Asymmetric clauses and forum non conveniens

In Investec Bank Plc v Pavlo Protopap & Anor, the English court had to consider whether to decline jurisdiction, where the parties had given it exclusive jurisdiction on an asymmetric basis.

The bank issued a claim in England, but the borrower applied for a stay of these proceedings on the ground that Switzerland was the more appropriate forum.

The clause

The clause in the relevant facility agreements was as follows:

29.1

The Facility Letter, these [Standard Terms] and any non-contractual obligations arising out of or in connection with it are governed by English law.

29.2

The courts of England have exclusive jurisdiction to settle any dispute arising out of or in connection with the Facility Letter and/or these [Standard Terms] (including a dispute relating to the existence, validity or termination of the Facility Letter and/or these [Standard Terms] or any non-contractual obligation arising out of or in connection with the Facility Letter and/or these [Standard Terms]) (a “Dispute”).

29.3

The Bank and the Borrower agree that the courts of England are the most appropriate and convenient courts to settle Disputes and accordingly neither of them will argue to the contrary.

29.4

This Clause 29 (Governing Law and Enforcement) is for the benefit of the Bank only. As a result, the Bank shall not be prevented from taking proceedings relating to a Dispute in any other courts with jurisdiction. To the extent allowed by law, the Bank may take concurrent proceedings in any number of jurisdictions.

Could this be circumvented?

The borrower argued that there were strong reasons sufficient to displace the contractual bargain and that the court should exercise its inherent discretion to stay proceedings in favour of Switzerland, as a more suitable venue.

Other documents involved in related transactions were governed by Swiss law and contained exclusive choices of the Swiss courts to resolve disputes, though the bank was not a party to these. The borrower argued that related disputes would be heard in the Swiss courts and it would make sense for all issues to be resolved together. The borrower would wish to serve notices for contribution or indemnity on other parties, all of whom were Swiss and whose contractual relationships with the borrower were governed by Swiss law with jurisdiction given exclusively to the Swiss courts.

The bank pointed out that all the factors relied upon by the borrower were known at the time they agreed to the jurisdiction clause in the facility agreements. The issue of default under the facilities was simple and not contingent on the outcome of disputes between the borrower and others as to what was done with the money.

The judge found for the bank, dismissing the application for a stay. None of the arguments raised by the borrower were such as to disapply the bank’s right to have its dispute decided in accordance with the contractual agreement on jurisdiction. The facility agreements were governed by English law, which the English court would be better placed to apply and the bank was a UK company.

Positive statement of forum convenience

At 29.3, the clause contained an agreement that neither party would argue that the courts of England were not the most appropriate and convenient forum (a forum non conveniens waiver or “FNC waiver”). The judge held that previous caselaw showed the court still had a discretion to grant a stay on forum non conveniens grounds where the contract included a FNC waiver, if the party applying for a stay could show grounds that were not apparent when it entered into the contract. However, clause 29.3 here also contained a further statement that the parties agreed that the courts of England were the most appropriate and convenient forum. The judge held that this, by way of contractual estoppel, prohibited any argument by the borrower that the courts of England were not appropriate and convenient.

While the circumstances where a FNC waiver will not be effective are limited and the courts will be slow to override one, it appears from this case that, where a non-exclusive or asymmetric jurisdiction clause is used, an additional statement that the parties agree that the chosen courts are the most convenient and appropriate can further strengthen such a clause against FNC arguments.

Asymmetric clauses and the Hague Convention

The parties’ agreed position was that the clause, being asymmetric, did not fall to be considered as an exclusive jurisdiction clause to which the Hague Convention on Choice of Court Agreements 2005 would apply. Had it fallen under the Convention, the English court would not have had any discretion to refuse to take jurisdiction. The judge noted the position of the parties on this and delivered judgment in accordance with that, while reserving the court’s position on the issue of whether an asymmetric jurisdiction clause can be an exclusive jurisdiction clause for the purposes of the Convention.