In the recent cases of Hin-Pro International Logistics Ltd v Compania Sud Americana De Vapores SA1 (Hin–Pro) and Spliethoff’s Bevrachtingskantoor BV v Bank of China Ltd2 (SBV) the Court of Appeal and High Court considered their powers in determining the jurisdiction of disputes where one party has breached an English jurisdiction clause and commenced proceedings elsewhere.
Hin-Pro International Logistics Ltd (Hin-Pro), a freight-forwarder registered in Hong Kong, commenced proceedings against Compania Sud Americana De Vapores SA (CSAV) in China for the alleged misdelivery of several consignments of cargo delivered under straight bills of lading. The bills of lading provided for English law and jurisdiction.
CSAV submitted that no misdelivery had taken place and alleged that the actual C&F sellers had been paid in full, therefore Hin-Pro’s Chinese proceedings were dishonest.
“Exclusive” jurisdiction clause
CSAV sought and obtained both an anti-suit injunction and a worldwide freezing order against Hin-Pro from the English Commercial Court. Hin-Pro appealed the anti-suit injunction to the Court of Appeal, alleging that the jurisdiction clause was not exclusive and they were entitled to bring proceedings in China. The clause stated:
“...any claim or dispute arising hereunder shall be subject to English law and the jurisdiction of the English High Court of Justice... If, notwithstanding the foregoing, any proceedings are commenced in another jurisdiction, such proceedings shall be referred to ordinary courts of law.”
Dismissing Hin-Pro’s appeal, the court found that this was an exclusive English jurisdiction clause for the following reasons:
- The words “shall be subject to” are imperative and directory.
- The commercial purpose of the clause is to stipulate what law will govern and which court will have jurisdiction.
- As the governing law was English, England is the best forum.
- The phrase “notwithstanding the foregoing” is a recognition that the first sentence requires litigation in England.
- The second sentence will only apply where the first sentence is ineffective.
- As it is not clear which party would benefit from English jurisdiction the clause could not be interpreted against either party (contra proferentem).
Accordingly, the court ruled that the anti-suit injunction should be maintained. This judgment shows the lengths the court will go to protect the commercial workability of contracts.
In contrast, the judgment of Spliethoff’s Bevrachtingskantoor BV (SBV) is illustrative that the court’s powers can only extend so far.
The dispute related to two shipbuilding contracts between SBV and shipbuilders. The ships had not been delivered on time. Arbitration proceedings were commenced by SBV in London in accordance with the contract and awards obtained in its favour.
The shipbuilders brought proceedings against SBV in the Qingdao Maritime Court in China, alleging fraud. SBV sought and obtained from the tribunal in the London arbitration proceedings interim anti-suit orders restraining the shipbuilders from advancing the Qingdao proceedings. SBV also initially challenged the jurisdiction of the Qingdao court and then participated in the Chinese proceedings. The Chinese court found in favour of the shipbuilders.Proceedings were brought in the English High Court by SBV in respect of claims under refund guarantees issued by the Bank of China. The bank’s defence against SBV relied on the Chinese judgments. SBV claimed that the judgments should not be recognised as they were obtained in breach of arbitral anti-suit orders and English law and jurisdiction clauses.
Recognising Chinese court judgments
Notwithstanding that the Chinese proceedings had been commenced in breach of the arbitration clauses and arbitral anti-suit orders, the court found that the Chinese court judgments were to be recognised, as SBV had voluntarily submitted to the proceedings3. SBV were also unable to contend that the Chinese judgments should not be recognised on the grounds of public policy.
The difference in the outcome of the cases is an important reminder to be aware of the governing law and jurisdiction clauses in contracts. The CSAV case shows that, if a party wishes to rely on the jurisdiction clause in its contract, he will need to take active steps to enforce it if his opponent starts proceedings elsewhere.