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Jurisdiction clause is exclusive despite it contemplating proceedings in other jurisdictions

01 June 2015

Compania Sud Americana de Vapores SA v Hin-Pro International Logistics Ltd [2015] EWCA Civ 401, 23 April 2015

A jurisdiction clause was found to be exclusive despite expressly providing for proceedings in other courts in certain circumstances. The finding of exclusivity was based on several factors including the choice of an English governing law and the mandatory language used ("shall be subject to"). The doctrine of contra preferentum has limited value in determining whether a jurisdiction clause is exclusive or not.

During 2012 and 2013 the appellant (Hin-Pro) began various separate proceedings against the respondent (CSAV) in the Chinese maritime courts. The bills of lading under which Hin-Pro's claims were brought were on CSAV's standard terms and contained the following jurisdiction clause:

"23. Law 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. In the case of Chile, arbitrators shall not be competent to deal with any such dispute and proceedings shall be referred to the Chilean Ordinary Courts.
"

Despite CSAV obtaining a without notice anti-suit injunction from the English court, Hin-Pro continued with the Chinese proceedings, and damages were awarded against CSAV in at least two of the Chinese cases.
In the English Commercial Court CSAV sought, inter alia, a declaration that Hin-Pro was obliged by clause 23 to litigate disputes in relation to the contracts evidenced by the bills of lading in England.
Cooke J held that Hin-Pro was indeed obliged by clause 23 to litigate its claims before the English High Court. The Chinese actions therefore breached clause 23. Cooke J granted a permanent injunction precluding Hin-Pro from pursuing or taking any further steps in the Chinese courts.

Clause 23 is an exclusive jurisdiction clause

On appeal, Hin-Pro submitted that clause 23 was not an exclusive jurisdiction clause because the clause does not refer to exclusive jurisdiction, and does not say that no other court may have jurisdiction. On the contrary, the second and third sentences recognise that proceedings may be commenced outside England and make provision for that eventuality.

Hin-Pro also submitted that, at the very least, the wording of clause 23 leaves room for doubt as to whether CSAV (as proferens of the clause) was to have the benefit of exclusivity – it should therefore be construed contra preferentem.

In upholding the decision of the Commercial Court, Clarke LJ decided that clause 23 was, in effect, an exclusive jurisdiction clause:

(1) First, the words "shall be subject to" are imperative and directory. By selecting such wording, the parties did not agree only to submit to English jurisdiction if and when English jurisdiction is invoked. On the contrary, they agreed to submit any claim to the jurisdiction of the English courts.

(2) Second, whilst a non-exclusive English jurisdiction clause is not necessarily worthless or otiose when there is express provision for English law as the governing law, the natural purpose of a clause like clause 23 is to stipulate (a) what law will govern; and (b) which court will be the court having jurisdiction over any dispute. The parties made English law mandatory and therefore must (absent any convincing reason to the contrary) be taken to have intended that English jurisdiction should also be mandatory. When the parties agreed that claims and disputes should be determined by the English High Court they were, by necessary inference, agreeing that they should not be determined elsewhere.

(3) Third, there is obvious commercial sense in making both English law and English jurisdiction mandatory. Whilst foreign courts may (but will not necessarily) apply English law if that is what the parties have agreed, England is the best forum for the application of its own law.

(4) Fourth, the phrase "[i]f, notwithstanding the foregoing, any proceedings are commenced in another jurisdiction" would not be necessary if the first sentence of clause 23 made English jurisdiction optional.

(5) Fifth, the second and third sentences are designed to cover a situation where the first sentence is ineffective, for example where a country whose jurisdiction is invoked does not recognise the intended effect of an exclusive jurisdiction clause (as is the case, in some circumstances, in China and Canada).

(6) Sixth, the contra preferentem rule applies to the interpretation of a contract at the time it was drafted, not to the result of a particular suit. An exclusive English jurisdiction clause can benefit either party depending on the circumstances, meaning the doctrine has limited value in determining whether a jurisdiction clause is exclusive or non-exclusive.

(7) Finally, whilst the previous authorities involving different provisions in different contracts are not binding (and are, at best, a useful guide), the tenor of the English authorities is that an agreement for English law and jurisdiction in this form is likely to be interpreted as being exclusive.

COMMENT

Although the word "exclusive" did not appear in clause 23, Clarke LJ's analysis of the language of the clause reveals that it is, in fact, an exclusive jurisdiction clause. However, given that the clause expressly contemplates the possibility of alternative competent jurisdictions, this result was far from a foregone conclusion. The case therefore demonstrates the importance of accuracy when drafting jurisdiction clauses.
For example, where the parties want an exclusive jurisdiction clause, it is always worth including the word "exclusive" for the avoidance of any doubt.

Conversely, when the parties want to combine a mandatory governing law provision with a non-exclusive jurisdiction clause, care should be taken to avoid the application of the former's mandatory language to the latter. Similarly, any provisions designed to deal with the possibility of alternative jurisdictional options should be carefully considered.