluding that the combination of the FNC waiver and the non-exclusive English jurisdiction clause overwhelmingly pointed against a stay of the English proceedings on case management grounds. Flaux J considered that in the absence of a very strong or exceptional reason for a stay on FNC grounds, it would be wrong for the court to stay the proceedings on case management grounds, if this would have the effect of key issues being decided in another jurisdiction.
Comment: This decision indicates that even if parties enter into a contract containing a FNC waiver and a non-exclusive English jurisdiction clause, the court may nevertheless grant a stay on FNC grounds in certain circumstances. If FNC grounds arise which are very strong or exceptional, unforeseen and unforeseeable at the time the parties made the contract, the effectiveness of the FNC waiver may be impaired. Furthermore, the foreseeability of an element may be determined by the terms of the agreement (even if the particular element was not foreseen by the parties). For example, if the parallel proceedings are contemplated by the agreement, then they will be deemed foreseeable for the purposes of a stay application, even if the parties did not contemplate the particular parallel proceedings that arose.
This decision also indicates that if such very strong or exceptional, unforeseen and unforeseeable grounds do not arise, it is very unlikely that parties will be able to sidestep a FNC waiver by seeking a stay on case management grounds. This will particularly be the case if a stay on case management grounds would result in key issues being determined in the courts of another jurisdiction.
In practice, parties employing a FNC waiver and a non-exclusive jurisdiction clause need to pay close attention to the wording of their contract to ensure that it correctly reflects their intentions as to the availability of certain matters as possible grounds for a stay. If parties do wish for certain matters to be available as a basis for a stay, care must be taken to ensure that the contract does not exclude these matters from being available for such purpose.
1  1 WLR 916
2  EWCA Civ 658
3  EWHC 30369 (Comm)
4  EWCA Civ 7
This case 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 email@example.com, or tel +44 20 3088 3710.