Staying proceedings brought in breach of contract: non-Hague cases

We have reached the point of knowing exactly what the parties promised each other; we can finally turn to the issue of stays of English proceedings where the stay is applied for on the basis of a jurisdiction agreement.

If there is a statutory duty to grant relief by reference to the jurisdiction agreement, there is little more to be said on the issue of relief. So for example, if the jurisdiction agreement for a foreign court is one to which the 2005 Hague Convention on Choice of Court Agreements applies, the duty of the English court to give effect to it is primarily established by the Convention; the issue is examined in paragraph 23.17, below. But if the jurisdiction agreement is not one to which the 2005 Hague Convention applies, the court will, on application, be very likely to stay English proceedings which are brought in breach of it.

The leading case is the decision of the House of Lords in Donohue v Armco Inc, which overtakes the trio of decisions which paved the way for it. The House of Lords confirmed that contractual agreements about the place of litigation, just like any other contractual term, should be enforced according to their plain meaning: the judgment is so compelling that one wonders how it could ever have been in doubt. Proceedings brought in breach of a jurisdiction agreement for a foreign court will be stayed unless the circumstances are exceptional. An exception is not established by showing the natural forum for the litigation to be in England: for the court to condone the breach of contract by the claimant it will be necessary for the claimant to point to something substantially more, which provides ‘strong cause’ for the court to allow him to break his contract.^[1]

Older English cases, now only of curiosity value, show a degree of fidelity to choice of court agreements for foreign courts which may have reflected the court’s feelings towards the court chosen.” In cases decided before the First World War, choices for Budapest, Leipzig and Hamburg were enforced with short, sharp judgments. While it was part of British India, a choice for Calcutta was treated similarly. But by contrast, a choice of court for Germany was denied enforcement in 1939; and in the days when they led behind the iron curtain, choices for the USSR and Poland were said to raise no more than a presumption for a stay; in more recent, but still turbulent, times, a choice for the Egyptian courts was also said to raise no more than a presumption in favour of a stay.

Donohue v Armco Inc™ represents a new dawn. The principal means of dealing with a party who has broken his agreement to sue in a particular court is by specific relief directly enforcing the primary obligations of the agreement. It may now be that, aside from the case of multipartite proceedings, which raise distinct considerations and which are considered below, the courts will be equally unprepared to countenance arguments that a claimant should be allowed or left alone to break his contract to sue in any court - English or foreign - in which he has promised not to.

Donohue v Armco confirmed that only in exceptional cases will English proceedings brought in breach of a foreign jurisdiction agreement not be stayed. Earlier cases had paid lip-service to such a rule while suggesting that exceptions were not so hard to find. For example, in The El Amria,'' an exclusive jurisdiction agreement for the court at Alexandria was not enforced by a stay of the English proceedings because the witnesses (factual and expert) were English and in England, and because related litigation was already pending in the English courts: the latter point is plausible, at least if the litigation is genuine and not contrived; the former, in the context, inconsequential. For all that, the orthodox view is that the court leans in favour of a stay unless exceptional

JURISDICTION AGREEMENTS AT COMMON LAW reasons dictate otherwise; and the management of multipartite litigation may be the only real exception.

In The Pioneer Container,^[2] it was suggested that if proceedings would be time-barred in the chosen court, and if there had been no fault in failing to save limitation there, this might furnish an exceptional reason not to stay proceedings. But this rather unwelcome possibility - unwelcome, because the short limitation period for actions before the foreign court may have been one of the factors which led the parties to contract for it in the first place - may be more apparent than real, for it will be hard to see why it is not culpable to fail to save limitation in the court which has been agreed to by contract. Even so, if political changes in the country whose court was chosen mean that the claimant would not now get a fair trial, the jurisdiction clause - even if not technically frustrated by this event - may not be enforced.

However, in the context of genuine multipartite litigation, where some but not all of those genuinely involved in the dispute are party to the jurisdiction agreement, the jurisdiction agreement may not be given effect, even if it is for the English courts, as was confirmed by the House of Lords in Donohue v Armco Inc.' Although there may be a contractual agreement on jurisdiction, this will not be specifically enforced where to do so would fracture the coherent adjudication of a multipartite dispute. Of course, the potential for abuse of this principle is understood, and if a court believes that non-parties to the jurisdiction agreement - affiliates and subsidiaries, or ‘friends and relations’ as they were memorably described in Donohue v Armco Inc'⁵¹ - have been put up to litigate by one party, in order to contend that they were not bound by the jurisdiction agreement, with a view to fabricating an exception, a court should detect it. But where there is no such manipulation, the existence of a jurisdiction agreement is strongly indicative, but is not conclusive, on the question whether relief will be ordered.

Legal policies collide at this point. There is a strong public interest in encouraging and enforcing agreements on where proceedings will be brought: the avoiding of litigation about where to litigate has an intuitive appeal. But there is a strong public interest in preventing conflicting judgments from coming into existence, and therefore in having all the interested parties before the court and bound to and by a single adjudication, and the question is whether the latter is sufficient to overcome theprivate interest of one party in holding the other to his bargain.^[3] After all, the choice of court in the commercial agreement will have been part of the contractual bargain, and there is certainly no general jurisdiction in English courts to rewrite the terms of a contract which is not impeachable on grounds of misrepresentation, duress, and so on. The defendant who argues that pacta sunt servanda makes a case which some will consider overwhelming.

For all that, the courts have duties which go beyond the issue presented by the Us between claimant and defendant. And as a matter of principle, the legal position of litigants who are not party to a jurisdiction agreement should not be significantly affected by a contract made between others. In some cases, judicial case management may provide the best reconciliation of conflicting legal policies. And as to the principle that pacta sunt servanda, it is worth remembering that the refusal of one form of specific relief is not the same thing as absolving the breaching party of all the consequences of his breach, or the wrongdoer of all the consequences of his wrong. It is all a matter of balance.

• [1] The more the courts show their willingness to uphold such clauses, the less incentive there will be for a claimant to try to break his contact and provoke litigation whose cost he will ultimately have to bear. And see the US Supreme Court in Carnival Cruise Lines Inc v Shute 111 S Ct 1522 (1991). For the possibility that a court may be justified in giving slightly less weight to a jurisdiction agreement in a trust instrument, see Crociani v Crociani [2014] UKPC 40; Ivanishvili v Credit Suisse Trust Ltd [2020] SGCA 62. 2 It is certainly not intended to suggest that these reactions are in all cases ill-founded. 3 Austrian Lloyd Steamship Co v Gresham Life Assurance Society Ltd [1903] 1 KB 249. 4 Kirchner v Gruban [1909] 1 Ch 413. 5 The Cap Blanco [1913] P 130. 6 The Media (1931) 41 LI LR 80. 7 Ellinger v Guinness Mahon & Co [1939] 4 All ER 16. 8 The Fehmarn [1959] 1 WLR 159. But cf The Kislovodsk [1980] 1 Lloyd’s Rep 183. 9 The Adolf Warski [1976] 1 Lloyd’s Rep 107. 10 The El Amria [1981] 2 Lloyd’s Rep 119; The Nile Rhapsody [1994] 1 Lloyd’s Rep 382; The Al Battani [1993] 2 Lloyd’s Rep 219. 11 It was occasionally said, in a quite unsatisfactory way, that the contract-breaker may be able to get away with it because equity’s remedies are discretionary: cf Citi-March Ltd v Neptune Orient Lines Ltd [1996] 2 All ER 545. 12 [2001] UKHL 64, [2002] 1 Lloyd’s Rep 425. 13 Certainly, if he now seeks to complain about the law and procedure of the court he agreed to, he should not be given any sympathy. 14 [1981] 2 Lloyd's Rep 119. See also Evans Marshall v Bertoia [1973] 1 WLR 349, where a similar result had been reached. 15 Against the port authority; the actual case was against the carrier. The same reasoning led to the same result in Citi-March Ltd v Neptune Orient Lines Ltd [1996] 2 All ER 545.
• [2] [1994] 2 AC 324. But cf Citi-March Ltdv Neptune Orient Lines Ltd [ 1996] 2 All ER 545. In the light of Baghlaf Al Zafer v Pakistan National Shipping Co [1998] 2 Lloyd’s Rep 229 and Pirelli Cables Ltd v United Thai Shipping Corp Ltd [2000] 1 Lloyd's Rep 663 it may be reasonable not to save limitation in the foreign court if it has jurisdiction only by reason of an agreement which is void as a matter of English law (in casu, under the Hague-Visby Rules). 2 Ellinger v Guinness Mahon <£ Co [1939] 4 All ER 16 (Germany, but which went Nazi); Carvalho v Hull Blyth (Angola) Ltd [ 1979] 1 WLR 1228 (Portuguese Angola, but which went revolutionary). 3 [2001] UKHL 64, [2002] 1 Lloyd’s Rep 425. 4 It is to be noted that though this is true for jurisdiction agreements enforced at common law, it is not true for arbitration agreements for which Arbitration Act 1996, Section 9, makes a stay of proceedings mandatory, even if this separates part of a larger dispute from the other part. 5 [2000] 1 Lloyd's Rep 579, 590-591 (for those not familiar with Winnie-the-Pooh, it was Rabbit who had a large number of friends-and-relations). But the House of Lords did not share this analysis of the proceedings and therefore saw no reason to disregard the effect of the doctrine of privity: [2001] UKHL 64, [2002] 1 Lloyd’s Rep 425. 6 The point being that not all those who may be involved in the factual dispute will be party to, and liable to be affected by, the agreement. For a case of multipartite litigation involving jurisdiction clauses for England and for Hong Kong (where the court elected to uphold the English and accordingly not to enforce the Hong Kong one) see Sinochem International Oil (London) Co Ltd v Mobil Sales and Supply Corp [2000] 1 Lloyd’s Rep 670, 680.
• [3] Republic of Angola v Perfectbit Ltd [2018] EWHC 965 (Comm) (service out on two defendants upheld despite jurisdiction agreement for Angola, as claim against the other seven conspirators was one for which England was the proper place). 2 It is surely irrelevant that there may have been little actual bargaining, for the theory is that the parties reached agreement by such means as seemed sufficient to them. 3 As it was put by Sir Owen Dixon in Huddart Parker Ltd v The Ship 'Mill Hili' (1950) 81 CLR 502, 509, the court should exercise a ‘strong bias in favour of maintaining the special bargain’. 4 It led the House of Lords to overcome the provisions of the jurisdiction agreement in Donohue v Armco Inc [2001] UKHL 64, [2002] 1 Lloyd’s Rep 425. But for the very different approach where the Lugano Convention is concerned, where no judicial flexibility whatever is allowed for, see Hough v P&O Containers Ltd [1999] QB 834. Likewise for arbitration, where there is no real discretion to refuse effect to an agreement on arbitration on grounds of wider dispute management: Arbitration Act 1996, Section 9. 5 Dawnus Sierra Leone Ltd v Timis Mining Corp Ltd [2016] EWHC 236 (TCC). 6 The same will be true, mutatis mutandis, if an anti-suit injunction is sought, on which see further below. Chapter 28. 7 Though the contrary may be shown. 8 Standard Steamship Owners' P & I Association (Bermuda) Ltd v Gann [1992] 2 Lloyd’s Rep 528. In BP Pic v Aon Ltd [2005] EWHC 2554 (Comm), [2006] 1 Lloyd's Rep 549 it was held that there was no breach involved in applying to serve out where there was a non-exclusive jurisdiction agreement for Illinois, for there were at the date of the application no proceedings pending in the Illinois court; but that in all the circumstances it was not possible to show that England was clearly the more appropriate forum for the trial of the issues. See also Winnetka Trading Corp v Julius Baer International Ltd [2008] EWHC 3146 (Ch), [2009] Bus LR 1006, where the narrowing of the distinction between exclusive and non-exclusive jurisdiction clauses is noted (non-exclusive jurisdiction for Guernsey; stay of English