Damages for breach of a jurisdiction agreement: principle

The modern law starts with Union Discount Co v Zoller. An investor brought proceedings before an American court. The defendant company challenged the jurisdiction of the American court by reference to an exclusive jurisdiction agreement for the English courts. The American court held that the agreement on jurisdiction was valid and binding, and dismissed the proceedings, but its procedural law meant that it could not award costs against the investor. The company, substantially out of pocket as a result of the breach, sued the investor for damages before the English courts. When the investor applied to have the claim struck out, on the basis, admittedly correct, that English domestic law precluded a civil claim for damages in respect of unrecovered costs, the application was dismissed in terms which made it pretty clear that, as far as the Court of Appeal was concerned, the claim was so well founded that it could have given summary judgment (with damages to be assessed) in the claimant’s favour.

The decision to award damages could not be said to subvert or undermine, still less contradict, the American judgment in the company’s favour: it built on it, and drew further consequences from it. In Donohue v Armco Inc, the concession made by counsel and accepted by the court meant that there was no need to test the limits of the principle that breach of a jurisdiction clause gave a cause of action for damages. The case was one in which there was a contractual right not to be sued in the United States, which derived from a valid and binding promise not to bring proceedings elsewhere than in an English court. Subject to its being shown what loss had flowed from its breach, it was accepted by counsel and the court that if proceedings brought in the United States were not restrained by injunction, and if these US proceedings invoked or relied on claims and causes of action which could not have been maintained before an English court, damages for breach would be recoverable.

In AES Ust-Kamenogorsk Hydropower Plant LLP v Ust-Kamenogorsk Hydropower Plant JSC,'¹ the court issued an injunction to restrain a party to an arbitration from bringing proceedings in Kazakhstan on the basis that an arbitration agreement for London connoted a promise not to bring proceedings in any other forum; but the court observed, as though it were a matter of course, that the prima facie right to damages for bringing or continuing proceedings in breach of a jurisdiction agreement had been established in Donohue v Armco Inc and did not need to be elaborated. And in The Alexandras T^s the Supreme Court considered that the only real issue which arose when proceedings in England sought damages for breach of an exclusive jurisdiction agreement was whether the court had jurisdiction in the light of proceedings which had been brought before the Greek courts which had been (as it turned out, wrongly) said to raise the same cause of action and to have been started before the date on which the English court was seised of the claim. It does not appear to have struck any member of the court that there was any substantive problem in bringing such a claim for damages. And anyway, given what was decided in Ellerman Lines Ltd v Readf it could not possibly be said that these recent decisions took the law into territory which it had not previously occupied.

It is implicit in these decisions that the cause of action is a straightforward one for breach of contract. That seems right, even though the view has been expressed that a claim in tort for the unlawful interference with contractual rights would also be possible. There is no need for such an analysis in the context of a claim between contracting parties, but it is plausible that a non-contractual claim could be made against a non-party who may be accused of wrongfully interfering with the agreement on jurisdiction, say by funding or otherwise maintaining litigation by one of the parties to that agreement in a different court. Once it is accepted that a contractual jurisdiction agreement contains a perfectly ordinary commercial bargain, whatever else it may or may not do, there are no conceptual difficulties with proceedings

1
17 [2013] UK.SC 35, [2013] 1 WLR 1889, esp. at [25].
2
18 [2013] UK.SC 70, [2014] 1 Lloyd’s Rep 223. See esp. at [36] [39], [131]-[132], [135]; for whether it was affected by the Brussels I Regulation (or the Lugano Convention; correctly held not), see the resumed proceedings, reported as Starlight Shipping Co v Allianz Marine & Aviation Versicherungs AG [2014] EWCA Civ 1010 [2014] 2 Lloyd’s Rep 554; see also Barclays Bank Pic v Ente Nazionale di Previdenza ed Assistenza del Medici e degli Odontoiatri [2016] EWCA Civ 1261, [2017] 2 All ER (Comm) 432. It appears that the Spanish Supreme Court also agrees that damages for breach are recoverable and raise no issue of special principle: Soga USA Inc v D Angel Jesús (Decision 6/2009, 12 Jan 2009) [2009] Rep Jur 542. The fact that the German Supreme Court is now also of this opinion was noted above.
3
19 [1928] 2 KB 144.
4
20 Swissmarme Services SA v Gupta Coal India Pte /./¿/[2015] EWHC265 (Comm) [2015] 1 Lloyd’s Rep 456.
21 This view is preferred by Tham [2004] LMCLQ 46. That it can be defended reflects the proposition that English law has no problem with the cumulation or concurrency of causes of action. However, there may be problems with the damages element of a cause of action framed in tort: Magdeev v Tsvetkov [2019] EWHC 1557 (Comm); Singapore Shooting Association v Singapore Rifle Association [2019] SGCA 83.
22 Crescendo Maritime Co v Bank of Communications Co Ltd [2015] EWHC 3364 (Comm), [2016] 1 Lloyd’s Rep 414. See also AMT Futures Ltd v Marzillier et al GmbH [2017] UKSC 13, [2018] AC 439 (a case on jurisdiction, but the cause of action is illustrative of the point made here).
23 ‘No contract of this kind is complete without a clause which identifies the law to be applied and the methods to be used for the determination of disputes. Its purpose is to avoid the expense and delay of having to argue about these matters later. It is the kind of clause to which ordinary businessmen readily give their agreement so long as its general meaning is clear.’: Lord Hope in Fiona Trust & Holding Corp v Privalov [2007] UKHL 40, [2007] Bus LR 1719, [26].

D PROCEDURAL MATTERS RELATING TO JURISDICTION brought to give effect to it and to defend it from attack. It is possible that if this line of authority is developed, post hoc satellite litigation - litigating about where the claimant should (not) have litigated - may attract the disapproval of those who also disapprove of ante hoc litigation about where to litigate. But it has not happened yet; and a breach is a breach is a cause of action for damages.

If a promise to behave or act in a certain way, and not to act in others, has been bargained and paid for by contracting parties, a claim for damages to compensate for losses caused by its breach or unlawful subversion seems justified in terms of ordinary common law theory, never mind anything more sophisticated. A contractual promise which specifies where proceedings will or will not be instituted is, among other things, a promise by a party defining the things that he will or will not do; the steps which he will or will not take. There is no novelty in the conclusion that, if a party makes a promise as to his behaviour, then departs from it, and in so doing causes loss to the other, he is liable for breach of contract, and is therefore liable to pay damages. It is difficult to see that matters are, or need to be, any more complex than that.