Impala Warehousing and Logistics (Shanghai) Co Ltd v. Wanxiang Resources (Singapore) PTE Ltd [2015] EWHC 811 (Comm)

In June 2014, what subsequently became referred to as the “Qingdao Metals Fraud” came to light and was widely reported in the press. The alleged fraud concerned a Chinese metal trading company and its affiliates, which were reported to have been using the same stockpiles of metal commodities stored at the bonded warehouses in Qingdao Port for the purpose of collateralising multiple loans. This has given rise to litigation in multiple jurisdictions, some of which has found its way to the English courts.

We are reporting separately on the recent Commercial Court decision in Mercuria Trading Energy Pte Ltd v. Citibank NA and another, which also arose out of the alleged fraud. This article deals with another Commercial Court decision, in which the Court considered whether it should give effect to an exclusive English jurisdiction clause incorporated in warehouse certificates issued by the Claimant warehouse keeper (“Impala Shanghai”) by making final an interim anti-suit injunction previously granted by the Court to prevent the Defendants (“Wanxiang”) from pursuing substantive proceedings against Impala Shanghai in the Shanghai courts. The Court upheld the anti-suit injunction and made it final.

The background facts

The metal to which this particular dispute related was 5004.343 metric tonnes of aluminium ingots said to be stored in warehouses in Qingdao (“the Goods”). Impala Shanghai issued warehouse certificates in respect of the Goods. Wanxiang, a large trading company, became the holder of two warehouse certificates issued by Impala Shanghai in or around July 2014 in respect of the Goods.

On or about 27 May 2014, the Chinese authorities placed the warehouses in Qingdao in lockdown as part of a criminal investigation against the alleged fraud. Neither Impala Shanghai nor Wanxiang has had access to the warehouse since. It appears that because of the lockdown, Impala Shanghai could not deliver the Goods nor were they in a position to ascertain whether the Goods were still in the warehouse, if they ever were there.

Wanxiang commenced court proceedings in Shanghai, seeking an order that Impala Shanghai deliver the Goods to it or, if delivery could not be made, that Impala Shanghai should pay damages of almost US$9 million (“the Shanghai Proceedings”).

Impala Shanghai contended that the English courts had exclusive jurisdiction under the warehouse certificates but the Shanghai court rejected this argument. Impala Shanghai then applied to the English Court seeking mandatory and prohibitory injunctive relief, requiring Wanxiang to discontinue the Chinese proceedings and restraining it from commencing or prosecuting any claim otherwise than before the English courts, on the basis that the warehouse certificates incorporated an exclusive English jurisdiction clause which read: “All contracts between the Company and the Customer and any claims relating to the Goods shall be governed by the law of England and disputes dealt with exclusively by the English courts.

The Commercial Court decision

The Court granted an interim anti-suit injunction in the first instance and subsequently had to decide whether to make that interim injunction final. A number of arguments were put forward by Wanxiang against the anti-suit injunction, but all proved unsuccessful. In particular:

Contractual issues

  1. The Court dismissed Wanxiang’s argument that the Shanghai proceedings related to a claim in tort rather than contract, so that the jurisdiction clause in the warehouse certificates did not apply. The Shanghai courts were dealing with the claim on the basis that it was contractual. Furthermore, the issue of warehouse certificates to a party depositing goods in a warehouse, or a party purchasing goods already in the warehouse, will bind that party to the terms of the warehouse certificates. On an English law analysis, therefore, there was a bailment on terms and the underlying relationship with the warehouse was contractual. The fact that the purchase was financed by a bank did not mean that the terms of the warehouse certificates no longer applied to the original purchaser.
  2. The Court further rejected the argument that the exclusive English jurisdiction clause was not effectively incorporated into the warehouse certificates. On their face, the warehouse certificates referred to and incorporated Impala’s terms and conditions. On the reverse of the certificates, the website on which the latest version of those terms and conditions could be found was identified. While the website provided three sets of standard terms, it was clear which of those related to warehousing and that those were the applicable terms. Those warehousing terms contained the relevant jurisdiction clause. Reference to a website was sufficient incorporation of the warehousing terms to be found on the website. Wanxiang had the opportunity to find out what the terms were if it wanted to and it was, therefore, deemed to have notice of the terms, including the exclusive jurisdiction clause.
  3. Wanxiang also sought to argue that, in fact, the relevant contract that applied to the transactions in question, was a Collateral Management Agreement (“CMA”) entered into between Wanxiang’s financing bank, Rabobank, Wanxiang and Impala UK and that the warehouse certificates were no more than receipts. The CMA provided for Singapore jurisdiction. The Court disagreed. While Impala UK had undertaken to provide certain services under the terms of the CMA, the contractually agreed scheme also provided for warehouse certificates to be issued by Impala Shanghai, as in fact they were. In any case, the CMA ceased to be relevant once Wanxiang had repaid its borrowing from Rabobank. 

Basis for granting an anti-suit injunction

As a matter of principle, the English Court will usually grant an anti-suit injunction to restrain (non-EU) foreign proceedings in breach of an exclusive English jurisdiction clause, unless there are strong reasons not to do so. The Court found that, in this case, there were no such strong reasons.

Specifically, the fact that any English Court judgment would not be enforceable in China was not a sufficiently strong reason. While non-enforceability might in certain circumstances amount to strong reason, this would be rare because the non-enforceability of an English Court judgment in a particular foreign country may be foreseen or foreseeable as a risk when the exclusive jurisdiction clause is agreed. Furthermore, the fact that Impala Shanghai was based in China, did business in China, Wanxiang was a subsidiary of a Chinese company doing business in China and evidence on issues of fact was in China, did not sway the balance in favour of refusing an anti-suit injunction. The Court also gave little weight to the argument that the exclusive jurisdiction clause was not specifically negotiated (because it was contained in standard terms and conditions) and should not therefore be enforced.

In conclusion, the Court held that Impala Shanghai was in principle entitled to a final prohibitory injunction and a final mandatory injunction.

Comment

This case highlights the English Court’s pragmatic attitude when considering whether to grant an anti-suit injunction in breach of an exclusive English jurisdiction clause. The Court will seek to enforce the commercial bargain between the contracting parties and uphold the jurisdiction clause in the absence of significant prejudice that militates against doing so.

Ultimately, this type of jurisdictional dispute, and the resulting forum shopping, normally come down to pure monetary considerations. In this case, if the underlying claim is determined in England, limitation provisions in Impala's terms and conditions may reduce a claim of approximately US$10 million to about US$1 million. On the other hand, the Chinese courts would likely refuse to apply those limitation provisions. This may be one of the factors that has apparently resulted in the parties considering whether to refer their dispute to Hong Kong arbitration.

Given the extent and consequences of the alleged Qingdao fraud, it is expected that more related decisions will be handed down in the coming months.