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THE CHOICE OF LAW AGREEMENT AS A REASON FOR EXERCISING JURISDICTION

Published online by Cambridge University Press:  12 September 2014

Maria Hook
Maria Hook*
Affiliation:
Lecturer, University of Otago, New Zealand, maria.hook@otago.ac.nz.
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Abstract

This article examines the effect of choice of law agreements on the courts’ exercise of jurisdiction. In particular, it considers whether English courts ought to exercise jurisdiction to uphold choice of law agreements that would otherwise be defeated in a competing forum. Two reasons have been advanced in support of this approach: that courts should prioritize the choice of law rules of the forum; and that the parties should be held to their agreement on the applicable law. This article argues that neither of these reasons is justifiable in principle.

Keywords

choice of law agreementclose connectionforum conveniensgoverning lawjurisdictionparty autonomy
Type
Shorter Articles and Notes
Information
International & Comparative Law Quarterly , Volume 63 , Issue 4 , October 2014 , pp. 963 - 975
Copyright
Copyright © British Institute of International and Comparative Law 2014 

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References

1 Council Regulation (EC) 593/2008 of 17 June 2008 on the law applicable to contractual obligations [2008] OJ L177/6 (Rome I Regulation), art 3; Council Regulation (EC) 864/2007 of 11 July 2007 on the law applicable to non-contractual obligations [2007] OJ L199/40, art 14; see also Re Egerton's Will Trusts [1956] Ch 593 (Ch) for matrimonial property contracts that do not fall under the Matrimonial Causes Act 1973.

2 Navig8 Pte Ltd v Al-Riyadh Co (‘The Lucky Lady’) [2013] EWHC 328, [2013] 2 Lloyd's Rep 104 (Com Ct).

3 A Briggs, Agreements on Jurisdiction and Choice of Law (OUP 2008) paras 11.52–11.53.

4 Council Regulation (EC) 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters [2001] OJ L12/1.

5 But see art 33 of Regulation (EU) No 1215/2012 of 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters [2012] OJ L 351/1 [Brussels I Recast], which introduces a discretion to decline jurisdiction for third state cases.

6 Art 4. On the precise scope of the court's residual jurisdiction under art 4, see L Collins (ed) Dicey, Morris and Collins on the Conflict of Laws (15th edn, Sweet & Maxwell 2012) para 12-016 [Dicey].

7 Spiliada Maritime Corporation v Cansulex Ltd [1987] 1 AC 460 (HL) 480. On the policies underlying the rules of jurisdiction generally, see Hill, J, ‘The Exercise of Jurisdiction in Private International Law’ in Capps, P, Evans, M and Konstadinidis, S (eds), Asserting Jurisdiction (Hart 2003) 39Google Scholar; Fawcett, JJ, ‘Trial in England or Abroad: The Underlying Policy Considerations’ (1989) 9 OJLS 205Google Scholar.

8 ibid.

9 Dicey (n 6) para 12R-001.

10 But note that jurisdiction as of right is not strictly a discretionary matter: Dicey (n 6) para 11-141. Rather, the court has a discretion to stay the action.

11 Spiliada Maritime Corporation v Cansulex Ltd (n 7) 478.

12 See eg: Charm Maritime Inc v Kyriakou [1987] 1 Lloyd's Rep 433 (CA); Tryg Baltica International v Boston Compania de Seguros SA [2005] Lloyd's Rep IR 40 (Com Ct) [49]; Dicey (n 6) para 12-034.

13 VTB Capital v Nutritek International Corp [2013] UKSC 5, [2013] 2 AC 337 [46]. But the Court in The Lucky Lady (n 2) seemed to interpret Lord Mance's dictum as going to the superiority of local choice of law rules ([28]).

14 Britannia Steamship Assurance Association v Ausonia Assicurazioni SpA [1984] 2 Lloyd's Rep 98 (CA).

15 Banco Atlantico v British Bank of the Middle East [1990] 2 Lloyd's Rep 504 (CA).

16 Irish Shipping Ltd v Commercial Union Co Plc [1991] 2 QB 206 (CA) 229–230.

17 See also Stonebridge Underwriting Ltd v Ontario Municipal Insurance Exchange [2010] EWHC 2279 (Com Ct); cf Akers v Samba Financial Group [2014] EWHC 540 (Ch) [82].

18 Tiernan v Magen Insurance Co Ltd [2000] ILPr 517 (Com Ct).

19 ibid [18].

20 ibid [14].

21 Dornoch Ltd v Mauritius Union Assurance Co Ltd [2005] EWHC 1887, [2006] Lloyd's Rep IR 127 (Com Ct).

22 ibid [79].

23 ibid [79].

24 Dornoch Ltd v Mauritius Union Assurance Co Ltd [2006] EWCA Civ 389 [52]–[53].

25 Golden Ocean Group Ltd v Salgaocar Mining Industries Pvt Ltd [2011] EWHC 56, [2011] 1 WLR 2575 (Com Ct) (affirmed on other grounds).

26 ibid [141]–[142].

27 ibid [143].

28 Dornoch (n 21) [79]; see also Erste Group Bank AG v JSC ‘VMZ Red October’ [2013] EWHC 2926 (Com Ct) [189]–[190].

29 Tiernan (n 18) [18].

30 cf ‘[w]e are not so provincial as to say that every solution of a problem is wrong because we deal with it otherwise at home’: Loucks v Standard Oil Co of New York 120 NE 198 (1918) 201 per Cardozo; endorsed by Lord Parker CJ in Phrantzes v Argenti [1960] 2 QB 19 (QB) 33–34.

31 Spiliada Maritime Corporation v Cansulex Ltd [1985] 2 Lloyd's Rep 116 (CA) 135; referred to by Lord Goff in the House of Lords, 482; see Dicey (n 6) [12-038].

32 See Hill (n 7) 50.

33 See Dicey (n 6) para 12-003: ‘the concept of the “natural forum” … represents a principled and even-handed means of deciding whether or where jurisdiction should be exercised’.

34 Spiliada Maritime Corporation v Cansulex Ltd (n 7) 477–478.

35 See Spiliada Maritime Corporation v Cansulex Ltd (n 7) 474 and Hill (n 7) 45–6 for the point that jurisdiction should not, primarily, be a matter of convenience.

36 cf von Mehren, AAdjudicatory Authority in Private International Law: A Comparative Study (Martinus Nijhoff 2007) 30Google Scholar.

37 Spiliada Maritime Corporation v Cansulex Ltd (n 7) 478; see Dicey (n 6) para 12-036.

38 This is not strictly a two-stage enquiry: Cherney v Deripaska [2009] EWCA Civ 849, [2010] All ER (Comm) 456 [19]; VTB Capital v Nutritek International Corp (n 13) [44], [190].

39 Cherney v Deripaska (n 38) [20]–[21]; see Dicey (n 6) para 12-054.

40 Spiliada Maritime Corporation v Cansulex Ltd (n 7) 482; for service out cases, see the summary in Cherney v Deripaska (n 38) [20]–[21].

41 For the point that differences in the applicable law are relevant to stage 2 of Spiliada and do not go to the identification of the natural forum, see Lewis v King [2004] EWCA Civ 1329 [38]–[39]; Metall und Rohstoff AG v Donaldson Lufkin & Jenrette Inc [1990] 1 QB 391 (CA) 488.

42 This may also be the sole ground for service out of the jurisdiction: CPR 6.36 and PD6B para 3.1(6)(c).

43 cf Re Harrods (Buenos Aires) Ltd (No 2) [1992] Ch 72 (CA), where the Court of Appeal properly disregarded the fact that the foreign court would apply a different law to a minority shareholder's claim, because the law designated by English choice of law rules was the result of ‘anomalous historical survival’ of the company's incorporation in England: 125 per Bingham LJ.

44 cf Banco Atlantico v British Bank of Middle East (n 15) 510, where the High Court had found that the connection of the dispute to England was ‘fragile’, but the Court of Appeal refused to grant a stay because the foreign court would not give effect to the Spanish choice of law agreement (holding that the defendants’ connection with England was ‘a solid one’).

45 See Dicey (n 6) 557 for the point that ‘there is a strong tendency for the court to consider England as the natural forum’ in cases concerned with the London insurance market.

46 See Mills, A, The Confluence of Public and Private International Law (CUP 2009)CrossRefGoogle Scholar 16ff for an analysis of the role of ‘justice’ in private international law.

47 I use this term as shorthand to describe the general idea that parties ought to be held to their agreements. An important qualifier to this—which courts tend to neglect—is that all agreements must operate within the bounds of the law of contract (and, where applicable, of rules on the validity of choice of law/jurisdiction agreements).

48 Seashell Shipping Corporation v Mutualidad de Seguros del Instituto Nacional de Industria [1989] 1 Lloyd's Rep 47 (CA) [The Magnum].

49 ibid 53.

50 ibid 51–3.

51 Coast Lines Ltd v Hudig & Veder Chartering NV [1972] 1 Lloyd's Rep 53 (CA).

52 The Magnum (n 48) 53.

53 ibid 53.

54 In addition to the cases cited below, see also Sawyer v Atari Interactive Inc [2005] EWHC 2351, [2006] ILPr 129 (Ch) [59], [62]; Stonebridge Underwriting Ltd v Ontario Municipal Insurance Exchange [2010] EWHC 2279 (Comm Ct) [33], [36], cf [44]; Caresse Navigation Ltd v Office National de L'Electricité (The Channel Ranger) [2013] EWHC 3081 (Com Ct) [57]–[65]; cf Golden Ocean Group Ltd v Salgaocar Mining Industries Pvt Ltd (n 25) [143]; Cadre SA v Astra Asigurari SA [2005] EWHC 2626, [2006] 1 Lloyd's Rep 560 (Com Ct). For cases where the parties made a combined choice of law and jurisdiction, see: Shell International Petroleum Co Ltd v Coral Oil Co Ltd [1999] 1 Lloyd's Rep 72 (Com Ct); Akai Pty Ltd v People's Insurance Co Ltd [1998] 1 Lloyd's Rep 90 (Com Ct); Horn Linie GmbH v Panamericana Formas e Impresos SA [2006] EWHC 373, [2006] 2 Lloyd's Rep 44 (Com Ct).

55 The Lucky Lady (n 2).

56 ibid [16].

57 ibid [22].

58 ibid [22].

59 ibid [35].

60 ibid [36]–[38]. But cf Howden North America Inc v ACE European Group Ltd [2012] EWCA Civ 1624, [2013] Lloyd's Rep IR 512, concluding that it is not appropriate to grant a declaration that English law is applicable, in circumstances where foreign proceedings are afoot and the foreign court may ignore an express or implied choice of English law, in order to provide a potential defence for enforcement of the foreign judgment.

61 The Lucky Lady (n 2) [22].

62 Ace Insurance Ltd v Moose Enterprise Pty Ltd [2009] NSWSC 724.

63 ibid [53].

64 ibid [42]–[46]; Briggs (n 3) paras 11.45–11.58.

65 McIntyre v Belcher (1863) 14 CBNS 654, 664 per Willes J, cited by Lord Denning MR in Secretary of State for Employment v Associated Society of Locomotive Engineers and Firemen [1972] 2 QB 455 (CA) 492.

66 cf Briggs (n 3) para 11.52; but see Takashi, K, ‘Damages for Breach of a Choice-of-Court Agreement: Remaining Issues’ (2009) 11 YrbkPrivIntlL 73, 101Google Scholar.

67 Ace Insurance Ltd v Moose Enterprise Pty Ltd (n 62) [47]–[53]: The Court rightly reasoned that choice of law agreements are primarily declaratory in character, but then suggested that declaratory agreements are in a different class to covenants or promises: [51]–[52].

68 M Hook, ‘The Choice of Law Contract’ (PhD thesis, Victoria University of Wellington, 2014).

69 New Hampshire Insurance Co v Strabag Bau AG [1992] 1 Lloyd's Rep 361 (CA) 371–372. Art 23 of the Brussels I Regulation (n 4) provides that agreements on jurisdiction must be either ‘in writing or evidenced in writing’, or in a form which accords ‘with practices which the parties have established between themselves’ or with international trade usages.

70 ibid 371–372; see Dicey (n 6) para 14-079.

71 This follows logically from the requirement that the agreement be express; see also Salotti v RUWA [1976] ECR 1831.

72 In the context of choice of law, too, a presumed intention is no longer sufficient to amount to a choice of law agreement (Dicey (n 6) paras 32-005–32-007). Nevertheless, courts continue to blur the lines between presumed intention and real implied intention. In Lawlor v Sandvik Mining and Construction Mobile Crushers and Screens Ltd [2013] EWCA Civ 365, [2013] 2 Lloyd's Rep 98, the Court of Appeal considered that it was necessary to draw a distinction between ‘inferring an unexpressed intention and imputing an intention’ ([29]), but then went on to contradict itself by accepting a ‘tacit choice in circumstances which do not suggest that [the parties] gave actual thought to the matter’ ([32]). Applying an objective standard of intent, the relevant question must be whether the parties could reasonably be understood to have made a choice. If there is no reason to explain why the parties did not bother to express their choice, there is no real agreement.

73 In some ways, this approach recreates the fallacy of lex validitatis reasoning in choice of law, which is that the parties must have intended to choose the law under which their choice of law agreement—or their underlying contract—is valid and enforceable. If it were that easy, we could do away with much of the law of contract. For criticism of the rule of validation, see R Fentiman, International Commercial Litigation (OUP 2010) para 4.64.