JURISDICTION AGREEMENTS FOR A COURT IN A LUGANO STATE

General

Article 23 of the Lugano Convention, which forms the other half of Section 7 of Title II, which is entitled ‘Prorogation of Jurisdiction’, provides as follows:

(1) If the parties, one or more of whom is domiciled in a State bound by this Convention, have agreed that a court or the courts of a State bound by this Convention are to have jurisdiction to settle any disputes which have arisen or which may arise in connection with a particular legal relationship, that court or those courts shall have jurisdiction. Such jurisdiction shall be exclusive unless the parties have agreed otherwise. Such an agreement conferring jurisdiction shall be either: (a) in writing or evidenced in writing; (b) in a form which accords with practices which the parties have established between themselves; or (c) in international trade or commerce, in a form which accords with a usage of which the parties are or ought to have been aware and which in such trade or commerce is widely known to, and regularly observed by. parties to contracts of the type involved in the particular trade or commerce concerned. (2) Any communication by electronic means which provides a durable record of the agreement shall be equivalent to ‘writing’. (3) Where such an agreement is concluded by parties, none of whom is domiciled in a State bound by this Convention, the courts of other States bound by this Convention shall have no jurisdiction over their disputes unless the court or courts chosen have declinedjurisdiction. (4) The court or courts of a State bound by this Convention on which a trust instrument has conferred jurisdiction shall have exclusive jurisdiction in any proceedings brought against a settlor, trustee or beneficiary, if relations between these persons or their rights or obligations under the trust are involved. (5) Agreements or provisions of a trust instrument conferring jurisdiction shall have no legal force if they are contrary to the provisions of Articles 13, 17 or 21, or if the courts whose jurisdiction they purport to exclude have exclusive jurisdiction by virtue of Article 22.

The wording of Article 23 is substantially identical to the provision in Regulation 44/2001. However, the corresponding version in Article 25 of Regulation 1215/2012 differed from it in three principal respects, which are mentioned here for the avoidance of later confusions; their practical significance is small. First, Article 25 was widened to apply to agreements for the courts of a Member State regardless of the domicile of the parties: even where none was domiciled in a Member State. Article 23 of the Convention, by contrast, gives modified effect to an agreement made when no party has a domicile in a Lugano State; but the cases in which this will make a difference are practically nil. Second, Article 25(1) of Regulation 1215/2012 provided that the designated court had jurisdiction ‘unless the agreement is null and void as to its

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Article 24, dealing with jurisdiction by entering an appearance, was dealt with above.

substantive validity under the law of that Member State’.^[1] The language was taken from the 2005 Hague Convention on Choice of Court Agreements, but the point it makes is trivial. Third, Article 25 of Regulation 1215/2012 stated that 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 validity of the agreement conferring jurisdiction cannot be contested solely on the ground that the contract is not valid.’ That, however, merely confirmed what was already known.

The function and effect of an agreement on jurisdiction

If there is an agreement upon the jurisdiction of a court or the courts of a Lugano State, which complies with the requirements of Article 23, the court or courts designated will have jurisdiction which will be exclusive unless the agreement provides otherwise. There are many points of detail on which the law has become rather complex, but the basic idea is simple enough: parties may exercise their autonomy to identify a court which is to have jurisdiction, and subject to clear and precise exceptions, that court should adjudicate and other courts should not. It is convenient to make six preliminary points.

The first thing to say is that Article 23 does not require the parties to have made a contract which contains among its terms a provision that the courts of a Lugano State are to have jurisdiction: the parties may agree in this manner if they wish, but there is no compulsion to do so. Even if many of the reported cases before the English courts appear to have interpreted the question ‘did the parties make an agreement?’ as though it actually meant ‘did the parties make a contract?’ it is sufficient for the purposes of Article 23 that there is an agreement. There is no reason to interpret this as ‘an agreement which takes the form of a contract which contains this as a term’.

The second thing to say is that it may not be necessary that the parties have made the agreement, as distinct from its being required that the party who is said to be bound has communicated, to the other, his agreement to accept the jurisdiction of the named court in respect of the present proceedings. It may prove to be very significant indeed that what is required to prorogate and to derogate from the jurisdiction of a court in a Lugano State is an agreement, which may be understood to be initially unilateral and which need not be formed by an exchange of promises. It may follow that if the parties make a contract which also deals with the issue of where proceedings will and will not be brought, this creates and establishes a set of mutual-performance undertakings which are, conceptually and functionally, separate and distinct from the agreement which was effective to prorogate jurisdiction.

The third thing to say, which follows from the first two, is that a person may depart from his agreement on jurisdiction; the effect which this resiling has on the jurisdiction of a court will be determined by reference to the Convention, with such incidental reference to national law as may be required to secure the correct application of the Convention. But if he had also contracted not to sue in a particular court in which he then institutes proceedings, he breaches his contractual promise. It may not be -probably is not - helpful to describe this as the breach of a jurisdiction agreement, because it risks confusing two distinct legal propositions: a public law, jurisdictional, rule about whether the court has authority to adjudicate; and a private law rule about abiding by contractual promises or paying damages as the consequence of breach.

Fourth, one should note the position in the hierarchy of jurisdictional rules given to agreements on jurisdiction for the courts of a Lugano State. They may not override the exclusive jurisdiction conferred by Article 22.^[2] Prorogation of jurisdiction by voluntary appearance before the courts of another Lugano State will override them; and their effect in relation to insurance, and to consumer and employment contracts, is curtailed. The fact that a court in a Lugano State has taken jurisdiction in violation of Article 23 does not lead to its judgment being refused recognition: the opposite is the case. In this sense Article 23 is misleading when it describes the chosen court as having exclusive¹ jurisdiction. It confers a jurisdiction which may exclude the jurisdiction, based upon rules lower down in the hierarchy, of courts which might otherwise have had it, but not a great deal more. Prorogated jurisdiction is not exclusive jurisdiction properly so called.

Fifth, the matter before the court must obviously fall within the four corners of the agreement. There is no reason to suppose that the Article is unavailable to a claimant who relies on the jurisdiction agreement to seise a court from which he seeks a declaration that the substantive contract is in fact invalid; there is no reason to suppose that the Article does not apply to bind a claimant who seeks a determination that the substantive contract is not valid. A common lawyer would naturally suppose that a core function of a court identified as having jurisdiction would be to permit and require it to determine such questions, which frequently arise;" the general approach of the decision in Benincasa v Dentalkit Sri' is certainly on the same lines.

Though the statutory limits are drawn widely, so that Article 23 may apply to ‘any disputes which may arise or have arisen in connection with a particular legal relationship’, the question whether the particular dispute is one which the parties did indeed agree to subject to the jurisdiction of the court chosen is one of construction of the agreement made. It was confirmed in Powell Duffryn Pic v Petereit,'^2, and reiterated several times, that the task of construction was laid on the court seised or proposed to be seised. It may be implicit in this (the Court was not explicit) that it should apply the rules of contractual construction of its own law, including private international law. Though the European Court did not say so, it is in principle hard to see how else it could be done, although the Court may yet establish the outer boundaries of what may, as a matter of national law, fall within the agreement.^[3] It will also be a question of construction, resolved if necessary by the application of the law which governs this aspect of the agreement, to identify those mentioned in it. In England, this question of construction is referred to the law governing the substance of the jurisdiction agreement. To the extent that an English court may take a more ample view of the material scope of a jurisdiction agreement than is taken under the law of a State which is more wary of such clauses, especially when they are used outside mercantile contracts, there will be scope for some difference of view, and some consequent unevenness in the manner in which Article 23 may apply.

And sixth, if the jurisdiction agreement does apply to the dispute between the parties, it is binding on them and on the court. In the absence of a tacit agreement between the parties to depart from it, the agreement is effective: it is irrelevant that the court may consider that applying it is inconvenient for the overall resolution of the broader dispute, or would it be contrary to its public policy, or similar objection. In this respect also, operation of agreements within the framework of the Convention is different from the approach of the common law.

• [1] Including, according to Recital (20) to the Regulation, the conflict of laws rules of that law. This provision, which is said also to apply within the context of the 2005 Hague Choice of Court Convention (discussed in Chapter 25) appears to introduce the principle of renvoi into this issue of commercial law, which is quite extraordinary. However, it plays no part in the Lugano Convention. 2 BAT Caribbean SA v PHP Tobacco Carib Sari [2017] EWCA Civ 1131. 3 See JSC Aeroflot-Russian Airlines v Berezovsky [2013] EWCA Civ 784, [2013] 2 Lloyd's Rep 242.
• [2] Article 23(5). 2 As a consensual variation of the agreement: 150/80 Elefanten Schuh GmbH v Jacqmain [1981] ECR 1671. 3 The word ‘exclusive’ will be seen to have different meanings in different contexts. In the context of Art. 23 it means ‘relatively exclusive’. Those who move in the weird world of gentlemen's clubs or in the institutions which educate class enemies, will recognise such shades of meaning. 4 Or sufficiently: the test which asks who has the better of the argument will often apply. 5 Ryanair Ltd v Bravofly [2009] IEHC41, [2009] ILPr 701. 6 C-269/95 Benincasa v Dentalkit Sri [ 1997] ECR 1-3767. It may be otherwise if the claimant claims to be free to ignore the jurisdiction agreement on the basis that he is not party to it. 7 Fiona Trust & Holding Corp v Privalov [2007] UKHL 40, [2007] Bus LR 1719. 8 C-269/95, [1997] ECR 1-3767. 9 C-214/89, [1992] ECR 1-1745. 10 C-269/95 Benincasa v Dentalkit Sri [1997] ECR 1-3767; C-325/13 Cartel Damage Claims (CDC) Hydrogen Peroxide SA v Evonik Degussa GmbH EU:C:2015:335, [2015] QB 906, [67]. 11 Terre Neuve Sari v Yewdale Ltd [2020] EWHC 772 (Comm).
• [3] In C-325/13 Cartel Damage Claims (CDC) Hydrogen Peroxide SA v Evonik Degussa GmbH EU:C:205:335, [2015] QB 906, [67] the Court appears to have established, on its own authority, that the agreement in question could not be held to apply to certain kinds of cartel damage claim. This did not appear to depend on what national law might have said or thought; it may have overstepped the mark. 2 Breitenbiicher v Wittke [2008] CSOH 145 (jurisdiction agreement in German contract in German language stated to be binding on the parties if they had the status of Kaufmann (translated as ‘merchant’): German law was applied to determine whether this condition was satisfied and jurisdiction prorogated accordingly). 3 Notice that the present submission is concerned with questions of construction of wording used in a clause which is taken for valid, and not with questions of validity, which are principally governed by the wording of Art. 23 itself, and which are examined below. A whisper of doubt may be introduced by C-519/19 Ryanair v DelayFix sp zoo EU:C:2020:933 which may suggest, in relation to Regulation 1215/2012, that construction is a matter for the law of the chosen court. This is unprincipled, but as it is based on wording not present in the Lugano Convention it is best disregarded. 4 For the application in this context of the general (broad) principles of construction favoured by English law, articulated in Fiona Trust & Holding Corp v Privalov [2007] UKHL 40, [2007] Bus LR 1719, see Deutsche Bank AG v Asia Pacific Broadband (Tireless Communications Inc [2008] EWCA Civ 1091, [2008] 2 Lloyd’s Rep 619; Maple Leaf Macro Volatility Master Fund v Rouvroy [2009] EWHC 257 (Comm), [2009] 1 Lloyd’s Rep 475. 5 C-325/13 Cartel Damage Claims (CDC) Hydrogen Peroxide SA v Evonik Degussa GmbH EU:C:2O15:335, [2015] QB 906.