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    12:16 AM Yip Man (Assistant Professor, Singapore Management University)

    Contractual Construction of Jurisdiction Agreements: Exclusive or Non-Exclusive - Hin-Pro International Logistics Limited v Compania Sud Americana De Vapores S.A. [2015] EWCA Civ 401

        

    The English Court of Appeal’s decision in Hin-Pro International Logistics Limited v Compania Sud Americana De Vapores S.A. [2015] EWCA Civ 401 is a case of note to Singapore as it took on the complex task of construing the effect of a jurisdiction agreement contained in a standard form bill of lading. The detailed contractual analysis has many points of reflection for Singapore law, given that the Singapore Court of Appeal has recently considered a contractual construction approach to jurisdiction agreements. 

    Singapore’s approach: no bright-line division between exclusive and non-exclusive jurisdiction agreements 

    “Strong cause” or Spiliada test?

    By conventional wisdom, most textbooks and courts tend to discuss the subject of jurisdiction agreements by simplistically dividing them into two categories: (a) an exclusive jurisdiction agreement; and (b) a non-exclusive jurisdiction agreement. An exclusive jurisdiction agreement is in essence an agreement between parties that they will only submit their disputes (falling within the scope of the clause) to the contractual forum and nowhere else. Bringing proceedings in another forum amounts to a breach of contract. Therefore, where the plaintiff has brought the dispute to the Singapore courts in accordance with the exclusive jurisdiction agreement, the defendant who wishes to litigate elsewhere must show “strong cause” amounting to exceptional circumstances to justify the breach of contract in order to succeed in his stay of proceedings application. The “strong cause” test looks beyond the foreseeable convenience factors as these are taken to be within the parties’ contemplation in agreeing on the choice of dispute forum. The test requires a high threshold to be met and is generally focused on unforeseeable factors and the ends of justice. 

    Where a non-exclusive jurisdiction agreement is concerned, the court applies the familiar Spiliada test (propounded by the House of Lords in Spiliada Maritime Corp v Cansulex Ltd [1987] AC 460). It has been clarified by the Singapore Court of Appeal in Orchard Capital I Ltd v Ravindra Kumar Jhunjhunwala [2012] 2 SLR 519 that the jurisdiction agreement is one of the factors to be considered in the Spiliada test as to whether the contractual forum should exercise its jurisdiction. The precise weight to be ascribed to the jurisdiction agreement in this exercise would depend on the circumstances of the case at hand (at [25]). In coming to this view, the Court of Appeal was very much persuaded by Professor Yeo Tiong Min’s sophisticated analysis in  “The Contractual Basis of the Enforcement of Exclusive and Non-Exclusive Choice of Court Agreements” (2005) 17 SAcLJ 306. 

    Contractual construction 

    Professor Yeo’s other strand of analysis in relation to jurisdiction agreements was also broadly approved, though with some reservations, by the Court of Appeal. In essence, Professor Yeo argued in the article that there is no real distinction between exclusive jurisdiction agreements and non-exclusive jurisdiction agreements as a matter of principle, although the divide has some practical utility. In his view, the content of the agreement between the parties is a matter of contractual construction in accordance with the proper law of the contract. Whilst the Court of Appeal found Yeo’s thesis persuasive, it also recognised that it is not without difficulties, namely, a contractual approach might be impractical to be applied at an interlocutory stage and that it could lead to uncertainty (at [26]). Accordingly, it was not ready to “whole-heartedly” accept the approach recommended by Professor Yeo (at [26]), especially since neither party to the dispute referred to Professor Yeo’s arguments. Nevertheless, on the assumption that Professor Yeo’s approach was to be fully adopted, the Court of Appeal said that the parties’ intention is to be gathered from the contractual language and if Singapore law is the proper law of the contract, the intention is to be determined by reference to the context (at [27]). And on the contractual analysis, the Court of Appeal said that the argument for an “exclusive” characterisation would fail as well. 

    In the later case of Abdul Rashid bin Abdul Manaf v Hii Yii Ann [2014] 4 SLR 1042, the High Court said (at [45]-[47]) that the labels of “exclusive” and “non-exclusive” will be ascribed their ordinary meanings, unless they are not supported by the context in which they are used or if they are not consistent with the rest of the contractual provisions.

    Notably, in Orchard Capital, the Court of Appeal has advised that counsel should “pay close attention” to Professor Yeo’s article in a dispute concerning jurisdiction agreements (at [3]). To fully grasp the contractual analysis of the jurisdiction agreement, one would also do well to consider decisions adopting a predominantly contractual approach to such clauses. To this end, the English Court of Appeal judgment in Hin-Pro International Logistics Limited is one such decision. 

    Hin-Pro International Logistics Limited: contractual construction 

    The jurisdiction agreement in Hin-Pro International Logistics Limited is a standard term contained in a standard form bill of lading provided by Compania Sud Americana de Vapores S.A. (“CSAV”). The relevant clause provides as follows:

    23    Law and jurisdiction 

    This Bill of Lading and any claim or dispute arising hereunder shall be subject to English law and the jurisdiction of the English High Court of Justice in London. If, notwithstanding the foregoing, any proceedings are commenced in another jurisdiction, such proceedings shall be referred to ordinary courts of law. In the case of Chile, arbitrators shall not be competent to deal with any such dispute and proceedings shall be referred to the Chilean Ordinary Courts. 

    Hin-Pro International Logistics Ltd (“Hin-Pro”), a freight forwarder registered in Hong Kong, brought proceedings against CSAV in the Chinese courts under five bills of lading (containing Clause 23 above) covering the carriage of cargo from China to Venezuela, claiming that the cargo was released without the production of the original bills. The nub of the appeal before the English Court of Appeal is whether Clause 23 is an exclusive jurisdiction clause. Getting to this particular characterisation issue involved answering other questions but they need not be addressed in present discussion. 

    It is noteworthy that Clause 23 is not labeled “exclusive” or “non-exclusive”. What is apparent is that the drafting of Clause 23 envisages proceedings might be brought in courts other than the English High Court. Indeed, these were Hin-Pro’s arguments in favour of a “non-exclusive” characterisation. Yet, the English Court of Appeal held that Clause 23 is to be construed as an exclusive jurisdiction agreement. 

    The Court said that the bill of ladings, as with all commercial contracts, are to be interpreted “in the light of the facts which were known to the original parties to it or which were reasonably available to them in the situation in which they were at the time of the contract”, citing Rainy Sky v Kookmin [2011] 1 WLR 2900 at [14]. It then canvassed the various factors that might or might not impact on the interpretation of Clause 23, and these are set out below with some brief observations and comments. 

    Language of the contract 

    The bill of lading contract is in English. But the Court did not think that this fact should affect the interpretation, rejecting Hin Pro’s argument to the contrary that the contract would be issued to companies whose staff’s first language might not be English and these persons might understand the terms of the contract differently. It was explained (at [58]) that Hin Pro’s submission, if accepted, would involve a difficult exercise of determining “which first language the reasonable man is to be taken as speaking” and the interpretation of the same contract would vary depending on the “non-English first language chosen”. The Court rightly said that in agreeing to a contract written in English, “the parties must be taken to have agreed that it shall be interpreted with all the nuances of the English language and in the way that a speaker whose first or only language was English would do so”. 

    This must be right. Commercial parties are expected to undertake costs to have the terms of the contract reviewed by lawyers with the necessary legal and language competence, and if they fail to do so, they proceed to sign the contract at their own risk. 

    Contractual language and structure 

    The Court then considered the language of Clause 23. Considerable weight was ascribed to the “imperative and directory” words of “shall be subject to” which point towards the clause being an exclusive jurisdiction agreement. The Court was of the view that such an interpretation is consistent with English authorities.  

    This is a familiar canon of construction. That being the case, the language used is merely a factor in the construction exercise, albeit an important one. Nevertheless, one must be careful to distinguish between words that are indicative of parties’ intention and words that are less indicative, as well as what is the precise intention that the words are indicative of. The words “shall be subject to” in particular are not entirely indicative of the intended effect of the clause because all they mean is that parties agreed to submit to the jurisdiction of the English High Court. After all, it is very common for parties to provide that they “shall submit to the non-exclusive jurisdiction of Court X”.  The choice of the word “shall” is simply a convention of drafting of such clauses. 

    As for the phrase “If notwithstanding the foregoing, any proceedings are commenced in another jurisdiction”, the Court interpreted it as meaning “If notwithstanding the parties’ agreement that all claims or disputes arising under the bill of lading shall be determined in accordance with English law and by the English High Court” (at [67]).  Quite clearly, this interpretation is one that is arrived at due to other considerations, as the language itself does not mandate it. 

    Finally, the Court had to reconcile the provision for the event of litigation in other jurisdictions in the second and third sentences of Clause 23 with an exclusive jurisdiction agreement characterisation. The provision, it was said, was to cater for litigation being brought in jurisdictions which would render the first sentence ineffective or do not recognise the effect of an exclusive jurisdiction agreement as understood by the common law jurisdictions (at [68]). 

    In other words, the Court read the second and third sentences as a provision for the contingency of a party acting in breach of their agreement to litigate only in England by bringing proceedings in a court which will disregard their agreement. This is not an implausible interpretation but parties who wish to make provision for such kinds of contingency are advised to spell out the intended effect as clearly as possible. The Court’s interpretation in this case is probably reinforced by the fact that the bill of lading is governed by English law and English courts are best placed to apply English law. 

    Context and Commercial Sense 

    The Court took note that this is a contract between corporations engaged in international trade, as opposed to a consumer contract or an insurance contract (at [55]-[56]). Where it is a consumer contract, there may be concerns of consumer protection that are translated into certain interpretative techniques or tendency. As for an insurance contract, it is observed that it is more likely that the assured is the party who is suing, and this “‘very limited’ mutuality of the clause in practice” is a significant factor (at [56]).  

    The Court also took note of the fact that the standard form bill of lading contract in the present case is of widespread use and is issued to other parties concerning CSAV’s other shipments to different parts of the world (at [65]). Accordingly, many courts could have jurisdiction over disputes arising out of or in connection with the bill of lading, and “it makes little commercial sense to add England as an optional additional court, but without any obligation on either party to litigate there” (at [64]). This is notwithstanding the Court’s acceptance that a non-exclusive English jurisdiction agreement is “not wholly worthless or otiose even where there is express provision of English law” (at [63]).  

    That the standard form of contract would be used with many contracting parties in many parts of the world is certainly a relevant factor. But whether this should suggest that the jurisdiction agreement in question is exclusive or non-exclusive in character is dependent on the circumstances of the case. For instance, whether it would be advantageous for the party providing the standard form to have all disputes being brought in one country as opposed to having the option to sue in different jurisdictions, typically the home jurisdictions of the counter-party bearing in mind debt recovery/asset concentration considerations. Another relevant factor might be certainty in knowing where disputes will be brought. 

    Governing law 

    For the English courts, at least, where the contract provides for both English law and English jurisdiction, there is a tendency to read the jurisdiction agreement as being an exclusive one, unless there is provision to the contrary. As the Court in Hin-Pro International Logistics Limited said (at [66]):

    Third, there is obvious sense in making both English law and English jurisdiction mandatory. Whilst foreign courts may (but will not necessarily) apply English law if that is what the parties have agreed, England is the best forum for the application of its own law.

    The Court also thought that the tendency to construe such clauses as exclusive confirms that this is the likely view that reasonable businessman would take (at [78]). 

    The Court’s conclusion is supported by the fact that the standard form bill of lading contract is issued to many contracting parties from different jurisdictions, and there is always a risk that some of these foreign jurisdiction may not apply English law, thereby defeating the parties’ intention. This argument applies with less force in a case where the contract is only entered into with one party, especially where the alternative forum is identified and there is strong evidence suggesting that it will apply English law, albeit not with the same level of competence as the English court. 

    Contra proferentem rule? 

    Hin-Pro, in arguing for an exclusive jurisdiction agreement interpretation, also tried to rely on the contra proferentem rule but the Court did not think much assistance could be sought from it (at [69]). The rule states that the person who proposes the wording of the clause is assumed to have considered his own interests in the drafting and as such any ambiguity is to be resolved against him. The Court noted that there is authority saying that the rule is rarely of any assistance in the interpretation of commercial contracts, even though it may sometimes be applied in interpreting a standard form contract (At [69]-[70]). The Court further noted that the contra proferentem rule has not yet been invoked in the interpretation of jurisdiction agreements but did not say it ought not apply as a matter of principle (at [72]). 

    Carefully analysing the benefits brought by Clause 23, the Court reached the view that it “binds and benefits both parties in the same or, at any rate, a similar way” as its benefit is to provide certainty: the choice of a neutral forum that applies its own law (at [76]). This is especially evident in the present factual matrix because the same standard form contract is of widespread use. It is not at all easy to predict in advance whether it might be more advantageous for CSAV or the counter party in a particular type of dispute for the dispute to be brought in the English High Court (at [76]). 

    The Court’s reasoning is eminently sensible. But its conclusion does not foreclose the possibility of applying the rule in other cases where there is a clear advantage to one party but not the other in having the disputes litigated in the contractually chosen forum. 

    Relevance of relevant statutory provisions or international instruments  

    The Court also considered the significance of Article 21(1)(d) of the Hamburg Rules which renders the first sentence of Clause 23 void to the extent that it provides for exclusivity. It was thus contended by Hin-Pro that the Court ought to construe Clause 23 in a way that is consistent with Article 21(1)(d), that is to say, as a non-exclusive jurisdiction agreement. The Court rejected the submission, stating that its effect on a part of Clause 23 has no bearing on how it is to be interpreted in English law. 

    The Court also briefly highlighted the issue of whether the civil procedure on service out of the jurisdiction ought to affect the interpretation of Clause 23. Whilst considering the matter not beyond debate, it also thought that it would be “unrealistic to regard the knowledge of both parties to these bill of lading contracts as extending the provision of the [UK Civil Procedure Rules]” (at [59]).  

    Nevertheless, the English Court of Appeal’s particular views in this case notwithstanding, the general position is that courts do endeavor to interpret contracts in a way that ensures its validity. As such, it is not in vain in other cases to argue the significance of any prohibiting statutory rule, in particular, if evidence could be adduced to show that legal advice has been sought.

    Conclusion 

    In sum, therefore, all circumstances of the case will be considered and the factors are looked at in the round. A fight on jurisdiction is often the main battle between the parties in a dispute. It is thus imperative that the approach and principles regarding the determination of the effect of a jurisdiction agreement are clarified.  

    * This blog entry may be cited as Yip Man, "Contractual Construction of Jurisdiction Agreements: Exclusive or Non-Exclusive - Hin-Pro International Logistics Limited v Compania Sud Americana De Vapores S.A. [2015] EWCA Civ 401", Singapore Law Blog (8 May 2015) (http://www.singaporelawblog.sg/blog/article/109)

    ** A PDF version of this entry may be downloaded here

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