Waived forum non conveniens? A claim could still be stayed…

Last week, in Standard Chartered Bank (Hong Kong) Ltd v Independent Power Tanzania Ltd [2016] EWCA Civ 411, the Court of Appeal (judgment by Longmore LJ) allowed English proceedings to continue in parallel with Tanzanian proceedings involving the same parties and issues.

The case is of particular interest because the contracts included both a non-exclusive jurisdiction clause and a forum non conveniens (FNC) waiver clause (i.e. a clause by which each party irrevocably waived, among other things, any claim it might otherwise make that proceedings had been brought in “an inconvenient forum”).

The combination of those clauses ought severely to restrict the possibility of one party resisting proceedings on jurisdictional grounds.  On the other hand, the Court of Appeal’s decision in this case makes clear that such clauses cannot always prevent parallel proceedings being used to justify a stay of English proceedings, at least on case management grounds.

In general, though, non-exclusive jurisdiction clauses and FNC waiver clauses give rise to a real risk of parallel proceedings.  When deciding whether to include these types of clauses in a contract, this risk needs to be weighed carefully against the benefit of a choice of jurisdictions.

In addition, the court’s treatment of an abuse of process argument (not dependent on the jurisdiction clause points) provides a helpful outline of the relevant principles.

Readers may also be interested in e.g. Angharad Parry‘s post on Blue Tropic (in which parallel proceedings continued) and her post on AXA v Weir (in which a stay was granted) as well as my post on Jong v HSBC (in which English proceedings were ended in the face of an exclusive jurisdiction clause).

The rest of this post covers:

Forum non conveniens argument for a stay based on the stage of the Tanzanian proceedings – rejected

The background facts of the case are complicated.  All that matters for these purposes is that there were parallel proceedings in Tanzania and in England.  The Defendants had begun the Tanzanian proceedings and argued that, because much money had been spent in that forum and because proceedings were advanced, the English proceedings should be stayed.

The Court of Appeal upheld the factual findings of Flaux J ([2015] EWHC 1640 (Comm)) that:

  • In both England and Tanzania, proceedings were still in their preliminary stages.
  • The “considerable sums” spent in Tanzania had been used “essentially on interlocutory battles”.
  • The case was not ready for trial in Tanzania at the relevant time.

These conclusions meant that the Court of Appeal could apply the approach found in cases with a non-exclusive jurisdiction clause but without an FNC waiver clause (S & W Berisford v New Hampshire Ins. [1990] 2 QB 631 and British Aerospace Plc v Dee Howard Co. [1993] 1 Lloyd’s Rep 368).

Thus, a stay could be and was refused because there were “no strong or exceptional grounds for granting a stay”; the case was not nearly ready for trial in Tanzania.

The Court of Appeal did not set down a test to be applied to forum non conveniens stay applications where an FNC waiver clause has been agreed.  However the court might allow a stay on case management grounds

Disappointingly, having reached the conclusion that there were no strong grounds for a stay even absent an FNC clause, the Court of Appeal was able to avoid an interesting question.  In what circumstances may a stay be granted on, essentially, forum non conveniens grounds where the parties had actually agreed an FNC waiver clause?.

  • Flaux J had held that even where there was an FNC waiver clause, the court could grant a stay “if very strong or exceptional grounds … are demonstrated” and if the grounds in question “can properly be described as unforeseen and unforeseeable at the time when the agreement was made.”
  • On appeal, the Respondents had argued that in the face of an FNC waiver clause, “even unforeseeable factors should … be irrelevant.”

The tension between freedom of contract and the court’s powers which thus arises may not be resolved in the near future.

  • First, it is not easy to envisage relevant circumstances which would be both unforeseen and unforeseeable.
  • Second, the issue might well be side-stepped by the use of the court’s case management powers.  Although unwilling to rule on Flaux J’s proposed test, the Court of Appeal was willing to state that in “rare and compelling cases” perhaps to promote the “orderly process of litigation”, the court could grant a stay on case management grounds.

In this case, however, no stay on case management grounds was justified.

The English proceedings were not an abuse of process

An additional argument was advanced that actions by the Claimants’ parent company (SCB) in New York meant that the English proceedings were an abuse of process.  The argument is separate from the forum non conveniens argument.

The Court of Appeal upheld Flaux J’s decision that, unless there was an issue estoppel, there could be no abuse of process.  The Court of Appeal further agreed, applying the requirements set out in The Sennar (No. 2) [1985] 1 WLR 490, that there was no issue estoppel (i.e. broadly that the point had not already been decided in New York).  The main reasons given were as follows.

First, there was no privity of parties.  Here the court emphasised the importance of corporate personality and the difficulty of piercing the corporate veil (see Prest v Prest [2013] UKSC 34).

Second, the issue involved was not the same.  The fact that negative declaratory relief sought by the First Claimant in England related to the New York proceedings was not sufficient: “that would be to let the tail wag the dog with a vengeance, since that declaration claim is subsidiary to the essence of the claim now being brought in England.”

Finally, the English proceedings did not involve a collateral attack on the New York judgment.