In its decision on 20 May 2016, the Commercial Court (Walker J) considered a non-standard jurisdiction clause which fell within the regime of the Brussels I Recast Regulation (Regulation 1215/2012). Perhaps unsurprisingly, he held that a clause, expressed to confer non-exclusive jurisdiction on the English courts, “for the benefit of” the Claimants did not in fact confer exclusive jurisdiction on those courts.
The decision demonstrates that the court will use both a literal and a common sense business reading when construing the jurisdiction clause. Further, the Court was reluctant to allow the parties to import new elements (such as symmetry of obligations) into Articles 25 and 31 of the Recast Regulation.
Overview of the facts
The Defendant was a Spanish company seeking restructuring advice from the English Claimants, a financial advisory and asset management partnership. The letter of engagement used by the parties was governed by English law. It contained a clause whereby the Defendant agreed “for the benefit of” the Claimants that the English courts would have non-exclusive jurisdiction to settle any dispute arising in connection with the engagement.
The Defendant considered that the Claimants had failed to perform their obligations. It therefore sought declarations from the Spanish courts that: (i) the Claimants had repudiated the Contract and (ii) any outstanding obligations of the Defendant were extinguished, and also an award of damages.
The Claimants took the view that the Defendant should have brought proceedings in England because of the jurisdiction clause. The Claimants therefore brought English proceedings asserting breach of the jurisdiction clause by the Defendant and seeking indemnification in respect of expenses incurred in relation to the Spanish proceedings.
Walker J’s judgment that there was no breach of the jurisdiction clause
Mr Justice Walker considered that the English court had jurisdiction to consider the effect of the jurisdiction clause pursuant to Article 31(2) Brussels I Recast Regulation (1215/2012). This provision was introduced by the Recast regulation (i.e. was not part of Regulation 44/2001) and was said by many to be of benefit to commercial parties.
Article 31(2) establishes that, irrespective of whether it was the court first seised, a Member State’s court seised under a purported exclusive jurisdiction clause had to proceed to consider whether the clause did indeed confer jurisdiction. The Court thus had to determine not merely whether it had jurisdiction, but whether a party should not invoke jurisdiction elsewhere. The judge held that Article 31(2) did not contain any requirement that obligations of the jurisdiction clause be symmetrical.
The Claimants sought to rely on Article 25 of Brussels I Recast (which makes provision for the prorogation of jurisdiction; i.e. agreement between the parties that a certain court would have jurisdiction). The Claimants argued that Article 25 contained a rebuttable presumption of exclusivity. They submitted that the phrase “for the benefit of” in the jurisdiction clause meant that the clause provided for exclusive jurisdiction at the Claimants’ option. This, therefore, obliged the Defendant to bring proceedings in England. The Claimants said that allowing proceedings in another jurisdiction would deprive them of the benefit of the clause.
Mr Justice Walker rejected the Claimants’ argument. Even were it correct that Article 25(1) created a rebuttable presumption in favour of exclusivity, the clause in this case used the words “non-exclusive”. These words were sufficient to rebut any presumption of exclusivity that might exist. Further, the use of the term “non-exclusive” undermined the Claimants’ argument that the benefit referred to was exclusivity.
The judge observed that, as sophisticated commercial parties, the parties could have drafted a much more suitable clause if they genuinely had intended to reach the result for which the Claimants now argued. The judge further noted that the Claimants’ argument did not sufficiently address the fact that, under the Recast Regulation, it was unclear whether, absent the jurisdiction clause, the English court could have taken jurisdiction at all. That is, he identified a rationale for the clause (beside the exclusivity asserted by the Claimants).
Mr Justice Walker therefore found for the Defendants, and determined that the clause was not an exclusive jurisdiction clause.