Establishing jurisdiction can be complex. A recent decision has emphasised this by demonstrating the potential tensions between governing law and jurisdiction clauses and mandatory provisions of EU law, in this case the Commercial Agents (Council Directive) Regulations 1993 (the Regulations).
In Fern Computer Consultancy Ltd v Intergraph Cadworx & Analysis Solutions Inc (29 August 2014), the English High Court held that a claim under the Regulations did not satisfy the contractual jurisdiction gateways in the Civil Procedure Rules (CPR) Part 6.
English company Fern acted as Texan company Intergraph’s agent for selling software products in Europe, under an agreement which contained a Texas governing law and jurisdiction clause.
Fern commenced a claim in England for compensation under the Regulations and for unpaid commission under the agreement, obtaining permission to serve proceedings on Intergraph outside the jurisdiction.
Intergraph challenged the jurisdiction of the English Court. It argued that Fern had not met the necessary procedural requirements and that the parties had clearly chosen Texas for the governing law and jurisdiction of the contract.
Fern’s position was that parties cannot contract out of relief provided by mandatory provisions of English law.
The Court was therefore required to resolve a conflict under English law between the procedural jurisdiction rules and the substantive mandatory provisions.
In order to found jurisdiction in England and serve out, Fern had to establish that:
- Its case fell within one of the jurisdiction gateways in CPR Part 6.
- It had a good arguable case on the merits.
- England was clearly the appropriate forum.
Fern argued that two gateways were open to it because it had a claim:
- “made in respect of a contract where the contract … is governed by English law”; and
- “made in respect of a breach of contract committed within the jurisdiction”.
In respect of the first gateway, despite the governing law provision in the contract, Fern argued that because the claim was brought under mandatory provisions of the Regulations, English law governed. It relied on Accentuate Ltd v As Intergraphra Inc 1 . Intergraph argued Accentuate was wrong and should not be followed.
The Court decided against Fern, ruling that although a claim under the Regulations is governed by English law, in order to cross the threshold of the gateway, Fern had to show that the contract was governed by English law, not the claim. The Regulations did not form part of the contract. The contract was governed by Texan law.
In respect of the second gateway, the Court held that the sums claimed were not due “in respect of a breach of contract,” but under the Regulations. A failure to pay in England would be a breach committed in England but did not involve a breach of contract. Fern failed because its claim was under the Regulations.
The Court admitted these conclusions were not reached comfortably. It meant that an English Court had to turn away a claim brought by an English agent under mandatory provisions of English law, designed to protect agents from contracts that derogate from mandatory provisions.
This perhaps explains why the Court threw Fern a lifeline, giving it the opportunity to amend its case to include the tort jurisdiction gateway (because a breach of statutory duty can sometimes constitute a tort), before setting aside the order giving permission to serve out.
Further, the Court decided in Fern’s favour on the remaining procedural hurdles for service out, namely that Fern had a good arguable case on the merits and that England was clearly the appropriate forum.
However, the Court held that Fern could not establish that England was the appropriate forum in which to bring its claim for unpaid commission because that was a claim under the agreement and fell within the contractual exclusive jurisdiction clause.
The Court’s unenviable task was to reconcile mandatory provisions of English law with the jurisdiction procedural rules which recognise parties’ choice of governing law and jurisdiction. It seems that although English courts will give effect to mandatory provisions of EU law, even if this requires departing from jurisdiction and choice of law agreements, claimants will need to prove that their claim falls squarely within one or more of the jurisdiction gateways in CPR Part 6.