In Cube Lighting & Industrial Design Limited v Afcon Electra Romania SA, the Court commented on the requirements for a court to establish jurisdiction under article 23 of Regulation 44/2001 defining what was meant by the phrase “good arguable case”. However a more fundamental lesson can be learnt as to the hazards associated with failing to ensure that a written contract governs high value commercial relations that reach across national borders.
The claimant, an English company entered into supply arrangements with a Romanian company. A number of meetings took place between the parties, in the course of which three draft contracts were sent from the claimant to the defendant to formalise arrangements, including which governing law would prevail (English) and in which Court litigation would be carried out in the event of a dispute (United Kingdom). None of the draft contracts were signed by either party.
The claimant and the defendant fell out. The claimant issued proceedings in the English Court.
An issue arose as to whether or not the English Court had jurisdiction to hear the claim.
The claimant argued that the draft contracts evidenced the fact that the parties had previously agreed to accept the jurisdiction of the English courts. It then also argued that the parties had entered into a free standing oral agreement under which it had been agreed that the contract be subject to the jurisdiction of the English courts and that the jurisdiction clauses in the unsigned contracts were evidence of that. The claimant therefore submitted that the English Court had jurisdiction to hear the claim under Article 23 of EC Council Regulation 44/2001. The defendant argued that the contract had been agreed on different terms and not based on the three drafts.
The court held that the claimant had failed to demonstrate that it could establish clearly and precisely that the alleged jurisdiction agreement was the subject of consensus between the parties and the English court therefore lacked jurisdiction under article 23. It was necessary for the claimant to establish that there was a “good arguable case” that the matter ought to fall within the English court’s jurisdiction. This required more than just the establishment of a serious issue to be tried, but would not require as high a standard of proof as the balance of probabilities. The court decided that it was difficult to accept that the parties would have entered into a free standing jurisdiction agreement which would have overridden anything they subsequently discussed or agreed; it was equally difficult to accept that they would have done so informally or orally. On the evidence the claimant had failed to demonstrate that it had a notably better argument than the defendant regarding jurisdiction. The English court therefore lacked jurisdiction.
Despite the arguments over complex jurisdictional laws, this case also simply emphasises the mundane but fundamental importance of ensuring that negotiations between the parties are concluded in a signed contract, particularly when doing business abroad. Having failed to do so, the claimant suffered a “double whammy” of uncertainty; not only did it remain in dispute with the defendant over unpaid invoices but it would not be able to litigate that dispute in its “home” court.