The recent update to the Brussels Regulations [1] has highlighted the importance of a carefully considered and well drafted jurisdiction clause in any commercial agreement, to ensure that parties are able to litigate within their favoured jurisdiction. The revised Regulations have been particularly relevant in respect of exclusive jurisdiction clauses. However, the courts have recently taken the opportunity to review the effect of non-exclusive jurisdiction clauses.

Jurisdiction clauses and forum non conveniens (FNC) waivers have long been used in commercial contracts in order to determine the countries in which parties to a contract can bring proceedings. A non-exclusive jurisdiction clause enables parties to bring proceedings either in the courts of the chosen country or in the courts of any other country which has jurisdiction over the dispute under their own jurisdictional rules. The effect of an FNC waiver, together with a non-exclusive jurisdiction clause, is that the parties agree not to challenge the jurisdiction of the court identified in the jurisdiction clause, on the basis of FNC (that is, that another jurisdiction is better placed to hear the case). Therefore, if a party were to challenge the jurisdiction of the chosen court on grounds of FNC, then that party would be in breach of contract.

In a recent case [2], the Commercial Court considered its ability to grant a stay of English proceedings in circumstances were the parties’ agreement contained a non-exclusive jurisdiction clause as well as an FNC waiver. The court concluded that there must be very strong or exceptional grounds for not giving effect to the jurisdiction clause as agreed between the parties and these grounds must be unforeseen and unforeseeable at the time the agreement was made [3].

The case itself involved multiple international companies and related to a loan agreement, made between the claimant companies and three joint venture parties, concerning a power plant in Tanzania. The loan agreement and relevant deeds were subject to English law and contained non-exclusive jurisdiction clauses in favour of the courts of England and Wales and an FNC waiver, thereby expressly accepting the possibility of parallel proceedings in different jurisdictions. Some other relevant documents, such as the charge of shares and mortgage of land, were governed by Tanzanian law (as they were concerned with Tanzanian property) but included almost identical provisions regarding the parties’ ability to bring proceedings in another jurisdiction. When the loan fell into default, proceedings were initially brought in Tanzania and New York. The claimants then brought proceedings in England claiming sums due and also seeking declaratory and injunctive relief. The defendants sought a stay of the English proceedings on the basis that Tanzania was the appropriate forum for the matter to be heard, as well as applying for the English proceedings to be dismissed as an abuse of process.

The defendants’ applications were refused. The court found that there were no very strong or exceptional grounds for granting a stay of proceedings. The defendant companies had made a bargain that they would not seek to argue that England was not an appropriate forum in which to bring proceedings and there was no convincing reason why the defendants should be able to go back on their contractual bargain and obtain a stay.

Key Points

  • The case clarifies whether a non-exclusive English jurisdiction clause combined with an FNC waiver completely precludes any application for a stay on grounds of FNC: a stay of proceedings can be granted where appropriate, if there are exceptional grounds for doing so.
  • The grounds relied upon when asking the court for a stay must have been unforeseeable at the time of entering into the agreement. A stay will not be granted if parallel proceedings were contemplated by the parties, even if the parties did not contemplate the particular proceedings that in fact ensued.
  • An important issue that the court took into account in reaching its decision in this case was that none of the issues in the English proceedings had yet been determined by the courts in Tanzania [4]. It was therefore not contrary to the objective interests of justice to allow proceedings to continue in England.

WM Comment

This case is another recent example of the importance of a well drafted jurisdiction clause. Jurisdiction disputes can be complex, time-consuming and costly – not to mention the fact that they represent distraction and delay when it comes to resolving the substantive issues in any commercial dispute. To avoid this before the main fight even begins, it is particularly crucial that contracting parties get their drafting right when they agree to the inclusion of a non-exclusive jurisdiction clause combined with an FNC waiver, as such clauses will be open to challenge should litigation arise and the issue of the most appropriate forum come into question. For certainty, parties may wish to ensure that any agreement contains an exclusive jurisdiction clause to prevent any party from bringing proceedings in a forum other than the one stipulated in the contract.