A recent Court of Appeal case highlights the problems that can be caused where parties’ commercial arrangements are contained in multiple contracts that contain different governing law and dispute resolution procedures.
An English insurance company and an Italian insurance broker entered into a Terms of Business Agreement (ToBA), which was a standard London form brokering contract containing an English law and English court jurisdiction clause. Subsequently, the parties concluded a Framework Agreement granting each other exclusivity in the Italian market, which was governed by Italian law and including a Milan arbitration clause. The Framework Agreement appended the ToBA and stated that the two documents together formed the entire agreement between them. A dispute arose between the parties under the ToBA.
When the Claimant brought proceedings in England for breach of the ToBA, the defendant challenged the jurisdiction of the English court. The court had to decide whether the ToBA and Framework Agreement were freestanding and had equal weight, or comprised one agreement in which the ToBA was subordinate to the Framework Agreement. The first instance court dismissed the jurisdictional challenge and the defendant appealed.
The Court of Appeal agreed with the lower court judge that the two agreements were separate and that each remained subject to its own governing law and dispute resolution procedure. It did not matter that the Framework Agreement was the more recent document. Since the dispute arose under the terms of the ToBA and it was common ground that the business arising under the ToBA was a separate and distinct stream of business from that arising under the Framework Agreement, it was held that the English jurisdiction clause in the ToBA applied to the dispute.
It is good practice when concluding multiple contracts as part of a commercial relationship to ensure they have consistent and complementary governing law and dispute resolution mechanisms, if possible. This decision provides some clarity as to how the courts will approach the issue when the parties have concluded contracts with different governing law and jurisdiction provisions. It also highlighted the limits of the “one-stop one jurisdiction” principle formulated in Fiona Trust and Holding Corporation v Primalov UKHL 40 in which Lord Hoffman held that there is a presumption that parties to a contract would have intended any dispute arising out of their relationship to be determined in the same forum. It seems this presumption does not apply in more complex situations where the parties’ relationship involves different contracts with conflicting jurisdiction clauses. The parties are held to have made an express choice as to the law and jurisdiction governing each contract for their own reasons and one should not approach these arrangements with a presumption. The Court of Appeal held that while the presumption in Fiona Trust was a helpful starting point, it had to arrive at a careful and commercially-minded interpretation.
The Court of Appeal was also mindful of the need to respect the decision of the trial judge when revisiting the issue of construction of the commercial agreements.