Two recent decisions of the English High Court have considered jurisdiction clauses in contracts

Credit Suisse First Boston (Europe) Ltd v Seagate Trading Co Ltd [1999] 1 All ER (Comm) 261; [1999] 1 Lloyd's Rep 784
In this case the Court concluded that an exclusive jurisdiction clause might not be given effect to if there is a question as to whether the contract in which that clause is contained was validly entered into in the first place. This case arose out of a complex series of facts, at the heart of which was Seagate's purchase of Russian bonds from Credit Suisse. Soon after the purchase agreement was entered into, Seagate commenced proceedings against Credit Suisse alleging that it had entered into the agreement on the basis that it contained a hedge against devaluation of the Russian currency. In fact, this was a hedge in name only and did not provide the protection anticipated. Seagate sought injunctive relief in the Californian Courts on the basis of fraud, breach of fiduciary duty, negligence, breach of contract, rectification, and other related causes of action. Its essential complaint was that a trade confirmation Credit Suisse had induced it to sign did not reflect the bargain agreed to orally.

One of the terms of the trade confirmation was a clause conferring on the Courts of England exclusive jurisdiction to settle any disputes arising out of the agreement. On the basis of this clause, Credit Suisse sought an injunction in the English High Court against Seagate continuing or taking any further proceedings in the Californian Courts. The Judge agreed that the clause in question did operate as an exclusive jurisdiction clause. However he did not grant the injunction sought.

The basis for his decision was that the very dispute between the parties was whether there had been a valid agreement on the terms contained in the trade confirmation. Thus, Seagate in essence was arguing that as a result of Credit Suisse's fraud, negligence, breach of fiduciary duty, and/or other factors there had never been a meeting of the minds on the terms of the trade confirmation. Since the trade confirmation included the exclusive jurisdiction clause, one of the very issues requiring resolution was whether Seagate was subject to that clause at all.

In addition, the Judge noted that the parties had entered into a "Stand Still" agreement following the commencement of the Californian proceedings, the general tenor of which was that no party would take any further steps prior to the Californian Court's decision on the interim injunction question. The Judge thought that an English Court should be reluctant to grant an injunction that seemed to run against the spirit of the Stand Still agreement. The Judge therefore concluded that injunctive relief preventing Seagate from proceeding in the Californian Courts should be refused.

Credit Suisse First Boston (Europe) Ltd v MLC (Bermuda) Ltd [1999] 1 All ER (Comm) 237; [1999] 1 Lloyd's Rep 767
In another case the effect of an exclusive jurisdiction clause has also been considered. MLC had purchased two sets of Russian bonds from Credit Suisse Europe through Credit Suisse US as agent. A third Credit Suisse company, Credit Suisse Switzerland, issued one of the sets of bonds. The purchase agreements contained a jurisdiction clause giving the Courts of England jurisdiction but leaving it open for Credit Suisse Europe to take proceedings in other jurisdictions. The purchase of the notes was financed by a repurchase transaction. The repurchase agreement included a jurisdiction clause that nominated England but did not limit the parties' rights to take proceedings in other jurisdictions. MLC had also entered into a customer agreement with Credit Suisse US. The customer agreement contained a New York law clause but no jurisdiction clause.

In August 1998 the Russian economy collapsed and the bonds became worthless. MLC failed to pay amounts owing under the repurchase agreement. Credit Suisse Europe requested Credit Suisse US to liquidate certain assets belonging to MLC and pay the money to Credit Suisse Europe. Credit Suisse Europe then commenced proceedings in England for the excess.
MLC commenced proceedings in New York against Credit Suisse US, Credit Suisse Europe, and Credit Suisse Switzerland. Credit Suisse Europe applied to the English Court for an anti-suit injunction against MLC's New York proceedings. MLC responded by requesting a stay of the English proceedings alleging violations of US securities law.

Justice Rix found that the jurisdiction clauses in the purchase agreements constituted an exclusive jurisdiction clause as far as MLC was concerned. The express option for Credit Suisse Europe to bring actions elsewhere was not available to MLC. Justice Rix therefore granted an injunction staying those parts of MLC's New York action that arose out of the purchase agreements.

While much of MLC's New York action was based upon the purchase agreements (and thus subject to the jurisdiction clause) Justice Rix found that MLC's claim was also founded upon the repurchase agreement. As the repurchase agreement did not contain an exclusive jurisdiction clause Justice Rix declined to grant an injunction against MLC's New York claim under the repurchase agreement. MLC's application for a stay in respect of Credit Suisse Europe's London claim was denied.

This is a general summary only and should not be taken as a substitute for specific legal advice.

Russell McVeagh, law firm
Web site: Russell McVeagh

March 2001