When an English jurisdiction clause is not all it should be

The High Court has refused to grant an anti-suit injunction to restrain the defendant from pursing unfair prejudice proceedings in Hong Kong against:

• Two companies that had signed contracts including exclusive jurisdiction clauses in favour of the English court.
• Related companies within the same group (that had not signed up to the contracts containing English exclusive jurisdiction clauses).
  This is an example of the English court not granting an anti-suit injunction where a group company (which is not subject to an exclusive jurisdiction clause) is also a party to foreign proceedings.

Commercial parties know that there can be significant tactical advantages in securing cross border litigation in your home country. Anti-suit injunctions are designed to restrain a person or company from starting or pursuing proceedings outside of England. A breach of an anti-suit injunction amounts to a contempt of court and can lead to a fine or even the arrest of the individuals involved. English courts have also been known to refuse to enforce a judgment obtained in breach of an injunction on public policy grounds. An anti-suit injunction is a discretionary remedy, but generally speaking, where there is an English exclusive jurisdiction clause, the discretion will normally be exercised to grant an injunction unless there are “strong reasons” not to exercise it.

Team Y & R Holdings Hong Kong Ltd and others v Ghossoub and Cavendish Square Holding BV and another v Ghossoub has a complex factual background. Mr Ghossoub brought proceedings in Hong Kong seeking relief for the unfairly prejudicial manner in which he alleged the company’s affairs had been conducted. The sale and purchase agreement (SPA) provided that the English courts should have exclusive jurisdiction to settle any dispute arising out of the agreement. The unfair prejudice petition relied heavily on alleged breaches of the SPA (with Claimant 2) and the service agreement (with Clamaint 1). Both were subject to the exclusive jurisdiction of the English court. In response to the petition, five members of the claimant group applied to the English court for an anti-suit injunction seeking to restrain Mr Ghossoub from pursuing the Hong Kong proceedings until after the English court had decided the English law issues arising under the SPA and service agreement.

The High Court found that the jurisdiction clause covered disputes raised by the Hong Kong proceedings that were related or connected to the SPA, but it would be for the Hong Kong court alone to determine whether there had in fact been unfair prejudice. Furthermore, there was no basis for restraining the Hong Kong petition against three companies who were not party to the SPA. To require any part of the dispute to be litigated in England would bring about duplicated proceedings; this was a strong reason not to grant an anti-suit injunction.

Once you disentangle the factual background of this case, a number of key points emerge. Practitioners faced with advising a client on the appropriateness of bringing or defending anti-suit proceedings should consider the following issues.

Scope of the jurisdiction clause

Can the whole matter be decided in England or are the facts such that certain key aspects can only be decided by a foreign court? A significant factor was the fact that Mr Ghossoub was pursuing an unfair prejudice action in Hong Kong, which was a claim that could only be decided by the court of the company’s incorporation. On balance, the issues should have been determined before the Hong Kong court regardless of the contractual jurisdiction clauses.

Enforcement of the jurisdiction clause against third parties

It may seem an obvious point, but are all the parties to the proceedings party to the exclusive jurisdiction clauses? The SPA contained a term dealing with the position of third parties. It was the judge’s view that the contracting parties had therefore considered how the contract might affect third parties. There was nothing to suggest they intended the position of third parties to be affected by the jurisdiction clause. This is a point for those involved in the advising of and drafting of contractual agreements.

Whether it is appropriate to grant an injunction

The court’s assessment in these cases will be highly fact specific. The judge concluded that:

“Whether an exclusive jurisdiction clause should be understood to oblige a contractual party to bring claims relating to the contract in the chosen forum even if the claim is one against a non-contracting party, requires a consideration of the contract as a whole including not just the language used in the exclusive jurisdiction clause but also all other terms in the contract that may shed light on what the parties are likely to have intended”.

Conclusion

At a time when issues of jurisdiction in cross border matters remain as contentious and disputed as ever, this recent case in the English courts has sought to limit the potential scope of anti-suit injunctions, certainly with respect to unfair prejudice petitions. Whilst the English courts have long sought to protect the sanctity of agreements between parties, the High Court considers that contracting parties would not have intended to submit to the English court a dispute in respect of which the English court would have no jurisdiction to resolve or grant a remedy.

This article first appeared on the Practical Law Dispute Resolution Blog, September 2017.