Choice of court agreements — the Hague Convention 2005 means what it says

It’s not often we get decided cases on the 2005 Hague Convention on Choice of Court Agreements. But the Irish High Court produced a helpful one last week, which practitioners on both sides of St George’s Channel would do well to bear in mind.

In Compagnie de Bauxite & d’Alumine De Dian Dian SA v GTLK Europe DAC [2023] IEHC 324 GTLK, a company controlled by the Russian state but registered in Ireland, had issued a demand guarantee for $20 million in favour of the plaintiffs CBA SA. The guarantee, stated to be governed by English law and subject to the exclusive jurisdiction of the English courts, was in respect of a contract by a Cypriot entity, POLA, to aid CBA in the shipment of quantities of bauxite from Guinea to an aluminium smelter in Limerick.

POLA allegedly fell down in its performance and CBA claimed under the guarantee. GTLK, by then sanctioned by the EU following the Ukrainian debacle, denied liability (predictably if somewhat quixotically, the guarantee being a demand bond), and did its best to play hard to get, pointing out smugly that in any case EU sanctions prohibited it from making any payment without a derogation from the Irish government.

Exasperated, CBA finally sued GTLK in Ireland, claiming payment and potentially a mandatory injunction ordering it to seek the necessary official derogation to enable it to meet any judgment. Faced with the tricky argument that the English jurisdiction clause brought the case directly within the Hague Convention which not only permitted but required the Irish courts to stand aside, CBA argued that enforcing this clause would give rise to manifest injustice within Article 6(c) of the Convention. Why, it said, should it be forced to sue in London and then seek to port its judgment to Dublin, where GTLK’s assets were? Why should it have to face the double uncertainty of whether an English court could issue a mandatory order to an Irish company to petition its own government in Dublin, and if it could whether any such order would be enforceable in Ireland? Was not the injustice was made worse by GTLK’s delay in making its position clear, coupled with CBA’s expenditure of considerable sums on Irish lawyers?

Twomey J was having none of it. He essentially accepted the views of the Hartley and Dogauchi report produced by the HCCH, that “manifest injustice” was a very restrictive concept indeed, being limited to cases such as fraud, corrupt courts and genuine inability of a party to access the chosen forum. Here the essential complaint of CBA was merely that they found it thoroughly inconvenient to have to abide by the clause thay had agreed to: but neither this, nor the fact that there had been some little delay by GTLK and expenditure by CBA, came close to showing manifest injustice.

This must, with respect, be right. The message coming from the Convention is that, very exceptional cases aside, a person who has agreed to exclusive jurisdiction has made his bed and has to lie in it: to this extent, the rule under Hague is a good deal stricter than that at common law, under which a stay of local proceedings may be refused if there are strong reasons to do so (e.g. The El Amria [1981] 2 Lloyd’s Rep. 119 and Citi-March Ltd v Neptune Orient Lines Ltd [1996] 1 W.L.R. 1367). Any reinforcement of this message is a good thing, and will one suspects be welcomed by business.

Two other minor points are worth noting.

First, what happens about the case where a defendant genuinely leads a claimant to believe that he will not invoke the Convention and a claimant then irrevocably seriously relies on this? The Convention does not include estoppel within the Art.6 exceptions to the duty of a national court other than the chosen court to decline jurisdiction. It is to be hoped, however, that English and Irish courts will accept that where estoppel would otherwise be made out, then Article 6(c) will encompass it.

Secondly, on an unconnected issue Twomey J seemed to accept the possibility of a mandatory order on a sanctioned defendant against whom judgment was given to take at least some steps to attempt to lift the sanctions. This would certainly be a useful remedy against stonewalling by a sanctioned entity, and it seems unobjectionable as a matter of principle. Not only was this apparently recognised explicitly in the Irish legislation effectuating the 2005 Convention (see s.9 of the Choice of Court (Hague Convention) Act, 2015), but in England it seems well within the scope and intention of s.37(1) of the Senior Courts Act 1981.

In short, a useful little judgment which English and Irish lawyers alike would be well advised to keep a copy of on their hard disks.

Published by

Professor Andrew Tettenborn

Professor Andrew Tettenborn joined Swansea Law School and the Institute of International Shipping and Trade Law in 2010 having previously taught at the universities of Exeter (Bracton Professor of Law 1996-2010), Nottingham and Cambridge. Professor Tettenborn is a well-known scholar both in common law and continental jurisdictions. He has held visiting positions at Melbourne University, the University of Connecticut and at Case Law School, Cheveland, Ohio. He is author and co-author of books on torts, damages and maritime law, and of numerous articles and chapters on aspects of common law, commercial law and restitution.

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