In complex commercial transactions it is not unusual to find conflicting jurisdiction agreements in related agreements. Jurisdiction clauses are often included in agreements at the last minute and with little consideration for their wider effect. These cases illustrate the dangers of this and the importance of considering the wider impact a jurisdiction clause may have on existing and subsequent agreements.

What has happened?

In AmTrust Europe Ltd v Trust Risk Group SpA [2014] EWHC 4169 (Comm)  and Monde Petroleum SA v Westernzagros Ltd [2015] EWHC 67 (Comm)the Commercial Court considered the effect of competing jurisdiction clauses in separate but related agreements between the same parties.

In the AmTrust case, the parties had entered into a Terms of Business Agreement that was subject to English law and jurisdiction and a Framework Agreement that contained an arbitration agreement.

In the Monde Petroleum case, the parties had entered into a Consultancy Agreement that contained an arbitration agreement and, after disputes had arisen under the Consultancy Agreement, entered into a Settlement Agreement containing a clause giving exclusive jurisdiction to the English courts.

In both cases, disputes arose been the parties meaning that the Commercial Court had to decide which forum had jurisdiction to resolve those discord. This question ultimately depended on the interpretation of the conflicting jurisdiction clauses.

What are the key points?

The leading authority on the interpretation of conflicting jurisdiction clauses is the decision of the House of Lords in Fiona Trust & Holdings v Privalov & Others[2008] 1 Lloyd’s Rep 254In this case, Lord Hoffmann stated that it was to be presumed that rational businessmen who are parties to a contract intend all questions arising out of their legal relationship to be determined in the same forum. This has become known as the presumption in favour of one-stop adjudication. The presumption is a strong one and requires clear words to the contrary if it is to be displaced.

Where there are different jurisdiction clauses in separate but related agreements between the same parties, the “one-stop” presumption remains the starting point for the interpretation of a jurisdiction clause. However, the question that the court has to then decide is whether, by including conflicting jurisdiction clauses, the parties intended disputes relating to distinct aspects of their relationship to be determined by different tribunals: Deutsche Bank AG v Sebastian Holdings Inc [2011] 2 All ER (Comm) 245  and  UBS AG v HSH Nordbank [2009] 1 CLC 934. How the clause will be construed in each case will depend on the language of the clause and the surrounding circumstances.

In both cases, the parties put forward detailed arguments supporting rival interpretations of the conflicting jurisdiction clauses. In the AmTrust case, Mr Justice Blair concluded that the intention of the parties was that the arbitration clause should apply only to the Framework Agreement and that the English court had jurisdiction under the Terms of Business Agreement. In the Monde Petroleumcase, Mr Justice Popplewell concluded that the parties intended the jurisdiction clause in the Settlement Agreement to supersede the arbitration agreement in the Consultancy Agreement and apply to all disputes arising out of both agreements.

How will this affect me?

These cases illustrate the difficulties that can arise in practice when there are different jurisdiction agreements in agreements between the same parties. In both of these cases, the parties accepted that the question ultimately depended on the interpretation of the conflicting jurisdiction clause, but disagreed as to how the clauses should be interpreted. Consequently, the court had to determine the intention of the parties from the language of the clause and the surrounding circumstances, even though, in all likelihood, the parties had not actually considered the effect of the conflicting clauses at the time they were drafted. These cases are the latest in a long line of authorities all of which illustrate the importance of giving careful consideration to the drafting of jurisdiction clauses in separate but related agreements between the same parties, including settlements agreements.

Our Perspective

Effective jurisdiction clauses are important: without one you run the risk of spending a lot of time and money arguing about which court or arbitral tribunal has jurisdiction over a particular dispute. Jurisdiction clauses are not something that commercial parties tend to focus on to any great extent during contractual negotiations, but there are a couple of simple steps that you can take avoid disputes over jurisdiction:

  1. Keep your jurisdiction clause simple. The more complex the clause the more difficult it is to draft effectively.
  2. If you are negotiating a suite of documents, or negotiating the settlement of a dispute, make sure that all of the jurisdiction clauses work together.