In the recent decision of Terre Neuve v Yewdale the English High Court considered applications by certain defendants challenging the Court’s jurisdiction to hear claims against them. The proceedings concerned the alleged misappropriation of a sum of €10.6 million paid by Terre Neuve to Yewdale and allegedly misapplied with the participation of the other defendants pursuant to a tax optimisation scheme.
The English court’s approach to construing jurisdiction clauses was authoritatively set out by the House of Lords in Fiona Trust & Holding Corp v Privalov (which has been followed by Courts in the Cayman Islands).
The English High Court set out important guidance on the Fiona Trust principle.
- Lord Hoffman held in Fiona Trust that the wording of jurisdiction clauses should be given a broad or generous interpretation based on the presumption that rational businesspeople are likely to have intended that all questions which arise out of the relationship which they have entered into or purported to enter into, are to be submitted to the same forum.
- The “relationship” between the parties is the relationship which arises from the contract entered into by them containing the jurisdiction clause.
- If the parties have confidence in their chosen jurisdiction for one purpose, they should have it for other purposes, where those purposes arise from the same contractual relationship, but not where a dispute merely arises between the same parties but is unrelated to the underlying contract.
As to the extended Fiona Trust principle, the Court noted:
- The generous interpretation to be given to jurisdictional clauses has been extended to cover multi-contract disputes. A jurisdiction agreement in one contract may on its proper construction, extend to a claim that is made under another contract where both contracts are part of an overall package (for example Sapinda Invest v Altera).
- The extension must be based on the construction of the particular jurisdiction clause, not on any implication or implied incorporation of the jurisdiction clause.
- The extension normally applies where the contracts are interdependent or concluded at the same time. A party seeking to rely on a subsequently agreed jurisdiction agreement, in a separate contract, is likely to face an uphill struggle.
The Court found that the claims did not fall within the scope of any of the jurisdiction clauses in the written agreements, and accordingly dismissed the jurisdictional challenges. The decision provides a useful summary of principles relevant to jurisdictional challenges.