Posts Tagged Choice of court
Oakfield Foods: Writ of control granted in enforcement of EU order of payment; otherwise enforcement stayed pending challenge to jurisdiction in Poland.
In Oakfield Foods v Zaklad Przemyslu Miesnego Biernacki SP Z O O  EWHC 250 (QB), Kimbell DJ granted a writ of control for £149,100.43 (monies to be paid into court) on the basis of the European orders for payment and their enforcement (EOPs) Regulation 1896/2006. The order for payment was issued in June 2018 by the Regional Court in Poznan.
In the simmering dispute on jurisdiction, it is Oakfield’s position that the court in Poland did not have jurisdiction because, under the terms of the sales agreement between it and Biernacki, there was choice of court for the courts of England and Wales. The position Biernacki in their application for the EPO is that the meat that was sold from Biernacki to Oakfield, was delivered in each case on Incoterms CIF/CIP under cover of CMR notes, and delivery took place in Poland.
Article 20 EOP provides for a system of review of the order. Oakfield argue that the time-limit included in it has not even begun running for service was not properly done. Oakfield have also launched proceedings in Poland challenging the EOP. Those proceedings were issued on 1 July 2019.
Kimbell DJ after discussing the service issues (incl the relation between the EOP and the Service Regulation) granted a writ of control (shielding therefore Biernacki from the risk of non-payment), stayed further enforcement until the litigation in Poland will be resolved, and also, at 98, ordered that Oakfield notify Biernacki’s English solicitors every four to six weeks of progress in the application challenging the EOP so as to avoid the claim being warehoused.
Punjab National Bank. In a complex set of claims, Owusu is never easily applied and material non-disclosure severely punished by the High Court.
In  EWHC 3495 (Ch) Punjabi National Bank v Ravi Srnivasan et al three loan transactions lie at the core of the case. They were made between 29th March 2011 and 1st December 2014, and totaled some US$45 million. They were made for the purposes of oil re-refining and wind energy generating projects in the USA. Most defendants are all allegedly guarantors domiciled either in India or the USA. The borrowers themselves, with the exception of two defendants, both ex-EU, are not party to the proceedings because they are insolvent.
Proceedings concern both the enforcement of the loans but also allegations of fraud, and have also been started in the US and in India however these were not disclosed to the court at the time the original permission was sought to serve out of jurisdiction.
At first glimpse the case might be easily held, along the lines suggested by lead counsel for claimant: at 5 (iii). ‘A combination of the exclusive jurisdiction clauses and the strongly arguable claims in fraud pointed towards the need to try the whole matter in one jurisdiction. England was the only possible jurisdiction. The omission to disclose the US proceedings and the Chennai proceedings caused the defendants no prejudice as they knew from the loan documentation that PNB was at liberty to bring parallel enforcement proceedings in different jurisdictions. The Chief Master ought to have placed strong reliance on articles 3 and 5 of the Hague Convention on Choice of Court Agreements (the “Hague Convention”), and article 25 of The Recast Brussels Regulation (“Brussels Recast”), which obliged the court to accept jurisdiction where there were such exclusive jurisdiction clauses.’
Owusu v Jackson would suggest no entertainment at all of forum non conveniens. However the fraud allegations initially opened the door to a point of entry for forum non seeing as none of the defendants are EU based. Sir Geoffrey Vos at 63 lists the relevant factors: ‘the most important being the choice of jurisdiction clauses in both loan agreements and guarantees, the effect of Brussels Recast and the Hague Convention, the fact that some parallel proceedings can be necessary where enforcement against real property is required, and the centre of gravity of the lending relationship which was indeed in London. In addition, the US and Chennai proceedings did not cover the Pesco loans at all, so that disallowing English jurisdiction for those contractual claims prevented PNB from bringing proceedings in its main chosen jurisdiction in respect of that lending and the guarantees given in respect of it.’
In the end however Vos agreed with the initial assessment of the High Court which emphasised non-disclosure (undoubtedly an example of procedural fraus): notwithstanding England being the most appropriate forum for those contractual claims without clear choice of court, and without a doubt the English jurisdiction guarantees of the other loans, but also for the fraud claims, had they been (which they were not) seriously arguable as presently pleaded, (at 72) jurisdiction must be dismissed in light of the need to protect the administration of justice and uphold the public interest in requiring full and fair disclosure.
That is a strict approach in light of the choice of court made and an awkward way around the forceful nature of Article 25 Brussels Ia. An outcome of my discussion with Andrew Dickinson and Alex Layton, is (per Alex’ suggestion) that the High Court seems to have applied an Elefteria approach to choice of court rather than Article 25 BIa.
 EWHC 3196 (Ch) Kinsella et al v Emasan et al is not quite as extensive an analysis on choice of court as Etihad Airways v Prof Dr Lucas Flöther which I review here. Nevertheless the required ‘good arguable case’ standard is again responsible for the extensive discussion of the issue.
Issues are similar as under A25 BIa – in the case at issue it is the Lugano Convention (Article 23) that is engaged. Teverson M’s analysis is very much a factual, contractual one: the basis of Emasan’s (defendant, domiciled at Switzerland) jurisdiction challenge is that: it is domiciled in Switzerland; an alleged 2002 Agreement was an oral agreement which was not subject to any jurisdiction agreement; that alleged 2002 Agreement was not varied by 2006 and 2007 Deeds in such a way as to bring claims for breaches of its alleged terms within the ambit of the jurisdiction clauses contained in those later Deeds, but was superseded by them; there is no other basis upon which the jurisdiction of the English Courts is established in relation to claims based on the 2002 Agreement.
Whether choice of court was made for the 2002 agreement depended on whether A23 Lugano’s conditions were fulfilled that the agreement be made in writing or evidenced in writing; or in a form which accords with practices which the parties have established between themselves (the lex mercatoria gateway was not relevant at issue).
Every one of the written agreements made to give effect to claimant’s entitlement under the original, oral 2002 Agreement included a jurisdiction clause recognising the jurisdiction of the English Courts. A great deal of emphasis was placed on witness statements. At 101 Master Teverson holds that the agreement on jurisdiction under the 2002 agreement can properly in the circumstances of this case be regarded as evidenced by the jurisdiction clauses in the 2006 and 2007 Deeds.
(Handbook of) European Private international law, 2nd ed. 2016, Ch.2, Heading 2.2.9
In Clearlake Shipping Pte Ltd v Xiang Da Marine Pte Ltd  EWHC 2284 (Comm) Andrew Burrows QC essentially halted an attempt by Xiang Da Marine to construct third party proceedings in Singapore so as to avoid choice of court pro England following a series of contracts relating to the chartering of a vessel.
The proceedings, which the interim anti-suit injunctions are restraining, are third party proceedings brought in Singapore by Xiang Da against Clearlake and Gunvor. Those third party proceedings have arisen in relation to an action in Singapore against Xiang Da brought by China-Base Ningbo Group Co Ltd (hereinafter ‘China-Base’). In so far as Xiang Da is liable to pay damages or otherwise suffers loss by reason of the claim brought against it by China-Base, it seeks an indemnity or contribution from Clearlake and Gunvor as third parties. (The claim by China-Base against Xiang Da in Singapore in the meantime has been discontinued. But the third party proceedings remain extant; and those third party proceedings could still be used by Xiang Da to seek to recover loss suffered by reason of the claim brought against it by China-Base.)
The judgment is best consulted for further context; RPC have analysis here, 22 Essex Street here. The judgment is a good reminder of the law on anti-suit injunctions. One can also appreciate that given privity of contract, anti-suit granted viz-a-vis third party proceedings must be treated with caution. Yet restrained application of same is a good way to discipline overly creative proceedings designed simply to circumvent choice of court (and which with respect to the third party involved are vexatious or oppressive).
(Handbook of) EU private international law, 2nd ed. 2016, Chapter 2, Heading 2.2.1.
Fasten your seatbelts. Etihad v Flöther (Air Berlin) puts limits of EU law in applying Article 25 in the spotlight. On ‘particular legal relationship’ in choice of court, and asymmetric jurisdiction clauses in applications for stay.
 EWHC 3107 (Comm) Etihad v Air Berlin (officially: Etihad Airways v Prof Dr Lucas Flöther, who is the insolvency practitioner for Air Berlin) raises the issues of whether the relevant dispute arises in connection with the “particular legal relationship” between the parties, as required by Article 25 Brussels Ia, and the question whether so-called “asymmetric” jurisdiction clauses fall within Article 31 of Brussels Recast, an issue which I reviewed at the time of Commerzbank v Liquimar. (This in the very week that Michiel Poesen and I received copy of Mary Footer’s edited volume on optional choice of court, with our Chapter on Belgium).
Those reading this post and the judgment had better hold on – for this is more than just a quick safety briefing – the required ‘good arguable case’ standard is responsible for the extensive discussion of the issues, perhaps not entirely in line with the instruction for conciseness per the Supreme Court in Vedanta.
Etihad acquired a 2.99% stake in Air Berlin in August 2011 and, in December 2011, increased its shareholding to 29.21% pursuant to an agreement governed by English law and contained an exclusive jurisdiction clause in favour of the English courts. Between 28 and 30 April 2017, Etihad entered into a number of agreements for the purposes of providing Air Berlin with financial support. One of these was a facility agreement which contains the discussed jurisdiction clause:
33.1.1 The courts of England have exclusive jurisdiction to settle any disputes arising out of or in connection with this Agreement (including a dispute relating to non-contractual obligations arising from or in connection with this Agreement, or a dispute regarding the existence, validity or termination of this Agreement) (a “Dispute“).
33.2.2 The Parties agree that the courts of England are the most appropriate and convenient courts to settle Disputes and accordingly no Party will argue to the contrary.
33.1.3 This Clause 33 is for the benefit of the Lender only. As a result, the Lender shall not be prevented from taking proceedings relating to a Dispute in any other courts with jurisdiction. To the extent allowed by law, the Lender may take concurrent proceedings in any number of jurisdictions.
In a letter dated 28 April 2017 from Mr James Hogan, the then President and CEO of Etihad Aviation Group PJSC, to the directors of Air Berlin (the “Comfort Letter”), which provided as follows:
“For the purposes of the finalisation of the financial statements of Air Berlin plc for the year ended 31 December 2016, having had sight of your forecasts for the two years ending 31 December 2018, we confirm our intention to continue to provide the necessary support to Air Berlin to enable it to meet its financial obligations as they fall due for payment for the foreseeable future and in any event for 18 months from the date of this letter. Our commitment is evidenced by our historic support through loans and obtaining financing for Air Berlin”.
In German proceedings, started first, Air Berlin advances two alternative claims against Etihad under German Law: i) A claim for breach of the Comfort Letter on the basis that the Comfort Letter is legally binding. ii) Alternatively, if the Comfort Letter is not legally binding, a pre contractual claim in culpa in contrahendo, on the basis that Etihad used its negotiating power during the negotiations between the parties to avoid providing a clearly binding statement whilst, at the same time, inspiring the trust of Air Berlin that it would adhere to the commitment in the Comfort Letter.
Clearly Air Berlin considers the comfort letter a separate ‘agreement’ or ‘contract’ to which the widely formulated choice of court and law provisions of the Facility Agreement do not apply.
In the English proceedings, Etihad seeks the following declarations:
a) The claims made and declarations sought in the German Proceedings are subject to the exclusive jurisdiction of the English court within Article 25 of the Judgments Regulation, because, on its true construction, they are within the scope of the exclusive jurisdiction clause contained in the 2017 €350m Facility Agreement (the one with the jurisdiction clause discussed above);
b) The claims made and declarations sought in the German Proceedings are governed by English Law on the true construction of the governing law clause in the Facility Agreement, an implied agreement between the same parties and/or the application of Rome I and/or Rome II;
c) The Claimant is not liable for breach of the Comfort Letter, as alleged in the German Proceedings, because that letter, on its true construction, did not create a legally binding promise to provide financial support to Air Berlin;
d) The Claimant is not liable on the basis of culpa in contrahendo, as alleged in the German Proceedings, because the facts and matters relied on in the German Proceedings do not give rise to a cause of action known to English law; and
e) Further, and in any event, the Claimant is not liable to the Defendant as alleged by the Defendant in the German Proceedings.
On Article 25 the list of authority was of course very long. On Article 31, reference was made for background in particular to Commerzbank AG v Liquimar Tankers Management Inc. in which Cranston J supported as I discussed at the time, the cover of asymmetric choice of court by Article 31.
On Article 25, the
I. first point to discuss
was whether the choice of court agreement in the facilities agreement extended to the comfort letter. Etihad puts forward adopting the broad, purposive and commercial approach to interpreting such clauses which it suggests has been mandated by the English authorities, concluding the dispute arises out of or in connection with that agreement. Air Berlin emphasises that application of the standard of proof must take into account the EU law requirement that an exclusive jurisdiction clause under Article 25 must be “clearly and precisely” demonstrated.
At 56 ff Jacobs J first reiterates the jurisdiction clause relied upon, contained in the Facility Agreement, which is expressly governed by English law. Clause 32 of that agreement provides: “This Agreement and all non-contractual obligations arising from or connected with it are governed by English law”. The question of whether, as a matter of contractual interpretation, the clause conferring jurisdiction extends to claims in respect of the Comfort Letter and the related claims advanced in the German proceedings is to be determined by reference to English law. This may surprise uninitiated readers first reading Article 25 and relevant recitals, however to those with conflicts insight it will be well known that Article 25 merely scratches on the surface of the contractual depth of choice of court.
At 69 he sums up the principles (with reference to Fiona Trust), discusses them at length, and summarises at 102:
(i) the width of the jurisdiction clause in the Facility Agreement, (ii) the fact that the Comfort Letter was part of the overall support package where all relevant agreements between Etihad and Air Berlin were governed by English law with English jurisdiction clauses, (iii) the close connection between the Comfort Letter and the Facility Agreement in terms of the genesis of the Comfort Letter, (iv) Etihad’s good arguable case that the Comfort Letter did not create contractually binding obligations and was ancillary to the Facility Agreement, (v) the absence of any competing jurisdiction clause in any of the agreements within the support package, and the existence of English law and jurisdiction clauses in the relevant agreements as part of that package, and (vi) the reasonable foreseeability of disputes which required consideration of the Comfort Letter in conjunction with the Facility Agreement – all lead to the conclusion that the parties intended disputes arising in relation to the Comfort Letter to fall within the jurisdiction clause of the Facility Agreement.
Conclusion on this issue, at 109: ‘interpreting the jurisdiction agreement in the Facility Agreement as a matter of English law, there is a good arguable case that (i) the jurisdiction clause in the Facility Agreement is applicable to the Comfort Letter and any non-contractual claim in connection therewith, and (ii) the claim commenced by Air Berlin in Germany falls within the scope of that clause.’
On Article 25, the
I. second point to discuss at 110 ff was the requirement in Article 25 for the dispute to arise “in connection with a particular legal relationship” – a condition which Etihad must meet separately from the above conclusion that as a matter of English law, the claims made in Germany fell within the scope of the jurisdiction agreement in the Facility Agreement. Arguments here to some extent overlap with the strength or otherwise of the connection between the Facility Agreement and the Comfort Letter, discussed above. Reference here clearly was made to Airbus and the CJEU in Powell Duffryn. In the latter the CJEU held ‘”This requirement aims to limit the effect of an agreement conferring jurisdiction to disputes originating from the legal relationship in connection with which the agreement was concluded. It seeks to prevent a party from being surprised by the referral to a specified court of all disputes which arise in the relationships which it has with the other party and which may originate in relationships other than that in connection with which the agreement conferring jurisdiction was concluded”. The principles of Powel Duffryn were also followed in the equally seminal CDC case.
At 134 ff Jacobs J dismisses the argument that the way in which a particular claim is formulated in the foreign proceedings is determinative of the issue of whether the dispute arises in relation to a particular relationship. Rather: ‘it is obviously necessary to look at the nature of the claim made in those foreign proceedings. It is clear that what is then required is for the court to consider the substance of the claim that is made.’ At 136 ff he lists the arguments leading him to the conclusion that there is ‘no doubt that the dispute concerning the Comfort Letter can fairly (and certainly to a good arguable case standard) be said to originate from [the borrower /lender] relationship.’
The final issue to consider then was Article 31(2): “2. Without prejudice to Article 26, where a court of a Member State on which an agreement as referred to in Article 25 confers exclusive jurisdiction is seised, any court of another Member State shall stay the proceedings until such time as the court seised on the basis of the agreement declares that it has no jurisdiction under the agreement.”
The issue is therefore whether the jurisdiction clause in the present case is a clause which “confers exclusive jurisdiction” within the meaning of Article 31(2). A related question is whether the English court can properly be described as being “seised on the basis of” such exclusive jurisdiction agreement within the meaning of Article 31 (2). Air Berlin says “no” to both questions (on the first, purely on the basis of the clause being asymmetric), and Etihad says “yes”.
Reference is made to Codere, Commerzbank, leading to a firm finding that the clause is exclusive in casu, for it is (in prof Fentimann’s words) ‘exclusive against a counterparty’ and in Louise Mellett’s words (ICLQ, referenced in the judgment)
‘”In an asymmetric agreement, the borrower has promised not to sue anywhere other than the chosen jurisdiction. The question of whether the other party did or did not agree to do the same does not arise when the bank is seeking to enforce the agreement and should be irrelevant. Thus, the point is not so much that “considered as a whole” [asymmetric agreements] are agreements conferring exclusive jurisdiction, as the judge put it in Commerzbank. Rather, each obligation can be considered on its own; the clause includes a promise by the borrower not to sue in any jurisdiction and that promise is capable of being protected by Article 31(2). Each different obligation necessarily falls to be considered separately and the fact that the bank is not under a similar obligation is neither here nor there.”
(Further scholarship discussed includes Dickinson and Lein, and Ahmed; the Hague Convention is also discussed obiter, with reference to Clearlake and update 28 November 2019 as Sarah McKibbin notes Jacobs J suggesting obiter ‘Like Cranston J and Merrett, I consider that there are good arguments that the rules in the Hague Convention are engaged by an asymmetric clause.’ .
Reference to the CJEU on the Article 31 issue, requested by Air Berlin, is dismissed, something which may have to be reconsidered by the Court of Appeal. But even on the Article 25 discussion (I am thinking in particular of the relevance or not of the formulation of the claim), more CJEU authority in my view would be welcome.
(Handbook of) European Private international law, 2nd ed. 2016, Ch.2, Heading 2.2.9, Heading 188.8.131.52.1, Heading 184.108.40.206.
Merinson v Yukos: Dutch settlement following employment contract. Appeal denied. England has full jurisdiction as domicile of the defendant.
In  EWCA Civ 830 the Court of Appeal has dismissed the appeal against Yukos v Merinson which I reviewed here – review which readers may need to appreciate the judgment. Three issues were considered by Gross LJ at the Court of Appeal:
1. Are the Damages Claims and/or the Annulment Claims “matters relating to [an] individual contract of employment” within the meaning of Article 20(1)?>>>Salter DJ’s answer at the High Court was YES. I suggested in my review that that finding should not have been made without considering the lex causae of the employment contract: Rome I in my view should have been engaged here. Both Salter DJ and Gross LJ (at 27 ff) were persuaded however by the highly material nexus between the annulment claims – whether considered together with or separately form the damages claims (Gross LJ distinguished Aspen Underwriting in the process).
2. If so, is the Settlement Agreement “an agreement .. entered into after the dispute has arisen” within the meaning of Article 23(1)?>>>Salter DJ’s answer was negative, on the basis of extensive reference to the Jenard Report and Convention and Regulation scholarship. Gross LJ agrees – I continue to find that conclusion unconvincing.
3. Further, is the English court, in any event, precluded from entertaining the Annulment Claims by Chapter IV of the Recast Judgments Regulation? >>>Here the Court of Appeal made the High Court’s reasoning its own, much more succinctly than its entertaining of the other questions.
Plenty to discuss here for the 3rd ed of the Handbook.