The Commercial Court has confirmed that one-way or unilateral jurisdiction clauses (in which one party can bring proceedings in one jurisdiction only, whilst the other has the option to bring proceedings in other jurisdictions) are valid under English law: Mauritius Commercial Bank Ltd v Hestia Holdings Ltd and Another [2013] EWHC 1328 (Comm). In so doing, the Commercial Court has not followed the approach of the French Cour de cassation in Mme X v Bank Privée Edmond de Rothschild (the “Mme X Case“), in which a one-way jurisdiction clause was found to violate Article 23 of the Brussels Regulation because of its potestative nature (a potestative condition being one whose satisfaction is completely within the power of one of the parties, with no mutuality of obligation) – see our previous post.

The Mme X Case caused concern amongst many commercial parties, in particular financial institutions which favour such clauses.  Whilst such unilateral jurisdiction clauses may not be upheld in all jurisdictions, it is some comfort that, in a robust judgment, the Commercial Court upheld the jurisdiction clause and, obiter, concluded that even more one-sided clauses than the one before it would not violate the public policy of equal access to justice enshrined in Article 6 of the European Convention on Human Rights.

Further, although it found Mauritian law to be irrelevant, the Court nonetheless concluded that there was a good arguable case that the clause would be upheld in Mauritius notwithstanding the Mme X Case, having considered evidence that the Mme X Case was controversial, had attracted criticism both domestically and in the context of Article 23 (which requires autonomous interpretation), and is inconsistent with previous decisions of the same court.

Background

In this case, a Mauritian bank granted a loan facility to the first defendant (a Mauritian company), guaranteed by the second defendant (the Indian-registered parent company) with the loan and guarantee documentation governed by Mauritian law and providing for the exclusive jurisdiction of the Mauritian courts.  The first defendant defaulted and the parties agreed to reschedule repayment of the loans. 

The new amendment and restatement agreement (the “ARA“) was subject to English law, and contained (in Schedule 2) a restated facility agreement (the “RFA“).  Clause 24.1(a) provided that the English courts should have exclusive jurisdiction to determine disputes and Clause 24.1(b) provided that the parties agree that the courts of England are the more appropriate and convenient courts.  Clause 24.1(c) provided that Clause 24.1 was “for the benefit of the Lender only. As a result the Lender shall not be prevented from taking proceedings related to a Dispute in any other courts in any jurisdiction. To the extent allowed by law the Lender may take concurrent proceedings in any number of jurisdictions”.  The first defendant defaulted on the loan under the RFA and the bank brought proceedings in England, relying on the Service of Process clause in Clause 24.2 under which the defendants appointed a process agent.

The defendants argued that the jurisdiction clause was subject to Mauritian law and (because Mauritian law is based on French law and the Mauritian courts usually follow the French courts), therefore invalid due to its one-sided nature, following the Mme X Case.  In the alternative, they argued that, if it was subject to English law, it was nonetheless invalid as it was too one-sided to be compatible with fundamental principles regarding equal access to justice and should not be upheld.

Change in governing law

Popplewell J reviewed a number of authorities upon which the defendants based their argument that the proper law of the RFA was Mauritian law. None supported the conclusion that the parties could not agree to a prospective change in governing law of their contractual obligations, including for the jurisdiction agreement. In any case, the Court held that the ARA replaced the old facility agreement with the RFA as a new agreement. Clause 24 therefore fell to be considered under English law as its proper law.  Notwithstanding that Mauritian law was irrelevant, Popplewell J nonetheless explained that, on the evidence, he would have concluded that there was a good arguable case under Mauritian law that, notwithstanding the Mme X Case, Clause 24.1 would have been treated as valid and effective.

Interpretation of Clause 24 and equal access to justice

The defendants’ argument concerning the invalidity of Clause 24 rested on a very one-sided interpretation of the clause in favour of the bank. This interpretation was rejected.

The defendants argued that Clause 24.1(c) allowed the bank to sue them in any court in the world. Popplewell J, however, found the natural construction of Clause 24.1(c) was to allow the bank to bring proceedings in any court which would regard itself as having competent jurisdiction under its own rules of private international law. The defendants further contended that Clause 24 conferred no rights on the defendants to sue in any forum because the bank’s option in Clause 24.1(c) applied whether it was claimant or defendant and the bank could rely on the benefit of the jurisdiction agreement defensively as well as offensively.  Again, Popplewell J rejected the defendants’ reading of the clause: the defendants were obliged to sue in England and the bank had agreed to be sued in England.   A beneficiary of a one-sided jurisdiction agreement may use it defensively, but only where the terms of the clause have that effect. In the case of Clause 24, there was no such wording: the bank had agreed to be subjected to the exclusive jurisdiction of the English courts subject to its right to bring claims (which may overlap) abroad, pursuant to Clause 24.1(c).

Given that the defendants’ interpretation had been rejected, they conceded that there was no basis for challenging clause 24.1, such asymmetric provisions having regularly been enforced by the court. Indeed, Popplewell J concluded that even if the defendants’ interpretation had been accepted, that was the contractual bargain to which the court should give effect. To do so would not offend the public policy of “equal access to justice” as reflected in Article 6 of the ECHR, on which the defendants sought to rely.  Article 6 is directed to access to justice within the forum chosen by the parties, not to choice of forum. The defendants had not identified a forum in which their access to justice would be unequal to the bank’s, merely because the bank could choose the forum.

Jurisdiction apart from jurisdiction agreement

Even if Clause 24.1(a) and 24.1(c) were invalid under the proper law, Clause 24.2 which provided an address in England for service of suit on the defendants was independent and valid.  That being so, the bank established jurisdiction in England as of right by serving on the defendants’ agent in England.  The question then is whether the English court should assume and exercise its jurisdiction – and the burden fell on the defendants to show there was a more appropriate forum.  They had not sought to discharge this burden and, in any case, Clause 24.1(b) provided that England was the agreed forum conveniens.