14 July 2015

A well drafted contract will contain both a governing law and governing jurisdiction clause. However, difficulties can arise when parties enter into two (or more) separate contracts in which these clauses conflict.

When looking at the construction of arbitration clauses, the case of Fiona Trust & Holding Corporation v Primalov [2007] UKHL 40 is highly influential. This case established that when construing an arbitration clause, there is a strong presumption that commercial parties intended for all disputes arising out of the relationship between the parties to be decided by the same tribunal.

However, the Fiona Trust presumption does not extend to the situation where there are two or more express choices of law or jurisdiction contained in different agreements.

The recent Court of Appeal decision in Trust Risk Group SPA v Amtrust Europe Ltd [2015] EWCA Civ 437 builds on the principles set out in Fiona Trust, and has provided some important clarification on the approach the English Courts will take when faced with conflicting express jurisdictional clauses in connected agreements.

This case involved two separate agreements entered into by the parties. The parties first entered into a Terms of Business Agreement (‘ToBA’) with an English law and jurisdiction clause, and 6 months later entered into a Framework Agreement with an Italian law and jurisdiction clause, to which the ToBA was appended as a schedule. When a dispute concerning the ToBA arose, the claimant brought proceedings in an English court for a breach of the ToBA. The defendant challenged the jurisdiction of the English Court, contending that the jurisdictional provisions of the Framework Agreement applied instead.

The key question for the Court to decide was whether the jurisdictional clause in the Framework Agreement overrode those in the ToBA. The main judgement, given by Beatson LJ in the Court of Appeal, outlined the approach of the English Court in this situation, which is to undertake “a careful and commercially-minded construction of the agreements providing for the resolution of disputes.”

The Court examined whether the Italian jurisdiction and choice of law terms in the Framework Agreement had superseded those in the ToBA, and ultimately concluded after close analysis of the wording of the Framework Agreement and its commercial background, that the jurisdictional provisions of the ToBA had not been superseded by those of the Framework Agreement. Accordingly, as the dispute had arisen under the ToBA, English Courts had jurisdiction.

It is clear then that the Fiona Trust presumption will apply when there are connected agreements containing no express governing law or jurisdiction clause. However, when connected agreements make different express provisions for jurisdiction and governing law, the Court will analyse the contractual matrix and commercial nature of the agreements and seek to establish which agreement the dispute actually arose under. It is on that basis that the particular arbitration provisions that apply will be determined.

The author, James Pheasant, is a senior associate in our Disputes and Litigation team.

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