FORUM BATTLES 20th May 2010 Stephen Phillips QC

1. FORUM BATTLES20th May 2010Stephen Phillips QC

3. THE JUDICIAL ATTITUDE TO FORUM BATTLES “I hope that in future the judge will be allowed to study the evidence and refresh his memory of the speech of my noble and learned friend Lord Goff of Chieveley in this case in the quiet of his room without expense to the parties; that he will not be referred to other decisions on other facts; and that submissions will be measured in hours and not days” Spiliada Maritime v Cansulex [1987] AC 460, per Lord Templeman:    …what the court is at present concerned with is simply where an action should be tried. I appreciate that litigants do often feel strongly about the place where cases should be tried but disputes as to forum should not become state trials… But here we are with an appeal to this court with a mountain of material; an appellant’s skeleton argument of 69 pages; respondent's skeleton of 53 pages; a reply skeleton from the appellant of 39 pages. It surely would have been better for both parties and better use of court time if they had expended their money and their energy on fighting the merits of the claim. Deripaska v Cherney [2009] EWCA Civ 849, per Waller LJ:

4. COUNCIL REGULATION OR COMMON LAW Where one or more party is domiciled in a member state, the starting point will be Council Regulation 44/2001Common law still applicable where neither party so domiciled. And still may be applicable and has to be argued where the defendant is not domiciled in a member state: the Courts have been deciding the common law position first to avoid grappling with whether Owusu applies And common law continues to govern in offshore jurisdictions, Cayman, BVI etc.

5. JURISDICTION CLAUSES “Hierachy” of jurisdiction clauses analysed by Burton J. in Deutsche Bank AG v. Sebastian Holdings Inc. [2010] 1 All ER (Com) 808: 1. Exclusive jurisdiction : prescribes one jurisdiction and makes it a breach of contract to issue proceedings elsewhere; 2. Non-exclusive with a waiver of FNC: the chosen jurisdiction is “elevated “ above others and it is a breach of contract to assert forum non conveniens; 3. Non-exclusive The very best: exclusive with a waiver of FNC: see Bank of New York Mellon v. GV Films [2009] EWHC 2338 (Comm).

6. WHEN IS A JURISDICTION CLAUSE EXCLUSIVE? A clause may be exclusive by implication, and the exclusivity may bind only one party Continental Bank NA v Aekos Cia Naviera SA [1994] 1 WLR 588 CA:“The juxtaposition of a submission by the defendants to the jurisdiction of the English courts and the option reserved in favour of the bank to sue elsewhere brings into play the expressio unius exclusio alterius canon of construction. It suggests that a similar option in favour of the defendants was deliberately omitted”.Applied in Bank of New York Mellon v. GV Films [2009] EWHC 2338 (Comm) where the following clause was held to be exclusive in relation to proceedings brought by the one party only:

7. WHEN IS A JURISDICTION CLAUSE EXCLUSIVE? (Cont...) “The courts of England are to have jurisdiction to settle any disputes which may arise out of or in connection with these Conditions, the Trust Deed or the Bonds and accordingly any legal action or proceedings arising out of or in connection with these Conditions, the Trust Deed or the Bonds (‘Proceedings’) may be brought in such courts. The Issuer irrevocably submits to the jurisdiction of such courts and waives any objections to Proceedings in such courts on the ground of venue or on the ground that the Proceedings have been brought in an inconvenient forum. This submission is for the benefit of the Trustee and each of the Bondholders and shall not limit the right of any of them to take Proceedings in any other court of competent jurisdiction.....”

8. Council Regulation 44/2001 Article 23: “If the parties, one or more of whom is domiciled in a Member State, have agreed that a court or the courts of a Member State are to have jurisdiction to settle any disputes which have arisen or which may arise in connection with a particular legal relationship, that court or those courts shall have jurisdiction. Such jurisdiction shall be exclusive unless the parties have agreed otherwise ...”

9. THE EFFECT OF A JURISDICTION CLAUSE – COMMON LAW Well established that exclusive clauses will ordinarily be enforced by anti-suit injunction (of foreign proceedings) or stay (of English proceedings). It requires “strong reasons” or “special circumstances” to depart from that rule, such as where the interests of third parties are involved or where there are other disputes not covered which would give rise to parallel proceedings:Donohue v Armco [2002] 1 Lloyd’s Rep 425 HLTurner v Grovit [2002] 1 WLR 107 HL

10. But is the position now significantly different when the clause is non-exclusive, at least in relation to FNC applications for a stay? Gloster J. in Antec International [2006] All ER (D) 208) held that a stay of proceedings founded on a non-exclusive jurisdiction clause would not be granted unless the circumstances were “exceptional”. Factors which could have been foreseen at the time of contracting would not suffice. Burton J. in Deutsche Bank AG v. Sebastian Holdings Inc. [2010] 1 All ER (Com) 808, applying Antec:

11. “ if there is to be an exceptional case, where forum non conveniens arguments are to prevail, a fortiori in an exclusive jurisdiction or FNC waiver case, but even in the case of non-exclusive jurisdiction, the burden on the applicant to establish such a case must be a heavier, perhaps, in exclusive jurisdiction cases, a much heavier, one than if there were no jurisdiction clause at all. If the matters were unforeseeable at the time of the contract, then the burden may be the more easily satisfied...... In the absence of unforeseeability, and in this case in the absence of any impact on the parties, or on the issue of jurisdiction, of any third parties (such as featured considerably in Donohue's case), then the strong or very strong or exceptional grounds, said to engage the interests of justice and satisfy the necessary burden, must be all the more compelling”.

12. THE EFFECT OF A JURISDICTION CLAUSE – ARTICLE 23 If jurisdiction is founded under Article 2 because a defendant is domiciled in a member state, the courts of that state cannot entertain an application for a stay on FNC grounds: Owusu v. Jackson [2005] 2 All ER C9 (Comm) 557 ECJ.Does the same principle apply where jurisdiction is founded under article 23 and the defendant is not domiciled in a member state? UBS v. HSH Nordbank [2010] 1 All ER (Comm) 727 per Lord Collins: “The prevailing view is that there is no scope for the application of forum conveniens to remove a case from a court which has jurisdiction under the Regulation, even as a defendant who is not domiciled in a member state.”But in Choudhary v. Bhatter [2010] IL Pr 8 the Court of Appeal expressed no view on the point pending its resolution by the ECJ. In the meantime the point remains open and arguable.

13. USING ARTICLE 22 TO DISPLACE CONTRACTUAL JURISDICTION Article 23 clauses “shall have no legal force” if they purport to exclude jurisdiction of a court with exclusive jurisdiction under Article 22 (see also Article 25). Article 22: “The following courts shall have exclusive jurisdiction, regardless of domicile: 2. in proceedings which have as their object the validity of the constitution, the nullity or the dissolution of companies or other legal persons or associations of natural or legal persons, or of the validity of the decisions of their organs, the courts of the Member State in which the company, legal person or association has its seat.....”

14. In JP Morgan Chase Bank NA v. Berliner Verkenrsetriebe (BVG) Anstalt [2010] EWCA Civ 390 the defendant German company, sued in England under a jurisdiction clause, argued that the German courts had exclusive jurisdiction because it raised a defence that the contract was ultra vires its decision-making organs. The Court of Appeal rejected the argument that it is sufficient that one issue falls within article 22. To engage article 22 the proceedings must be “principally concerned with” that issue, which requires the Court to undertake an exercise in “overall classification” and make an “overall judgment”. The fact that the ultra vires argument was potentially decisive was not determinative: it was not the focus of the proceedings as a whole.

15. COMPETING JURISDICTION CLAUSES UBS v. HSH Nordbank [2010] 1 All ER (Comm) 727: UBS brought proceedings in England under a jurisdiction clause in notes issued under a CDO for a negative declaration that the transaction was not induced by misrepresentation . Several other related agreements in the transaction contained New York jurisdiction clauses and also covered the dispute. The Court of Appeal held that where jurisdiction clauses overlap the parties must be presumed not to intend that claims would be subject to inconsistent clauses. The parties must have intended that disputes relating to the transaction as a whole would be governed by the clauses in the agreements at the “commercial centre” of the transaction.

18. Cinnamon European Structured Credit Master Fund v Banco Commercial Portugues SA (cont) Cinnamon founded their submissions on the commercial and factual context surrounding the two agreements: Made on same day, between same parties, concerned same subject matter. Representation Letter could not be understood without reference to GS Purchase Agreement. GS Purchase Agreement could not be given effect without reference to Representation Letter. Blackburne J agreed with Cinnamon: Dispute fell within the clause in the GS Purchase Agreement – clauses should be “liberally construed”: Fiona Trust [2007] EWCA Civ 20.