International jurisdiction and arbitration

Chapter 2 focuses on international jurisdiction within the EU legal system and jurisdiction under international instruments. It illustrates how jurisdiction and arbitration clauses included in shipping contracts for the carriage of goods by sea may be found invalid and unrecognised by competent national judges. It also considers the limitations on party autonomy imposed by the EU legal framework regarding choice of jurisdiction and arbitration clauses.

International jurisdiction in the EU

International contracts for the carriage of goods by sea include jurisdiction and arbitration clauses, as well as clauses choosing the law applicable to the contract. The aim of this chapter is not to ascertain the limits on party autonomy related to applicable law clauses chosen by the parties but to analyse the framework that applies to jurisdiction and arbitration clauses. The incorporation of these clauses into B/Ls will not be treated here but in Chapter 3.

Separability of the jurisdiction clause from the main contract

Separability, as a term of art, properly describes the disentangling of two contracts from what may appear in other respects to be a single agreement, in order that the invalidity of the one contract not affect the validity of the other.^[1]

In other words, separability presumes the autonomy of the dispute resolution clauses (jurisdiction, arbitration or applicable law) or the rules on nullity or termination of the contract and its consequences as distinct from the contract, under the framework of the general principles of contract law. These clauses are independent of other clauses of the contract due to their purely procedural character and the overarching substantive or material party autonomy. Examples are found in Article 22(1) of the Spanish Arbitration Act (SAA), or Article 25(5) of the Brussels I Regulation (recast), which sets out the following: ‘An agreement conferring jurisdiction which forms part of a contract shall be treated as an agreement independent of the other terms of the contract’.

The determination of the validity of these dispute resolution clauses differs from the kompetenz-kompeten: principle that applies to arbitration. Article 3(d) of the Hague Choice of Court Convention states that: ‘an exclusive choice of court agreement that forms part of a contract shall be treated as an agreement independent of the other terms of the contract. The validity of the exclusive choice of court agreement cannot be contested solely on the ground that the contract is not valid’.

These clauses require a constructive comparative legal analysis,^[2] acknowledging that jurisdiction clauses aim to solve disputes by choosing a state court while arbitration ones are designed to evade state courts by entrusting the arbitrators with powers to undertake such duty.

The Brussels/Lugano regime presupposes that the separability of the choice of forum clause from the main contract implies that if the main contract is null or void it does not affect the other independent agreement. That was the doctrine set out in the Court of Justice of the European Union’s (C JEU) judgment in Benincasa v. Dentalkit Sri. The court referred to legal certainty as the basis of its ruling, but there was no mention of the doctrine of separability. The claimant agreed on a franchising agreement that included an Italian choice of jurisdiction clause. It raised a claim to a German court that referred to the CJEU the question of whether any court other than the one chosen under an exclusive jurisdiction agreement had jurisdiction to declare the main contract invalid.

In Benincasa, the CJEU distinguished between choice of forum agreements, governed by the uniform jurisdiction rules of the Brussels Convention, and the substantive contractual provisions, governed by the lex causae (paras 24-25 of the judgment). The CJEU distinguished between the choice of forum clause and other contractual provisions. As a result, the German court had to decide on its jurisdiction regardless of any consideration of the substance of the case (para 27). Legal certainty had to be ensured since the Brussels Convention could be invoked to frustrate the whole contract.

The rale of separability can be found in other international conventions dealing with contractual issues: e.g.. Article 81(1) of the UN Convention on Contracts for the International Sale of Goods (the Vienna Convention); Article 7.3.5(3) of the UNIDROIT Principles of International Commercial Contracts; Article 9:305(2) of the Principles of European Contract Law; Rule 111-3:509(2) of the Draft Common Frame of Reference in Europe; Article 7.3.4(2) of the OHADAC Principles on International Commercial Contracts.

The separability doctrine has been well accepted in England by courts^[3] and scholars. InMackender v. FeldiaAG,* a jurisdiction agreement was held to be valid despite the main contract being found to be voidable. A jurisdiction clause may be governed by a different law from the one that applies to the main contract. Normally the procedure is governed by the lex fori (the law of the forum) and jurisdiction agreements are considered a matter of substantive law. However, under English law, the lex fori generally governs their effect. In Deutsche Bank AG v. Asia Pacific Broadband Wireless Communication Inc, Longmore J held that the doctrine of separability applies, whereby: '... disputes about the validity of the contract must, on the face of it, be resolved pursuant to the terms of the clause and, indeed, the last sentence of the clause expressly so provides. It is only if the jurisdiction clause is itself under some specific attack that a question can arise whether it is right to invoke the jurisdiction clause. Examples of this might be fraud or duress alleged in relation specifically to the jurisdiction clause’.

• [1] Adnan Briggs, ‘The subtle variety of jurisdiction agreements’ (2012) 3 LMCLQ 364, 380. 2 José Carlos Fernandez Rozas, ‘Alternatives and uncertainties of the dispute settlement clauses in international maritime contracts’ (2018) Cuademos de Derecho Transnacional 10(2) 333, 336. 3 Law 60/2003 of 23 December on arbitration (Official State Gazette No 309 of 26 December 2003).
• [2] Georges René Delaume, ‘Clauses d’élection de for et clauses compromissoires: évolution et gestation d’un nouveau droit américain’ (1975) JDI 486; Nathalie Coipel-Cordonnier, Les conventions d'arbitrage et d’élection de for en droit international privé (LGDJ 1999) 1-6 2 Fernández Rozas, ‘Alternatives and uncertainties of the dispute settlement clauses in international maritime contracts’ (n 2) 336. 3 Case C-269/95 Benincasa v. Dentalkit Sri EU:C: 1997:337, [1997] ECR1-3767 at [21]-[32]. 4 Felix Spai'ka, Jurisdiction and Arbitration Clauses in Maritime Transport Documents (Springer 2010) 81-98. 5 Zheng Sophia Tang, Jurisdiction and Arbitration Agreements in International Commercial Law (Routledge 2014)71. 6 Convention of 27 September 1968 on jurisdiction and the enforcement of judgments in civil and commercial matters OJ 1972, L 299/32, consolidated text of 26 January 1998 [1998] OJ 1998 C 27/1 (Brussels Convention). 7 ibid. 8 See José Carlos Fernández Rozas, Sixto A Sánchez Lorenzo y Gonzalo Stampa, Principios Generales del Arbitraje (Thant lo Blanch 2018) 24; Fernández Rozas, ‘Alternatives and uncertainties of the dispute settlement clauses in international maritime contracts’ (n 2) 336.
• [3] Crédit Suisse First Boston (Europe) Ltdv. Seagate Trading Co Ltd [1999] 1 All ER (Coimn) 261; Sonatrach Petroleum Corp (BVI) v. Ferrell International Ltd [2002] 1 All ER (Comm) 627 (QB). 2 Adrian Briggs, Agreements on Jurisdiction and Choice of Law (OUP 2008) 79-82. 3 Machender v. FeldiaAG [1967] 2 QB 590 (CA) 598. 4 David Joseph, Jurisdiction and Arbitration Agreements and their Enforcement (Sweet & Maxwell 2005) 108-109. 5 Michael Pryles, ‘Comparative Aspects of Prorogation and Arbitration Agreements’ (1976) 25(3) ICLQ 543, 544. 6 Otto Kahn-Freund, ‘Jurisdiction Agreements: Some Reflections’ (1977) 26(4) ICLQ 825, 835; Sparka (n7). 7 [2008] EWCACiv 1091, [2008] 2 Lloyd’s Rep 619, para 24. 8 Simon Baughen, Shipping Law (7th edn, Routledge 2018) 363. 9 Aaron X Fellmeth and Maurice Horwitz (eds), Guide to Latin in International Law (OUP 2009), 233-234. 10 Case C-189/87 Kalfelis v. Bankhaus Schröder, Münchmeyer, Hengst & Co and others EU:C: 1988:459, [1988] ECR 5565; Case C-45/13 Kainz v. Pantherwerke AG EU:C:2014:7; Case C-12/15 Universal Music International Holding BV v. Michael Tetreault Schilling EU:C:2016:449. 11 Yvonne Baatz, ‘The Conflict of Laws’ in Yvonne Baatz (ed), Maritime Law (4th edn, Routledge 2018) 31.