Presentation is loading. Please wait.

Presentation is loading. Please wait.

Jurisdiction & Arbitration Clauses A talk by John A. Kimbell of Quadrant Chambers Given at the British-German Jurists’ Association Conference in Leipzig.

Similar presentations

Presentation on theme: "Jurisdiction & Arbitration Clauses A talk by John A. Kimbell of Quadrant Chambers Given at the British-German Jurists’ Association Conference in Leipzig."— Presentation transcript:

1 Jurisdiction & Arbitration Clauses A talk by John A. Kimbell of Quadrant Chambers Given at the British-German Jurists’ Association Conference in Leipzig 12 October 2014

2 Contents Overview – the general approach of English law views choice of court and arbitration clauses Incorporation (The Channel Ranger) Enforcement

3 The general approach of English Law “The freedom of the parties to make agreements on jurisdiction is very broad, limited only by marginal considerations which embody rules of jurisdictional public policy. An English court will accept jurisdiction where the parties have agreed to it because they have agreed it and because the jurisdictional rules are wide enough to accommodate this without effort, and will decline to exercise it where the parties have made agreement that it should not be exercised.” Briggs Agreements on Jurisdiction and Choice of Law (2008)

4 No room for chauvinism The text continues: “The English Court takes precisely the same view where the nominated court is English as where it is foreign: it admits no distinction of principle. There is no room for chauvinism… Contracts are made to be performed, and the fact that they may be contracts about the jurisdiction of courts is nothing to the point.”

5 Are there any limits on what parties can agree? (1) Jurisdiction Clauses Parties are excluded from agreeing jurisdiction in relation to certain subject matters. At common law, the two main exclusions are: (1) Disputes about title to foreign land (2) The validity of foreign intellectual property rights

6 Limitations to jurisdiction clauses under the Brussels Regulation (1) Proceedings which have as their object rights in rem in immovable property or tenancies of immovable property (2) 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

7 Limitations under the Brussels Regulation (contd.) (3) Proceedings which have as their object the validity of entries in public registers; (4) Proceedings concerned with the registration or validity of patents, trademarks, designs, or other similar rights required to be deposited or registered. In the above cases, it will not be open to the parties to agree a choice of jurisdiction under Article 23. The exclusive jurisdiction provided for in Article 22 will prevail.

8 Arbitration There are virtually no limits under English law as to the types of disputes which can be referred to arbitration. Certain remedies are not available to an arbitrator in England – criminal sentences, a divorce decree, a company winding-up petition but that does not prevent parties referring the underlying issue to arbitration if they wish – see Mustill & Boyd on Arbitration (1989) chap 10.

9 Formalities At common law, there are no formalities for jurisdiction clauses or arbitration clauses beyond those which apply to contracts generally. For jurisdiction clauses, Article 23 of the Brussels Regulation requires they be: (a) in writing or evidenced in writing; or (b) in a form which accords with practices which the parties have established between themselves; or

10 Formalities under Article 23 of the Brussels Regulation (contd.) ( c) in international trade or commerce, in a form which accords with a usage of which the parties are or ought to have been aware and which in such trade or commerce is widely known to, and regularly observed by, parties to contracts of the type involved in the particular trade or commerce concerned.” These requirements have given rise to a great deal of European case law.

11 Formalities under the Arbitration Act 1996 Section 5(1) of the Arbitration Act 1996 provides “The provisions of this Part apply only where the arbitration agreement is in writing, and any other agreement between the parties as to any matter is effective for the purposes of this Part only if in writing.” But “in writing” here includes “evidenced in writing” and that in turn is defined as being “recorded by any means”

12 Common law contractual validity At common law, the following contract law requirements must be satisfied by all jurisdiction clauses and arbitration clauses: (1)There must in fact be an agreement between the parties (consensus ad idem) (2)That agreement must validly incorporate the arbitration or jurisdiction clause concerned.

13 Common law – contractual validity (contd.) (3) The clause must be apt to cover the dispute which has arisen (4) The clause will be subject to the usual factors which may vitiate a contract, e.g.: frustration, mistake, duress, undue influence.

14 Mistakes can happen Consider this clause agreed between a Swiss company and an Indonesian company in a contract for the carriage by sea of a bulk cargo: “IN CASE OF ANY DISAGREEMENT BETWEEN OWNERS/MANAGERS AND CHARTERERS SUCH TO BE SETTLED AMICABLY OTHERWISE SUEZ COURT GRADES TO BE INVOLVED AND HONG KONG LAW TO APPLY”

15 Incorporation: The Channel Ranger

16 The Facts – see [2014] 1 Lloyds Rep 337 The CHANNEL RANGER is owned by a company based in the Marshall Islands (Caresse). In March 2011, the vessel was time chartered to a Danish Company called U-Sea A/S. U-Sea had a sub (voyage) charter agreement with the Swiss trading company, Glencore, for the carriage of a cargo of coal from Rotterdam to Morocco.

17 Channel Ranger - facts (contd.) Caresse (as shipowners) issued a bill of lading to naming Glencore as the shipper of the coal and the Moroccan state electricity company (ONDE) as consignee. The coal overheated and was doused with sea water on the orders of the master. This made the coal unusable for electricity generation. ONDE sued Caresse in Morrocco for damages. Caresse issued proceedings in London against ONDE

18 The clause in the Caresse bill of lading The B/L contained the following clause: “All terms and conditions, liberties and exceptions of the Charterparty dated as overleaf including the Law and Arbitration Clause are herewith incorporated” The “Charterparty overleaf” was specified as being the voyage charter between U-Sea and Glencore.

19 “…including the law and arbitration clause” Why are these words used? Answer: Because under English law, general words of incorporation however wide or general will not be effective to incorporate a jurisdiction clause or an arbitration clause. So “all terms whatsoever” or even “all terms whatever their subject matter” will not suffice. An express and specific reference to the arbitration / jurisdiction clause intended to be incorporated is required

20 Background and scope of the rule The rule requiring express reference is well established and goes back to a decision of the House of Lords in The Portsmouth [1912] AC 1. It is not a substantive rule of English but rather it is a rule of contractual interpretation. It applies equally to jurisdiction clauses and arbitration clauses – The Varenna [1983] 3 All ER 645 (CA). It is not confined to sea carriage but applies in other contexts too – e.g. building contracts and insurance.

21 Note the much stricter rule under German carriage of goods by sea law HGB Book V §522 (as amended in 2013): “Eine Vereinbarung auf die im Konnossement lediglich verwiesen wird, ist nicht inhalt des Konnossement” In English: “An agreement to which the bill of lading merely makes reference is not incorporated into the bill of lading”

22 The underlying principle: severability The underlying principle in English law is severablity. Jurisdiction and arbitration clauses are regarded as separate and severable from the rest of the contract. This is a strength and a weakness. It means that jurisdiction and arbitration clauses have the strength to survive recisssion of the contract – see Fiona Trust [2007] UKHL 2007. But it also means that they are harder to incorporate from one agreement to another.

23 Back to the Channel Ranger The clause in the Voyage C/P which the shipowners, Caresse, relied upon to give the English Commercial Court jurisdiction to hear their claim was as follows: “This charterparty shall be governed by English law and any dispute arising out of or in connection with this charter shall be submitted to the exclusive jurisdiction of the High Court of Justice of England and Wales”

24 The issue for the Court The issue for the Judge (Males J.) was therefore whether the words in the bill of lading “All terms and conditions of the Charterparty dated as overleaf including the Law and Arbitration Clause are herewith incorporated” Were apt to incorporate clause 5 from the Voyage Charter so as to give the English High Court jurisdiction to hear the Caresse’s claim for a declaration of non- liability against ONDE.

25 The rival contentions Caresse submitted that the words in the Bill of Lading should be interpreted as meaning ‘any dispute resolution clause’ in the charterparty is to be incorporated not just an arbitration clause ONDE submitted that the English rule requiring clear and express reference to an arbitration clause or jurisdiction clause for incorporation to be successful meant that only an arbitration clause could be incorporated and the c/p did not contain one of those.

26 The decision of the Court Males J accepted Caresse’s submission and held that the English High Court did have jurisdiction. The decision is controversial. Proceedings in a public court and private arbitration are usually considered to be quite distinct. By agreeing to one you are not normally taken to be agreeing to the other. Here the shipper signed up to arbitration and got the English High Court. Would it have worked the other way round?

27 The caveat: chauvinism by the back door? Males J. was concerned about the position of a consignee who receives a bill of lading and finds himself bound by a clause which he will not usually have seen. Males J. said the protection the consignee had was that only a jurisdiction clause which was “usual in the trade” should be capable of incorporation by reference. However, the court heard no evidence about what clauses are usual in the trade. Males J. simply asserts in para 48 of the judgement that the clause relied upon by Caresse was “usual in the trade”.

28 Enforcing arbitration and jurisdiction clauses Where proceedings are brought in breach of a jurisdiction or arbitration clause in a country outside the EU, it is possible to apply to an English Court for an anti-suit injunction. Inside the EU, the CJEU has ruled that: (i) Anti-suit injunctions are prohibited by the principle of mutual trust between courts within the EU (Turner v Grovit) (ii) this applies even to injunctions sought in support of arbitration clauses (West Tankers) (iii) The court first seized which decides the jurisdictional issue (Gasser).

29 The problem: The Italian Torpedo This trio of CJEU decisions has amounted to licence for parties in the EU to the use what is usually called the Italian Torpedo. The name is not entirely fair because the civil procedure rules of virtually all the EU Member States (expect the UK and Ireland) require Defendants to plead to the merits of a claim at the same time as raising any jurisdictional objection.

30 2015: a partial disarming of the Torpedo With effect from 10 January 2015, jurisdiction clauses will be given enhanced protection within the EU. Under the new Brussels Regulation (1251/2012) It will be for the court designated in the jurisdiction clause rather than the first court seised (as at present) which will decide whether or not it has jurisdiction over the dispute. Any other court seised must stay the proceedings until the jurisdiction issue is decided by the designated court.

31 But the Torpedo lives on for arbitration The new Brussels Regulation does not, however, provide any enhanced protection to parties seeking to enforce an arbitration agreement. In English s. 9 of the Arbitration Act provides a quick, summary cheap remedy. Within the EU what is needed is a Regulation providing that proceedings are stayed pending the designated tribunal ruling on its jurisdiction (Kompetenz Kompetenz) or the courts of the seat of the arbitration ruling on the issue.

32 Finally: The backstop role of Public Policy Proceedings brought in a non-EU court in breach of an English arbitration clause may lead to a judgment which is not enforceable in England – see AKC Investments v Kyrgyz Mobil Tel [2011] UKPC 7 §121. This has never been applied in the case of a judgment issued by a court in an EU Member State in ‘contravention’ of an arbitration clause. Article 34(1) of Brussels Regulation (ordre public exception) might be thought to open the door to this argument but the principle of mutual trust stands in it way.

33 Quadrant Chambers 10 Fleet Street London EC4Y 1AU 020 7583 4444

Download ppt "Jurisdiction & Arbitration Clauses A talk by John A. Kimbell of Quadrant Chambers Given at the British-German Jurists’ Association Conference in Leipzig."

Similar presentations

Ads by Google