Commercial Court In England Finds Forum Non Conveniens Waiver Clause Does Not Necessarily Preclude Stay On Grounds Of Forum Non Conveniens.

7 July, 2015

The Commercial Court has held that a non-exclusive jurisdiction clause combined with a forum non conveniens (FNC) waiver clause does not preclude the court from granting a stay of English proceedings in favour of another jurisdiction. The court will however only grant a stay if there are very strong or exceptional grounds which were unforeseen and unforeseeable at the time the agreement was made: Standard Chartered Bank (Hong Kong) Limited and another v Independent Power Tanzania Limited and others [2015] EWHC 1640 (Comm).

 

An FNC waiver clause is essentially an agreement that a defendant will not argue that proceedings commenced in the chosen court or courts are inconvenient and that there is some other more suitable court (the forum conveniens) in which the case should be heard. The question in the present case was what the court’s approach should be if, despite such a clause, the defendant seeks a stay of the English proceedings arguing another court is the appropriate forum to hear the claim.

 

The Court of Appeal in National Westminster Bank Plc v Utrecht-America Finance Co [2001] CLC 1372 took the view that the court was precluded from granting a stay in these circumstances, but that aspect of the decision was not binding and a number of subsequent first instance decisions have held there remains a discretion to stay. Flaux J in the present case followed those later authorities.

 

Although it appears the possibility of a stay is not precluded, the circumstances in which a stay will be ordered will be very rare. On the facts of this case, the stay was refused.

 

Background

 

The facts are complex but, in summary, the claimants brought proceedings against the defendants for breaches of, and sums due under, finance documents. All of the documents contained non-exclusive English jurisdiction clauses with FNC waivers and an express acceptance of the possibility of concurrent proceedings in different jurisdictions. By way of example, the Facility Agreement provided:

 

(B) Courts of England and Malaysia: For the benefit of the Arranging Banks, the Facility Agent and each Bank, all parties irrevocably agree that the courts of England and Malaysia are to have jurisdiction to settle any disputes which may arise out of or in connection with this Agreement and that, accordingly, any legal action or proceedings arising out of or in connection with this Agreement (“Proceedings”) may be brought in those courts and each party irrevocably submits to the jurisdiction of those courts.

 

(C) Other Competent Jurisdiction: Nothing in this Clause 33 shall limit the right of any party to take Proceedings against any other party in any other court of competent jurisdiction nor shall the taking of Proceedings in one or more jurisdictions preclude a party from taking Proceedings in any other jurisdiction, whether concurrently or not.

 

(D) Venue: Each party irrevocably waives any objection which it may have to the laying of the venue of any Proceedings in any court referred to in this Clause 33 and any claim that any such Proceedings have been brought in an inconvenient forum.

 

The defendants sought to stay the English proceedings on the basis that Tanzania was the most convenient forum to determine the dispute, notwithstanding the FNC waiver provided for in clause (D).

 

The claimants argued that the FNC waiver clause meant the court was precluded from staying the proceedings. Case law made clear that, absent such a clause, strong reasons not foreseeable at the time of the agreement were required to displace jurisdiction taken pursuant to a non-exclusive jurisdiction clause. So unless a stay was precluded by the FNC waiver clause, it would have no effect. The claimants also relied on the comments made by Lord Justice Clarke in National Westminster Bank Plc v Utrecht-America Finance Co [2001] CLC 1372 to the effect that the combination of a non-exclusive English jurisdiction clause and an FNC waiver precluded completely a stay on forum non conveniens grounds.

 

The defendants’ counter argument was that even where there is an exclusive jurisdiction clause in favour of the English court, this does not preclude completely an application for a stay (Donohue v Armco Inc [2001] UKHL 64), so the position should be no better where there is an FNC waiver.

 

Decision

 

Flaux J concluded after a review of the authorities that the comments made by Lord Justice Clarke in the National Westminster Bank case were obiter and observed that subsequent first instance decisions had not followed Lord Clarke’s approach.

 

The judge agreed with the first instance decisions, and in particular the analysis of Burton J in Deutsche Bank AG v Sebastian Holdings Inc [2009] EWHC 3069 (Comm). He held that if very strong or exceptional grounds for granting a stay are demonstrated, the court may in an appropriate case grant a stay, provided that the grounds in question can properly be described as unforeseen and unforeseeable at the time the agreement was made. In other words, the bargain which the defendant makes in entering a contract with an FNC waiver is that he will not seek to argue that England is not an appropriate forum in relation to forum non conveniens grounds which were foreseeable at the time the agreement was made.

 

On the facts, there were numerous connections with Tanzania. The finance had been provided to build and operate a power plant there and proceedings between various of the parties had been before the Tanzanian courts for the last 7 years or so. The judge held, however, that those factors had little force as they were all foreseeable at the time of contracting. As regards the argument that the lawyers and judges in Tanzania had built up a body of experience during the litigation, this was not significant as the proceedings had so far just been concerned with interlocutory matters. It was also no answer to say the claimants had taken part in the Tanzanian proceedings for a number of years, as parallel proceedings were contemplated and permitted by the jurisdiction clause.