Posts Tagged lex fori prorogati

Kaifer Aislimientos: the limits of Brussels I’s rules on choice of court.

[2017] EWHC 2598 (Comm) Kaifer Aislimientos, is a good illustration of the limits of Article 25 juncto recital 20’s lex fori prorogati rule.

Claimant argues that the Court has jurisdiction pursuant to Article 25 Brussels I Recast because the relevant contract contains an English exclusive jurisdiction clause and further contends that the relevant contract was concluded by AMS Mexico and/or AMS on behalf of AT1 and Ezion as undisclosed principals and that, as undisclosed principals, the contract – together with the jurisdiction agreement – was binding on AT1 and Ezion.

That is the only part of the judgment to feature the Brussels Regulation at all. Peter MacDonald Eggers DJ could have referred to CJEU precedent pro inspiratio, including Refcomp for instance. He could certainly also have referred to recital 20, and equally failed to do so.

In substance he applies the Brussels I Recast rule by applying lex fori prorogati (here: English law) to all but the formation of consent questions relevant to the validity of choice of court (here: under what circumstance undisclosed principals are subject to choice of court).

Geert.

(Handbook of) EU private international law, 2nd ed. 2016, Chapter 2, Heading 2.2.9.4.

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B.win v Emerald Bay. Article 34 Brussels I Recast (as well as dépeçage and lex causae for jurisdiction clauses)

Update May 2017. Judgment upheld on appeal.

Thank you David Lewis QC for signalling B.WIN v Emerald Bay at the courts of Gibraltar. The dispute arises between Bwin, the internet gaming company, and various former shareholders of Bwin, domiciled at Gibraltar and England (as well as Israel). The former shareholders had advanced a claim in the New Jersey Courts alleging that Bwin made fraudulent, alternatively negligent misrepresentations in relation to the opportunity for internet gaming in New Jersey, as a result of which they divested their shares for lower value prior to a lucrative take-over of Bwin.

Bwin Gibraltar in the proceedings at issue are seeking an anti-suit injunction in respect of the existing New Jersey proceedings (an earlier EU-wide and Lugano States anti-suit request was wisely dropped, seeing as it runs counter CJEU authority (Owusu).

Jack J, considers first of all the issue of dépeçage or bifurcation for choice of court made in two successive agreements with differing choice of court provisions (distinguishing recourse for regulatory as opposed to purely contractual issues).  At 38 the court misses the ball on lex causae for choice of court. While it is true that Rome I exempts choice of court agreements from its scope, going straight to the ordinary rules of English and Gibraltarian conflict of laws ( under which in general the proper law of the contract will govern the jurisdiction clause), negates Brussels I a’s new Article 25 rule combined with the recitals. These oblige the court to apply lex fori prorogati with renvoi. This may have had an impact on the complex analysis of the choice of court provisions made in the 2010 as opposed to the 2014 agreement (with an interesting side-step made into the potential reflexive effect of Article 25’s choice of court provisions).

Briefly then the new lis alibi pendens /related actions regime of Articles 33-34 Brussels I Recast is discussed. (In a much more succinct way than Zavarco). At 73 in particular: ‘I am doubtful whether any part of the [FNC] doctrine survives in cases where this Court has jurisdiction under the Brussels I-Recast Regulation. [reference to Owusu]. Instead the extent to which this Court can and should say the current proceedings is likely to be limited by Arts 33 and 34 of Brussels I-Recast.’ This is an interesting reflection on Article 34 Brussels I Recast, despite inevitable parallel particularly experienced by common law courts, not amounting to a forum non conveniens light.

Continued then at 74 ff:

‘However, I do not need to determine that issue. Gibraltar is a perfectly appropriate venue for the determination of the dispute between the parties. The business of Bwin Gibraltar is run from here. All the parties reside here. The misrepresentations relied on were made in Gibraltar or London. Most of the lay witnesses are either in Gibraltar or in Europe.

75. It is true that the New Jersey courts will be more familiar with New Jersey gaming law. However, given that a trial there would be with a civil jury, that may not be such an advantage. In terms of disclosure of documents from the DGE, this is neutral in my judgment. If the proceedings continue in Gibraltar, the parties can apply in the federal courts of New Jersey…for disclosure of documents…

76. In my judgment, neither Gibraltar nor New Jersey is a forum non conveniens. In exercising my discretion as to whether to grant an anti-suit injunction, I consider that there is nothing substantial to weigh against Bwin Gibraltar’s contractual entitlement not to be sued in New Jersey. Accordingly, I will grant an anti-suit injunction.’

A further, brief, consideration of Article 34.

Geert.

(Handbook of) European Private International Law – 2nd ed. 2016 , Chapter 2, Heading 2.2.14.5.

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Choice of court (in tender file) under Brussels I. CJEU confirms Szpunar AG in Hőszig /Hoszig – keeps schtum on Brussels I Recast.

The CJEU has confirmed the views of Szpunar AG in C-222/15 Hőszig /Hoszig, without (much as expected) entertaining the lex fori prorogati rule of the Brussels I Recast.

Can choice of court made in underlying documentation in the context of a tender, for which Hőszig entered a winning bid, be considered valid under Article 23 of the Brussels I Regulation (now: Article 25 Brussels I Recast)? Yes, the Court said, with explicit reference to the AG. Crucial point in the consideration is whether per Case 24/76 Colzani an explicit reference to the choice has been made, reference which can be controlled by a party applying normal diligence and where it is established that the general conditions containing the jurisdiction clause was actually communicated to the other contracting party (at 40 in Hoszig). This was so in the case at issue. The court points out that Article 23 (and now Article 25) includes mostly formal requirements (expression of consent, see the references in my posting on the AG’s Opinion) and only one substantial requirement (choice of court needs to relate to an identified legal relationship between the parties). The remainder of discussion on the substantive requirements with respect to the choice of court agreement, is subject to the lex causae of that separate choice of court agreement (exactly why the current Regulation now includes the lex fori prorogati rule; Szpunar AG’s discussion of this clause however was not required to settle the issue and therefore the Court does not look into it).

‘(T)he Paris Courts [have exclusive and final jurisdiction]’ is sufficient for the CJEU to determine the choice of court with precision: it is perfectly acceptable that it will subsequently be French civil procedure laws that will determine precisely which court will have jurisdiction.

A sensible judgment following clear Opinion of the Advocate General, together further completing the choice of court provisions of Brussels I.

Geert.

(Handbook of) European Private International Law, 2nd ed. 2016, Chapter 2, Heading 2.2.9 Heading 2.2.9.4. Chapter 3, Heading 3.2.2 .

 

 

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Once again: Choice of court (this time in tender docs) under Brussels I. Szpunar AG takes the sensible route in Hőszig /Hoszig.

In C-222/15 Hőszig /Hoszig, Advocate General Szpunar opined using the sensible route, on the application of Article 23 of Regulation 44/2001 . His excursus though on Article 25 of the Brussels I Recast and the new lex fori prorogati rule is the part of his judgment which I read with most interest.

First things first: can choice of court made in underlying documentation in the context of a tender, for which Hőszig entered a winning bid, be considered valid under Article 23 of the Brussels I Regulation (now: Article 25 Brussels I Recast). Pursuant to Clause 23.1 of these ‘general conditions of purchase’, headed ‘applicable law and settlement of disputes’, ‘[t]he Order shall be governed by and interpreted in accordance with French law. The application of the United Nations Convention on the International Sale of Goods dated April 11, 1980 is excluded. Any dispute arising out of or in connection with the validity, construction, performance or termination of the Order, which the parties are unable to settle amicably shall be finally and exclusively settled by the courts of Paris, including in the case of a summary procedure, injunctions or conservatory measure.’

Hőszig tried to sue instead in what it considered to be the place of performance of the contract, per Article 5(1) (now 7(1) in the Recast). Its torpedo of the choice of court included in the general conditions of purchase, was based on recourse to Article 10(2) Rome I, which holds that the putative law of the contract does not apply to consider a party’s consent if it would not be reasonable to do so. In such case the law of the habitual residence of said party applies. Here this would lead to Hungarian law rather than French law and Hungarian law, it is argued, would not accept such incorporation of general terms and conditions. Szpunar AG however simply refers to the fact that choice of court agreements are excluded from the Rome I Regulation. Recourse to Article 10(2) is barred by that exclusion.

What needs to be considered under Article 23 Brussels I is whether parties have reached consensus, ‘clearly and precisely demonstrated’, the AG suggests. This wording is typically associated with choice of law under Rome I however I would support its use in the context of the Brussels I (and Recast) Regulation, too, for that is what the Court’s case-law on the Article amounts to. Applying Case 24/76 Colzani mutatis mutandis, and taking into account that express reference to the general terms and conditions in documents exchanged between the parties prior to the tender being awarded, the AG concludes that agreement had been reached.

Now, is the expression ‘courts of Paris’ sufficiently precise? Szpunar AG suggests it is and I would concur, albeit that the last word on  that is probably not yet said. The Advocate General refers to Capotorti AG in Case 23/78 Meeth, who had advised that a clause worded such as here, refers by implication to the system of rules of territorial jurisdiction (typically on the basis of a combination of value and subject-matter) to determine precisely at which court proceedings must be instituted. The Court itself did not at all elaborate in the eventual judgment. Szpunar AG suggests it must have taken Capororti’s suggestion for granted. Therefore (at 44 of the Opinion) it is French procedural law which governs the question of precisely which Paris court is competent.

This leaves open the question, though (which I understand is not sub judice here) whether parties can employ choice of court to trump national rules of civil procedure. What if they agree that the courts of say province X in Member State A are preferable to settle the issue, e.g. because of perceived know-how, even if national civil procedure would ordinarily assign the case to province Y? Not an issue which to my knowledge has been settled by EU case-law.

By way of sign-off, the Advocate General then reviews whether the new text, Regulation 1215/2012, has in any way altered or added to the discussion on choice of court agreements. Readers will be aware (via this blog or the Handbook or otherwise) that the new Regulation refers to the lex fori prorogati to determine the validity of the choice of court agreement:  ‘[i]f the parties, regardless of their domicile, 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, unless the agreement is null and void as to its substantive validity under the law of that Member State’ (emphasis added by Szpunar AG).

Under Brussels I, various options were defended. Szpunar AG refers to Slynn AG having defended lex fori prorogati in Case 150/80 Elefanten Schuh,  and Szpunar AH himself suggest (at 47 in fine) lex fori additi under the former Brussels I Regulation (44/2001).

The AG is most certainly correct in my view that the lex fori prorogati is not meant to cover all aspects of the validity of the agreement. In my Handbook I distinguish between the expression of consent (harmonised by Article 25), and the formation of consent (not touched upon by Brussels I and now subject to the lex fori prorogati). He then suggests that the insertion of lex fori prorogati was meant to align the Brussels I (Recast) with the 2005 Hague Convention on Choice of Court Agreements, to which the EU have now acceded. I do not recall any such reference in the travaux preparatoires of Regulation 1215/2012 – however it has been a while since I consulted them extensively and the AG presumably has.

The Court of course will be much more succinct than its AG.

Geert.

(Handbook of) European Private International Law, 2nd ed. 2016, Chapter 2, Heading 2.2.9 Heading 2.2.9.4. Chapter 3, Heading 3.2.2 .

 

 

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Unilateral jurisdiction not necessarily invalid under French law – Cour de Cassation in Apple.

The French Cour de Cassation’s in Banque Privee Edmond de Rothschild Europe v X held that a unilateral jurisdiction clause was invalid under (doubtful) reference to (then) 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). In Credit Suisse, it extended this view (without reference this time to clauses potestatives) to choice of court in the context of the Lugano Convention.

In Apple Sales international v eBizcuss.com, the Cour de Cassation effectively qualifies its Rotschild case-law. The Court of Appeal held as unacceptable, under the theory of clauses potestatives, choice of court obliging eBizcuss to sue in Ireland, while allowing Apple Sales International to sue either in Ireland, or the place of registered office of eBizcuss, or any place where Apple Sales would have suffered damage. The Cour de Cassation now held that this clause is perfectly acceptable under Article 23 (now 25)’s regime for it corresponds to the need of foreseeability. (Which more extreme unilateral clauses arguably do not have). As always, the judgment is scant on details of the underlying contract whence it is not entirely clear whether French law was lex contractus or whether the Cour stuck to lex fori as determining validity of choice of court.

Geert.

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It’s not the grammar, stupid! The High Court in Anchorage on exclusive (or not) choice of court, anti-suit injunctions, Rome, Brussels and much more

In Anchorage (BNP Paribas v Anchorage Capital Europe et al). a bank and a hedge fund are at odds as to whether a handful of instant message communications resulted in a binding contract or contracts and if so, between which parties and on what terms. The issue for decision at the High Court was whether the disputes should be determined in London (home to the London Branch of BNP Paribas and allegedly identified as the exclusive – or not – court of choice in the alleged contracts), New York (home to the hedge fund which however also has a separate LLP domiciled in London) or possibly Luxembourg (home to two funds within Anchorage Group).

For review of the facts reference is best made to the text of the judgment, for there are many framework agreements etc at stake. The High Court’s review of the case though is most interesting for highlighting the limits to what Article 23 of the Brussels I Regulation harmonises. The Article aims to ensure a non-formalistic deference to parties’ agreement to have their disputes adjudicated in a particular court. As Males J notes (and the ECJ acknowledges), one should not be overly formalistic in applying Article 23.

Article 23 though does not harmonise the underlying contractual (or not) issues: with whom were contracts made, especially in an agent /principal context; what law applies to the (alleged) choice of court agreement (an issue more or less resolved in the new Brussels I Regulation). Males J applies English law to the issue of validity of the clause, on the basis it would seem of lex contractus (which arguably will no longer be possible come January 2015, as a result of the new Brussels I Regulation): either because of the express determination of such by the parties, or because the lex contractus of the agreement of which it forms part is English law by virtue of the Rome I Regulation (contract for the sale of goods; I am not sure though whether the underlying contract truly is a sale of a good). Arguments for the alternative (in particular, application of New York law to the choice of court agreement) are dismissed on the basis that they represent the kind of semantic approach to such clauses which English law has left firmly behind. Surely a poster-argument indeed for the use of English law in international commerce and an approach which is to be commended.

Even were the validity of the clause not to be upheld, the High Court outlines other jurisdictional grounds: Article 5(1) of the Jurisdiction Regulation on the basis of the place of performance of the obligation in question; Article 5(5) on the basis of a contractual dispute closely connected to the operation of a branch; Article 6(1) on the basis of the cases being closely connected. (Use of Anchorage London as an anchor defendant (lousy pun intended I fear) against the investment funds).

Forum non conveniens (potentially applicable should none of the jurisdictional grounds be valid and given the possibility of New York proceedings) was dismissed; the anti-suit injunction was granted. Here, Males J reviews the rather grammatical arguments made vis-a-vis the choice of court agreement being used transitively or not: again, the Court takes a non-formalistic approach and (respectfully) dismisses the grammatical argument as being elusive.

This is the kind of case upon which one could build an entire conflicts course. If you happen to be preparing one over the holidays period: good luck and enjoy. To all readers past, current and future: Merry Christmas and /or applicable and appropriate season’s greetings. Geert.

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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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