Jurisdiction agreements in trust instruments

Article 23(4) of the Convention provides that, where a trust instrument confers jurisdiction upon the courts of a Lugano State, that court has exclusive jurisdiction in actions brought against a settlor, trustee or beneficiary within the (internal) scope of the trust relationship. No requirement as to form (though in a trust instrument this will not be a major concern) is imposed by this provision. Such agreements are not permitted, however, to prevail over exclusive jurisdiction where this is conferred by Article 22, nor over Articles 13, 17 and 21. At first sight this would suggest that the Convention regards jurisdiction agreements in a trust instrument as being, in effect, no different from jurisdiction agreements in contracts. This may not be a view which everybody holds.

If the trust instrument provides for the jurisdiction of the English courts, questions may arise which are liable to be answered in a peculiar way. In Crociani v Crociani,' it was held that a provision of the trust instrument which provided for the law governing the trust to be altered, and which went on to provide that ‘thereafter the rights of all persons and the construction and effect of each and every provision hereof shall be subject to the exclusive jurisdiction of and construed only according to the law of the said country which shall become the forum for the administration of the trusts hereunder’ was not in substance an agreement on choice of court, or if it was, the jurisdiction chosen was not exclusive in nature. If the question whether a dispute falls within the scope of the jurisdiction agreement is for the national court to answer, an English court would say that, in a trust instrument, what may appear to be an exclusive jurisdiction agreement is not a clear and binding commitment of the parties to the trust relationship to bring disputes between them only to that court. It will depend on the construction of the provision, and there is evidently less standardisation in such provisions than one may expect. A ‘forum for the administration’ of a trust is not, and does not have the same significance as, a dispute resolution provision in a commercial contract.

The reasons for this are peculiar to trusts, which are in several significant respects different from contracts. The apparent agreement on jurisdiction may not be one which a beneficiary will have known about or agreed to; and the court may apprehend that the judicial duty to supervise the trust and trustees should not be so easily removed by a jurisdiction agreement for a foreign court. Crociani was a case on appeal from Jersey, where neither the Convention nor the Regulation operates, but if similar facts had arisen before a court bound to apply the Lugano Convention the extent to which the outcome would have been different is hard to say. The Privy Council was not called upon to deal with these issues, but a Lugano State court would have to.

Jurisdiction by agreement derived from other contractual terms

A contractual device, more frequently used in civilian systems than it is seen in English cases, is to stipulate in the contract for a place of performance, and then to rely on Article 5(1) to establish special jurisdiction in the courts of that place. It is clear that such a sensible provision should be respected, for it allows the parties to work out where they stand in terms of special jurisdiction; and in MSG v Les Gravières Rhénanes Sari,'⁶¹ the Court held that such a term did not need to comply with the formalities specified for agreements on the (exclusive) jurisdiction of a court.^[1] But such a freedom from the constraints of formality may be used abusively if the contract stipulates a place of performance which is manifestly unrealistic, or ‘abstract’, and which appears to have been stated only for the purpose of creating special jurisdiction in the courts of that place. If the term is open to criticism in those terms it will be regarded, notwithstanding its form, as being in substance an agreement on jurisdiction, and will be required to comply with the formal and other requirements of Article 23.

One might object that the decision in MSG involved a slight overreaction, for the identification of the term as a sham, or as ‘abstract’ or ‘fictitious’, may not be straightforward; and in any case, as special jurisdiction under Article 5(1) is not in any sense exclusive, it seems unnecessary to force a clause of this type into the straitjacket of Article 23, and then to regard it as creating an exclusive jurisdiction because the parties have not agreed otherwise.

• [1] C-106/95, [1997] ECR 1-911. 2 56/79 Zelger v Salinitri [1980] ECR 89. 3 Such as where a place for delivery is mentioned, but delivery there is impossible (for example, because it is not on the river and the contract provides for carriage by river only). 4 C-106/95 MSG v Les Gravières Rhénanes Sari [1997] ECR 1-911. See 7E Communications Ltd v Vertex Antennentechnik GmbH [2007] EWCA Civ 140, [2008] Bus LR 472, which would have applied the reasoning in MSG had it been necessary to decide the point. 5 Or, if it fails to comply with the formal requirements, to fail to create. 6 Unless on a true construction it may be held to be non-exclusive, which seems plausible.