By Jonathan Hew
Jurisdiction clauses in contracts set out which countries’ courts have the right to hear disputes arising out of the contract. It is important that they are clearly drafted as ambiguity can lead to expensive disagreements about their meaning. The recent case of Global Maritime Investments Cyprus Limited v O.W. Supply & Trading A/S (under konkurs)  EWHC 2690 (Comm) is an example of where clearer drafting may have avoided unnecessary satellite litigation.
Global Maritime Investments Cyprus Limited (“GMI”) and O.W. Supply & Trading A/S (“OW”) entered into a series of derivatives contracts. The contracts referred to “General Terms”, governed by English law.
OW subsequently filed for bankruptcy in Denmark. This led OW’s trustee in bankruptcy to commence proceedings against GMI in Denmark to determine the amount owed by GMI to OW under the contracts (and the General Terms). In that context, GMI made a summary judgment application in England for a declaration that any proceedings to obtain such an amount must be brought in the English courts.
The jurisdiction clause
GMI relied on this clause of the General Terms:
“13.2 With respect to any suit, action or proceedings relating to these general terms and conditions each party irrevocably submits to the jurisdiction of the English courts.”
The judge, Mr Justice Teare, considered the meaning that the clause would reasonably be understood to bear in its context. He found that the parties intended the clause to apply to all proceedings relating to the General Terms and that the parties saw good sense in linking the proper law of the transactions (English law, under clause 13.1 of the General Terms) with the law of the country whose courts were referred to in the jurisdiction clause.
Notably, the judge reached this conclusion even though the clause did not expressly require each party to submit all claims to the English courts. In his view, the parties’ “irrevocabl[e]” submission to the English courts made it difficult to interpret the jurisdiction clause as being non-exclusive.
The judge ruled that even if clause 13.2 was not an exclusive jurisdiction clause, the fact that GMI had already commenced proceedings relating to the General Terms in England meant that OW was precluded from commencing parallel proceedings elsewhere.
The judge rejected the trustee’s submission that it would be free to commence proceedings elsewhere once the English proceedings had concluded. According to the judge, allowing such proceedings “would give rise to the prospect of inconsistent decisions by separate courts on the same matters which prospect also cannot be supposed to be one which the parties would have regarded as acceptable.”
How will this affect you?
The mere failure to require that “all claims” be submitted to the courts of a particular jurisdiction will not undermine the efficacy of an exclusive jurisdiction clause, provided that it can reasonably be understood as such in its context.
However, to minimise the risk of a dispute, those drafting exclusive jurisdiction clauses should include such wording and ensure that there are no other ambiguities. For example, it should also be made clear that the parties are submitting to the “exclusive” jurisdiction of the relevant courts.
If you found this interesting, you can read the full decision here