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Resolving inconsistent jurisdiction clauses and limits to Fiona Trust presumption

06 July 2015

In Trust Risk Group SpA v AmTrust Europe Ltd [2015] EWCA Civ 437, 30 April 2015, the Court of Appeal held that when resolving competing jurisdiction clauses in two different agreements where one is entered into at a later date, the correct approach was to apply a careful and commercially-minded construction of the contracts and not the Fiona Trust "one-stop shop" presumption. This was despite the risk of disputes becoming fragmented. This case further limits the circumstances in which the Fiona Trust presumption applies.

This was an appeal from a High Court decision covered in our February/March 2015 issue, AmTrust Europe Ltd v Trust Risk Group SpA [2014] EWHC 4169 (Comm) concerning whether the English court had jurisdiction in a dispute between the Italian broker appellant and the UK insurer respondent.

In 2010 the parties entered into a Terms of Business Agreement (TOBA), which was subject to English law and jurisdiction. In 2011 they signed a Framework Agreement, governed by Italian law and providing for disputes to be determined by arbitration in Milan. The TOBA was included as a schedule to the Framework Agreement. The respondent alleged that the appellant had misappropriated premiums received from insured persons which were to be paid into a trust account for the benefit of the respondent. A dispute arose as to which contract this dispute was in respect of and, as a result, which dispute clause applied.

Blair J held that there was a "good arguable case" that the English courts had jurisdiction under the English jurisdiction clause in the TOBA. The appellant however argued that the Framework Agreement superseded the TOBA and that the arbitration agreement in the Framework Agreement applied to the dispute between the parties. The respondent countered that the TOBA continued as a freestanding agreement and that, as a result, any disputes arising out of the TOBA were subject to the English jurisdiction clause contained therein.

On appeal, the Court of Appeal focused on the scope of the Fiona Trust presumption (deriving from Fiona Trust & Holding Corp & ors v Privalov & ors [2007] EWCA Civ 20 and explained below) that the parties are likely to have intended that any dispute arising out of their relationship be decided by the same tribunal – the "one-stop" approach. Fiona Trust concerned the interpretation of an arbitration clause in one agreement. First, in order to determine whether and to what extent the Fiona Trust presumption applied, the court had to determine the contractual relationship between the parties; was there a single agreement (ie the Framework Agreement) or two separate agreements?

One or two agreements?

It was necessary for the court to determine whether there was a single agreement or two freestanding agreements because only where there was a single agreement would the Fiona Trust presumption apply.

In interpreting the Framework Agreement and the TOBA, Beatson LJ noted that the court's job was to discern the intention of the parties, objectively speaking from the words used, in the relevant context and against the factual background.

The starting point is the words used. Both sides raised linguistic arguments based on the wording of the agreements. However, a linguistic analysis alone could not provide clarity as to whether the two agreements were in fact one contract.

The court considered that there might be more scope to resort to the apparent commercial purpose of the agreements as an aid to construction than there otherwise would be in a well-drawn contract. It also suggested that in such a situation it was less likely that detailed linguistic analysis would be of assistance in construing the terms of the contract. However, this approach has its limits as both parties are often able to provide differing commercial "common sense" approaches.

The court ultimately found that there were two freestanding agreements on the basis that each dealt with different parts of the parties' relationship. The next issue was how to resolve the competing jurisdiction clauses.

Limits on the Fiona Trust presumption

The Court of Appeal, whilst acknowledging that Fiona Trust was helpful, held that there could be no such presumption where there were two or more different jurisdiction clauses in different agreements which governed different aspects of the parties' relationship.

Beatson LJ, giving the lead judgment in the Court of Appeal, considered two fairly recent Court of Appeal decisions relating to the construction of conflicting jurisdiction clauses in financial transactions. First, in UBS Securities LLC v HSH Nordbank AG [2009] EWCA Civ 585, the Court of Appeal considered the "commercial centre" of a transaction governed by multiple contracts entered into as part of one package in order to determine the applicable jurisdiction clause. Secondly, in Sebastian Holdings Inc v Deutsche Bank AG [2010] EWCA Civ 998, the Court of Appeal distinguished UBS and found that where a claim arose under a particular agreement, the jurisdiction clause in that agreement would apply even if it resulted in a fragmentation of proceedings.

Beatson LJ drew a distinction between, on the one hand, a single contract establishing a relationship between the parties which is later supplemented by a subsequent contract and, on the other, agreements concluded at the same time that represent a complete package. It is easier to conclude in the former case that the parties have chosen different jurisdictions to deal with different aspects of their relationship. There could be no presumption that the provisions in the later agreement were intended to capture disputes arising out of the earlier agreement. This was held to be the case even if there was a risk of fragmentation of the overall process for dispute resolution.

The Court of Appeal concluded that the jurisdiction clause in the TOBA was not affected by the conflicting jurisdiction clauses in the Framework Agreement. The clauses related only to matters arising out of the agreements in which they were contained.

COMMENT

When contrasted with the UBS and Sebastian decisions, this case identifies the two distinct factual patterns that affect the court's approach to resolving seemingly inconsistent dispute resolution provisions: (1) where two freestanding agreements are entered consecutively, with the latter dealing with different aspects of the relationship; and (2) where there are multiple contracts entered simultaneously about a single transaction between the parties. In the former, as in this case, it may be easier for the court to conclude that the parties chose to have different jurisdictions to deal with different aspects of the relationship.

There is no presumption that a dispute resolution clause in a more recent agreement is intended to capture disputes arising out of a previous agreement.

There are often good reasons for parties to enter into different agreements with different jurisdiction clauses, despite the risk that claims may not neatly fall under just one contract. As this case demonstrates, the context in which contracts which contain competing jurisdiction clauses are entered into will have a significant impact on the approach of the court to resolving the conflict. If different jurisdiction clauses are required in different contracts, it is important that they are drafted as clearly as possible to avoid disputes as to which mechanism applies.