Unilateral jurisdiction clauses valid under English law – The High Court in Mauritius Commercial Bank Limited v Hestia Holdings Limited

The High Court (England and Wales) has upheld a so-called ‘unilateral’ or ‘one-sided’ jurisdiction clause (choice of court agreement) on 17 May last. The finding is in contrast with the French Cour de Cassation’s stance  in Banque Privee Edmond de Rothschild Europe v X – which had some calling in the case by virtue of defendants arguing that the jurisdiction agreement ought to be subject to Mauritian law, which is anchored on French civil law. In that case, the Cour de Cassation held that the unilateral clause was invalid under (doubtful) reference to Article 23 of the Brussels I Regulation – the clause was held not to be binding under the French doctrine of clauses potestatives, even though the agreed forum was Luxembourg (whence the validity of the clause was judged under the lex fori derogati, not prorogati; that will no longer be possible under the recast Jurisdiction Regulation).

It is noteworthy that claimant was based in Mauritius; first defendant a Mauritius-registered company; and second defendant the first defendant’s parent company and registered in India. Under the current Brussels I Regulation (this however will change once the new regime applies as of 2015), for the choice of court clause to be covered by the Brussels Regime, at least one of the parties has to be domiciled in the EU.

The contract at issue, read:

‘Clause 23 – Governing Law. This Agreement and any dispute or claim arising out of, or in connection with, it or its subject matter or formation (including non-contractual disputes or claims) shall be governed by and construed in accordance with English Law.

Clause 24 – Enforcement.

24.1 Jurisdiction

(a) The courts of England have exclusive jurisdiction to settle any dispute arising out of or in connection with this Agreement (including a dispute regarding the existence, validity or termination of this Agreement) (a “Dispute”).

(b) The Parties agree that the courts of England are the most appropriate and the most convenient courts to settle Disputes and accordingly no Party will agree [sic, obviously a typographical error for argue] to the contrary.

(c) This Clause 24.1 is for the benefit of the Lender only. As a result the Lender shall not be prevented from taking proceedings related to a Dispute in any other courts in any jurisdiction. To the extent allowed by law the Lender may take concurrent proceedings in any number of jurisdictions.

24.2 Service of Process

(a) The Borrower and the Guarantor shall irrevocably appoint ‘Progress Corporate Services Private Limited’ presently located at 2, Lansdowne Road, Croydon, Surrey, London CR9 2ER.’

The Defendants argued that clause 24.1 is invalid under its proper law, whether that of Mauritius or England, and that in the absence of a valid English jurisdiction agreement, the court does not have jurisdiction over Hestia and Sujana. The Defendants’ challenge to the validity of clause 24.1 rested on two alternative grounds. They allege that the jurisdiction agreement contained in clause 24.1 remained subject to Mauritian law, notwithstanding clause 23; and that under Mauritian law the jurisdiction agreement is ineffective, as a result of the decision of the French Cour de cassation in Rothschild Europe v X, because it is one sided: it allows MCB to sue, or insist on being sued, in any jurisdiction in the world, but binds Hestia and Sujana to litigate in England if MCB so choose. Alternatively, it is submitted that if clause 24.1 is governed by English law, it is too one sided to be compatible with fundamental principles regarding equal access to justice and should not be upheld under English law.

The High Court rejected Mauritian law as the applicable law to the clause (although it did entertain the validity under Mauritian law obiter and was not convinced that Rotschild Europe would be applied by Mauritian courts) and saw no problem whatsoever for the validity of the clause under English law. Popplewell J referred to scholarship:

‘As Professor Fentiman has observed in a recent article in the Cambridge Law Journal entitled “Universal jurisdiction agreements in Europe” (CLJ (2013) 72 (1) 24-27) :

“Such unilaterally non-exclusive clauses are ubiquitous in the financial markets. They ensure that creditors can always litigate in a debtor’s home court, or where its assets are located. They also contribute to the readiness of banks to provide finance, and reduce the cost of such finance to debtors, by minimising the risk that a debtor’s obligations will be unenforceable. Such agreements are valid in English law . . . Indeed despite their asymmetric, optional character it is difficult to conceive how their validity could be impugned or what policy might justify doing so . . .” ‘

Arguments based on the ECHR were rejected:

‘If, improbably, the true intention of the parties expressed in the clause is that MCB should be entitled to insist on suing or being sued anywhere in the world, that is the contractual bargain to which the court should give effect. The public policy to which that was said to be inimical was “equal access to justice” as reflected in Article 6 of the ECHR. But Article 6 is directed to access to justice within the forum chosen by the parties, not to choice of forum. No forum was identified in which the Defendants’ access to justice would be unequal to that of MCB merely because MCB had the option of choosing the forum.’

Note Popplewell J’s reference to ‘improbably’: for any chosen forum would have to uphold jurisdiction on the basis of its own conflict of laws rules.

The material validity of unilateral choice of court agreements is not addressed by the recast Brussels I Regulation (in other words there is no EU rule determining their validity; the Cour de Cassation’s view on this is disputed) – and choice of court agreements continue to be exempt from the Rome I Regulation. The decision in Mauritius Commercial Bank certainly indicates a very favourable approach by the English courts. With the recast Regulation providing for lex fori prorogati as the law destined to rule on the validity of the choice of court agreement, this leads to clear instruction to counsel.

Geert.

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