DMC Category Rating: Confirmed

This case note is based on an Article in the July 2005 Edition of the ‘(Re)Insurance Bulletin’, published by the Reinsurance and Insurance teams at the international firm of lawyers, DLA Piper Rudnick Gray Cary. DLA Piper is an International Contributor to this website.

Background
The case concerned a shipment of goods from New York to Monrovia in Liberia, in March 2002, which gave rise to allegations of short delivery. The contract of carriage was evidenced by a bill of lading that included an exclusive English law and jurisdiction clause.

In August 2003, the cargo interests (the shippers and receivers or, rather, their insurers exercising rights of subrogation) started proceedings in Toronto, in breach of the jurisdiction clause. In September 2003, the shipowners issued proceedings in England for a declaration that there was no short delivery and for an injunction restraining the Canadian action. The English court gave permission to serve the proceedings in Canada and granted an anti-suit injunction.

Since the cargo interests themselves made no application challenging English jurisdiction, they could be treated as having no objection to the English court dealing with the case. But their insurers carried on with the Canadian proceedings, relying on section 46(1) of the Canadian Marine Liability Act 2001.

This provides that, in respect of a contract for the carriage of goods by water, a claimant can bring its action in the Canadian court if the defendant to the claim lives or has a place of business in Canada, or the contract was made in Canada. In this case, the shipowner was an English company with offices in Toronto and the bill of lading was issued in Toronto. Consequently, the Canadian Court had jurisdiction.

In April 2004, the English court granted the shipowners permission to join the insurers as defendants, on the grounds that they, as the real instigators of the proceedings in Canada, had procured the cargo interests to breach the jurisdiction agreement. The insurers challenged the English court's jurisdiction, but at first instance the judge upheld the jurisdiction clause over the Canadian statute. Insurers appealed.

Judgment
The Court of Appeal had no doubt that the insurers were necessary or proper parties to the proceedings. They had instigated the Canadian proceedings by virtue of their rights of subrogation. The rights to which they were subrogated were the contractual rights contained in or evidenced by the bill of lading. If the parties to that contract were bound by the jurisdiction clause, then so were the insurers.

The problem facing the court was that, although there was a perfectly good exclusive jurisdiction clause, there was also a perfectly good provision on the Canadian Act that clearly applied in these circumstances.

When a clash of jurisdiction of this sort arises, the English court will resolve it by reference to the proper law of the contract, which, in this case, was English law (Akai Pty Ltd v People's Insurance Co Ltd [1998] 1 Lloyd's Rep 90).

Normally, where the parties to a contract have agreed on jurisdiction, the English court will uphold that agreement, unless there are strong reasons for not doing so. But it has a residual discretion to decide whether it is appropriate for proceedings to be brought in England. The sort of factors the court will take into account are similar to those it considers in appropriate forum cases, such as where the evidence and witnesses are situated, what law governs the contract, whether the parties have any particular connection with a jurisdiction and so on (Donohue v Armco Inc [2001] UK HL 64).

If it decides to uphold the jurisdiction clause, the court may grant an anti-suit injunction restraining the foreign proceedings from continuing. The doctrine of comity (respect for the courts of other jurisdictions) means that it will be cautious in granting an injunction that could be perceived as an indirect interference with the foreign court. But it is likely to do so if the proceedings are oppressive or vexatious, such as where, for instance, they are brought in breach of a binding jurisdiction clause.

Within Europe, however, the recent case of Turner v Grovit (Case C - 159/02, [2004] 2 Lloyd's Rep 169) has made it impossible for the English court to grant an injunction to restrain proceedings in another state that is a party to the Jurisdiction Regulation, even if those proceedings are oppressive or vexatious. But Turner v Grovit does not establish a principle of universal comity. There is nothing to prevent the English court from granting an injunction in respect of proceedings in a court of a non-contracting state (Andrew Frederick Beazley v Horizon Offshore Contractors Inc [2004] EWHC 2555).

This was not a case to which the European Jurisdiction Regulation applied. The parties to the contract had expressly agreed that the English court would have exclusive jurisdiction over any dispute. The Court of Appeal could not see that upholding that agreement was in any way an attack on the legislature or the courts of Canada. It was merely restraining a party to a contract from doing something it had promised not to do.

What about the Canadian Act? The Court of Appeal agreed with the judge that the provision was an insufficiently strong ground for setting aside the jurisdiction agreement. Lord Justice Longmore commented: "the maintenance of the principle that parties should be free to choose the courts where their disputes are to be resolved must be of paramount importance and cannot be reduced to a mere legal aspiration".

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