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Essay: Jurisdiction clauses

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INTRODUCTION
In Conflict of Laws, Jurisdiction clauses are often used in contractual agreements. They are often basic, involving a simple agreement between the parties to submit to a particular country’s jurisdiction. There are two types of jurisdiction clauses – exclusive jurisdiction clause and non-exclusive jurisdiction clause.
In exclusive jurisdiction clause, the forum is stated explicitly and both the parties consent to move to only that forum if any dispute regarding the agreement arose. In non-exclusive clauses, though the forum is specified it isn’t exclusive and parties can initiate proceedings in case of dispute in another forum. Thus, there are lot of complexities associated with non-exclusive jurisdiction clauses as compared to exclusive jurisdiction clauses.
This project examines the various ways non-exclusive jurisdiction has been applied in Conflict of Laws, focussing on the landmark case of Orchard Capital v. Ravindra Kumar Jhujhunwala and examining its impact on the interpretation of ‘non-exclusive clauses’. The project further examines the stand-point of India on such clauses when contractual dispute involving parties from different countries have arisen.
CHAPTER 1: NON – EXCLUSIVE JURISDICTION – A BASIC UNDERSTANDING
In common law, the treatment of non exclusive jurisdiction clause has been less clear as compared to exclusive jurisdiction clauses. For exclusive clauses, the courts of Singapore and U.K. require the defendants to show a “strong cause” before granting a stay of proceedings. In relation to non-exclusive clauses, there seems to be two broad approaches in common law. First of that is application of the test laid down in the Spiliada case and treat the non-exclusive jurisdiction clause as a pointer towards the determination of a natural forum in stage one of the test. The second stage allows for proceedings to continue in the forum where it already started and if the plaintiff can show that he would be deprived of a legitimate, juridical or personal advantage if the proceeding is stayed.
The second approach relates to the application of the Spiliada test to exclude any factors that should have been foreseen at the time of entering into the non-exclusive jurisdiction. Sometimes this is referred to as he “modified Spiliada test”. The consequence of this is that a stricter test is applied to non-exclusive jurisdiction clauses as compared to exclusive jurisdiction clauses.
There also appears to be a third approached established in Singapore in the case of Bambang Sutrisno v. Bali International Finance. In this case, the Court of Appeal applied the “strong cause” test to a non-exclusive jurisdiction clause because the non-exclusive jurisdiction clause was coupled with an obligation on the part of the defendant to waive any objections on the ground of forum non conveniens, which made it appropriate to hold the defendant to standard of “strong cause”.
In the UBS AG v. Telesto Investments Ltd , the plaintiff sued the defendants for payments due under contracts entered with the defendants. The contract stated non-exclusive jurisdiction of Singapore courts. However, the defendants commenced proceedings in Australia for damages caused due to negligent misrepresentation. The plaintiff applied to restrain the proceedings in Australia while the defendant applied to stay the proceedings in Singapore. The stay application was denied and the anti-suit injunction was granted. On the appellate stage, the court applied the Spiliada test in relation to the application for stay where non-exclusive jurisdiction clause as a factor for identification of natural forum. This pointed to Singapore. One of the factors taken into consideration at the first stage was the alleged place of tort. On investigation, the court found that the place of occurrence of the tort was Singapore and hence the lex causae was Singapore. Moreover, the court also noted that if it was found that the tort had occurred in Australia, this would not be sufficient to displace Singapore as a natural forum as the tort action was seen as a more proper defence to the contractual claim rather than a claim in itself. In fact, there were valid policy concerns in allowing parties to displace a natural jurisdiction by counter-claiming in tort elsewhere, which is in substance a defence to the main action. This would result in forum shopping and should be discouraged by the courts. Thus, this was sufficient to dispose of the appeal against the assistant registrar’s decision not to grant a stay.
While there are conceptual differences between an exclusive and non-exclusive jurisdiction clause, in practice that is not always so. Sometimes, the language of a provision may be of non-exclusive clause, but when it is combined with an agreement not to object the choice of jurisdiction, it can give the provision an effect of an exclusive jurisdiction clause. Hence, it requires courts to look beyond its form. One such case highlighting this practice is Citibank NA v. Robert , the defendant had signed a guarantee on behalf of an Indonesian company in favour of the plaintiff bank which provided for non-exclusive jurisdiction of Indonesian courts. Further, it provided that the plaintiff could submit disputes arising out of guarantee to any court having jurisdiction over the assets of the defendant. When the Indonesian company defaulted, the plaintiff started proceedings against the defendant in Singapore. The defendant applied to stay proceedings which was dismissed at first instance. It was also dismissed on appeal where the court found that the defendant had failed to show a strong cause warranting the grant of a stay.
While deciding the case, the court was of the opinion that since creative drafting can lead to “endless permutations of jurisdiction clauses”, it was necessary to construe each jurisdiction clause carefully to determine the exact ambit of the agreement between parties.
 
CHAPTER 2: ANALYSIS OF THE JUDGEMENT OF ORCHARD CAPITAL V. RAVINDRA KUMAR JHUJHUNWALA
I. FACTS OF THE CASE:
The Appellant in this case is an “exempt limited liability company” incorporated in the Cayman Islands. The Respondent in this case is an Indian businessman who lives in Singapore. The Appellant and the respondent entered into certain business transactions in each other. There were three contracts signed between the appellant and respondent and contracts imposed certain financial obligations on the respondent. Later, the appellants and the respondents entered into a settlement agreement due to the failure on the part of the appellants to pay the amount stipulated according to the three contracts entered into between them. According to the terns of the settlement agreement, the respondent Mr. Jhujhunwala was supposed to pay 2.5 million USD to the appellants by a certain stipulated date in the agreement. The respondent failed to discharge his obligation and the appellants proceeded to enforce the agreement and recover the money due in a court in Singapore. The terms of the settlement agreement also provided for a non exclusive jurisdiction clause which stipulated Honk Kong to be the forum for the adjudication of the dispute in the case a dispute arises between the parties. This clause was worded as follows:
“This Agreement is governed by and construed in accordance with the laws of Hong Kong, SAR.The Parties submit to the non-exclusive jurisdiction of the courts of Hong Kong, SAR. The parties hereby knowingly, voluntarily and intentionally waive to the fullest extent permitted by law any rights they may have to trial by jury in respect of any litigation based hereon, or arising out of, under or in connection with this Agreement.”
The respondent wanted a stay on the proceedings on the ground that the terms of the agreement already stipulated that Hong Kong to be the seat of the adjudication in case of a dispute between the parties and the appellants were wrong in law to approach Singapore courts to enforce their claim. The respondent was refused a stay by the AR( Assistant Registrar). The respondents then made an appeal to the High Court and a stay was granted by the respondents in this case. This present appeal before this court is made by the appellants against the decision of the High Court.
II. ISSUES
1. Should the action brought upon by the appellants to enforce recovery be stayed on the ground of forum non conveniens?
III. JUDGEMENT OF THE COURT:
(a) Arguments by the appellants:
The Court observed that even though the issue before the court was not complicated, the legal issues which need to be looked into to decide a fairly straightforward issue is complex. The Court in this case looked into a lot of cases related to jurisdiction clause. One such landmark case was the case of Spiliada Maritime Corporation v Cansulex Ltd . In the aforesaid mentioned case, it was laid down that for the rule of forum non conveniens to be applicable, the court has to determine whether there is another forum which is available and which is better suited to adjudicate upon the dispute. The other forum should be better suited and this should be in the best interest of all parties involved in the dispute. Another important principle which was laid down in the aforesaid mentioned case is that onus to prove that there exists a better forum for the resolution of the dispute lies on the defendant. The Spiliada case also laid down certain factors which the court should consider while deliberating as to whether there exists a better forum, some of these factors are as follows: “ availability of witnesses, the law applicable to the transaction, the residence of the parties or the place where the parties carry on business and the possibility for the plaintiff to obtain justice in the foreign jurisdiction”. The appellants also cited the case of JIO Minerals FZC and others v Mineral Enterprises Ltd wherein the principles laid down in the case of Spiliada were reiterated. In the JIO Minerals FZC, it was reiterated that parties that in order for a stay to be granted, parties must not only show that there is another forum available for the adjudication of the dispute but in fact, this other forum is better equipped and more appropriate to adjudicate upon the case. So, it was quite clear that the onus to prove that Hong Kong was a better and more appropriate forum lay on Mr. Jhujhunwala(the respondent) in this case. The Appellants argued that the non exclusive jurisdiction clause is testimony to the fact that Hong Kong is an appropriate forum for the adjudication of the dispute but it was not the only appropriate forum and parties were at liberty to institute proceedings in any other appropriate forum. The appellants also cited the case of OCBC Capital Investment Ltd. v. Wong Hua Choon wherein the court inter alia discussed the extent to which a “non exclusive jurisdiction clause” was binding on the parties. The Court observed that the selected forum is an indicator that it is an appropriate forum for the adjudication of the dispute but in no ways is an indicator of the fact, that it is the only appropriate forum and it does not demonstrate that the selected forum is a forum which is better suited to adjudicate upon the dispute than any other forum. So, in this case the court observed that once the non exclusive jurisdiction clause is selected, the parties cannot argue that the selected forum is not appropriate for adjudication of the dispute. In the case of OCBC Capital, it was held that party that wants to stay the proceedings has to prove that there exists another forum which is better suited to adjudicate upon the dispute.
The Appellants then placed reliance on the works of Prof. Briggs (a famous scholar in this field). According to him, once proceedings are commenced in a particular forum, the party wanting to stay the proceedings has to demonstrate there is another forum which is better equipped and which is more appropriate to adjudicate upon the dispute. So, in this case the Respondent Mr. Jhunjhunwala had to prove to the court that Hong Kong was better equipped and more appropriate than Singapore to adjudicate upon the dispute. The Appellants also relied upon the case of Noble Power Investments Ltd v Nissei Stomach Tokyo Co Ltd . In this case, there was a “Corporation Agreement” between the parties which provided for a non exclusive jurisdiction clause according to parties selected Hong Kong as the non exclusive jurisdiction. The Court in the “Noble” case made certain general observations about “non exclusive jurisdiction clauses”. The Court observed that where the suit is commenced in the jurisdiction that was agreed upon in the contractual agreement, there is a heavy burden on the party which wants to stay the proceedings but in the case the case has commenced proceedings in a jurisdiction which is not the one mentioned in the non jurisdiction clause, then everything depends on the way the clause is worded. If the clause contemplates, the jurisdiction in which the proceedings have commenced, then the burden of proving that another forum would be more appropriate or suitable is quite heavy. The judges in this particular case have stated that although this case has no direct bearing on the present case at hand, it provides some insight into the way “non jurisdictional clauses” are to be interpreted by the court.
(b) Arguments by the respondents:
The main argument advanced by the respondents was that due to the selection of Hong Kong in the non exclusive jurisdiction clause, the parties have submitted themselves to the jurisdiction of Hong Kong and the parties. The respondent in this case, i.e. Mr Jhujhunwala also argued that apart from the fact that he resides in Singapore, there is no other strong connecting factor. So, if the principles in the case of Spiliada are to be applied then, then Hong Kong should be chosen as the choice of jurisdiction and not Singapore.
(C) Decision of the Court
The court heavily relied upon the decision of Prof Yeo in its analysis of non exclusive jurisdictional clauses. The Court essentially observed that are two ways of interpreting at “non-exclusive jurisdictional clauses”. The first way of looking at non exclusive jurisdictional clauses is to see from a contractual point of view. It is for the courts to determine whether the non exclusive jurisdiction agreement was meant to act as an exclusive jurisdiction agreement. This can be inferred when it can be deciphered from the contract that objecting to the selected forum in the non exclusive jurisdiction clause amounts to breach of the “non exclusive jurisdiction itself”. The second way of looking at a non exclusive jurisdictional clause is to consider it as a factor among other factors to be looked into when deliberating as to whether to stay the proceedings or not.
The Court concluded that even if one were to look at this from the first point of view, it was as clear as day that the non exclusive jurisdiction clause was not meant to an exclusive jurisdiction clause as the main intention of the contract was to ensure that the respondent in this case i.e. Mr Jhujhunwala discharges his obligation of paying the default amount. It is very important to remember that the earlier agreements between the parties provided for an exclusive jurisdiction clause which the present agreement did not provide for. So, it can be inferred that the non exclusive jurisdiction forum in this case was not meant to be binding on the parties.
Now, the court looked into the question as to whether the respondents have proved that Hong Kong would be a more appropriate forum for the adjudication of this dispute. Apart from the clause in the agreement, the respondent in this case did not show anything which would prove that Hong Kong was better equipped and more suitable to adjudicate upon the dispute than Singapore. The court was of the opinion that the appellants in this case deliberately opted for a non exclusive jurisdiction clause as it gave them more options and flexibility with regard to the forum of adjudication in case of a dispute.
IV. ANALYSIS OF THE JUDGEMENT
The judgment makes it clear that specification of a particular forum in the “non exclusive jurisdiction clause” does not bind the parties to that forum and the parties have the option and flexibility to adjudicate the dispute in other forums. The Court in this case thoroughly analyzed various legal principles and came to the conclusion that the object of a “non exclusive jurisdiction clause” is that the parties have to be provided with a certain degree of flexibility when it comes to selection of the forum of the dispute. The Court concluded that if the defendant wants to stay the proceedings in case proceedings are commenced in a place which is not stipulated in the “non exclusive jurisdiction clause”, the defendant has to not only prove that the other forum is appropriate(the forum stipulated in the contract) is appropriate to adjudicate upon the issue but also is better suited and more equipped to decide upon the dispute. Thus it can be inferred that this imposes a heavy burden upon the defendant moving for a stay in the legal proceedings in case the proceedings care commenced in a forum not stipulated in the “non exclusive jurisdiction clause”.
V. IMPLICATIONS OF THE JUDGEMENT:
The judgement is a cause of concern for transactional lawyers as the drafting of clauses have to clearer than ever before. Thus it becomes very clear that “non exclusive jurisdiction clauses” have to be worded very clearly so that such kind of disputes can be avoided. It becomes very important that in order to provide contractual certainty the parties should leave no room for interpretation in the contract and the parties must make a decision to opt for a “non exclusive jurisdiction clause” only when the parties want greater flexibility and want more options to choose the forum of adjudication of the dispute.
 
CHAPTER 3: INTERPRETATION OF NON-EXCLUSIVE JURISDICTION CLAUSE IN INDIA
Foreign companies entering into contracts with Indian companies often choose that the agreement between them will be governed by a foreign law and will be enforceable in a foreign court. When something goes wrong, Indian companies sometimes approach Indian courts on the ground that despite such agreement, Indian courts have a natural jurisdiction over the concerned subject matter. Thus, parties end up litigating in Indian Courts instead of the jurisdiction they agreed upon. The situation becomes complicated if the agreement is governed by foreign law as foreign law needs to be proved as fact, by evidence, in India.
Supreme Court has discussed this issue of application of non-exclusive clause in various cases. The two most important cases relating to it are discussed below:
I. MODI ENTERTAINMENT NETWORK V. W.S.G. CRICKET PTE. LTD.
In this case, Modi Entertainment Network entered into an agreement with W.S.G. Cricket Pte. Ltd to acquire exclusive right to sell the commercial rights of an international cricket series which was held in Kenya in October 2000. Under this agreement, WSG granted exclusive license to Modi to telecast the match on Doordarshan and to sell advertisement slots to WSG. The license was restricted to terrestrial telecast on Doordarshan since the satellite broadcast rights was granted to ESPN.
Modi Entertainment was a company based in India, while WSG was based in Singapore. Thus, the natural fora of jurisdiction to govern this agreement were Indian and Singapore courts. However, the Agreement provided for a clause that stated –
“this Agreement shall be governed by and construed in accordance with English law and the parties hereby submit to the non-exclusive jurisdiction of English Courts (without reference to English Conflict of Law rules).”
The dispute arose when the telecast commenced and WSG alleged breach of contract by Modi on the ground that Doordarshan’s signal was received in the Middle East as well which is a violation of the license. Moreover, WSG threatened to discontinue the feed given to Doordarshan. Following this, Modi filed a suit in the Bombay High Court for damages contending that WSG’s threats prevented advertisers from advertising in Doordarshan. On the other hand, WSG filed an action against Modi in the High Court of Justice Queen’s Bench Division for a money decree to recover the advertisement cost paid to Modi and got a writ of summons issued. The English Court summoned Modi to notify its intention to contest jurisdiction and a failure to do so would mean agreeing to submit to the English Court’s jurisdiction. Modi appeared before the court and sought 3 weeks’ time.
Meanwhile, Modi sought an anti-suit injunction against WSG’s suit in the English court contending that the Indian court was the natural forum to adjudicate matters relating to the concerned agreement and that the proceedings carried out by the English Court would be vexatious and oppressive. A single bench granted the injunction but it was set aside by a division bench.
At the appellate stage in the Supreme Court, Modi raised two contentions to support the anti-suit injunction –
(i) English Court was a forum non-conveniens in relation to the allegation of breach of Agreement by WSG in an unforeseen manner.
(ii) English Court has no connection to either parties as well as the subject matter and is not court of natural jurisdiction.
The Supreme Court observed that the possible breach was foreseen by the parties and had agreed to resolve the issues through the forum of choice. Thus, the test of foreseeability cannot be applied as the test could be applied only in circumstances where the forum of choice got merged with another court making it impossible for the parties to approach the chosen forum. SC also held the second contention could be considered only when contractual obligations had been disregarded and evidence was adduced. It was not a sufficient reason to justify prohibition of an action in a foreign court of choice by a court of natural jurisdiction.
After considering the facts in detail, SC held that in absence of any sufficient reasons to the contrary provided by the petitioner, the intention of the parties established by the Agreement should prevail. Thus, while contracting with an Indian party, a foreign party to the contract may make a choice to submit to the exclusive or non-exclusive jurisdiction of a foreign court irrespective of whether the parties or the transaction under the agreement are connected with that foreign court.
II. MOSER BAER INDIA LTD. V. KONINKLIJKE PHILIPS ELECTRONICS
Plaintiff manufactures and sells optical and magnetic storage media products. It entered into 6 Disc Patents License Agreement with the defendant from July 2001 to February 2003. The agreement had a jurisdiction clause that read:
“This Agreement shall be governed by and construed in accordance with the laws of the Netherlands. Any disputes between the parties hereto in connection with the Agreement (including any question regarding its existence, validity or termination) shall be submitted to the competent courts of the Hague, the Netherlands, provided always that, in case Philips is the plaintiff, Philips may at its sole discretion submit any such dispute either to the competent courts in the venue of Licensee’s registered office, or to any of the competent courts in the Territory. Licensee hereby irrevocably waives any objection to the jurisdiction, process and venue of any such court and to the effectiveness, execution and enforcement of any order or judgment (including, but not limited to, a default judgment) of any such court in relation to this Agreement, to the maximum extent permitted by the law of any jurisdiction, the laws of which might be claimed to be applicable regarding the effectiveness, enforcement or execution of such order or judgment.”
Earlier the defendant had entered into a Cross License Agreement granting reciprocal royalty free licenses with another company of Minnesota which assigned its right to Imation Corporation. Thus, it was assumed that any sale made by the plaintiff to Imation would be royalty free. Such sale was made by the plaintiff which came to the knowledge of the defendant who initially did not object. However, soon the defendant alleged breach of contract by the plaintiff and issued notice to the plaintiff threatening cancellation of DPLAs. Imation Corporation and the plaintiff were of the view that the defendant had no right to request for royalties with respect to sales made by plaintiff to Imation. This led to filing of two separate actions – plaintiff filed a suit in Delhi High Court seeking grant of injunction against the defendant with respect to the default notices. On the other hand, Imation filed a declaratory judgment action against the defendant before the Minnesota District Court, USA. The Court granted the injunction and ordered the defendant to continue issuing to the plaintiff Licenses Status Confirmation Documents.
Meanwhile, the defendant filed a counter claim and a third party complaint in Imation’s suit in the Minnesota court and the plaintiff was arrayed as party and the defendant. Later, Imation
Corporation and the defendant entered into a standstill agreement whereby they agreed to negotiate and resolve the disputes. During its pendency, several adjournments were taken on this ground in the plaintiff’s suit and the defendants sought extension of time for filing their written statements. Extension was granted. The settlement talks broke down and Imation re-filed its complaint and the defendant filed the suit in Hague claiming royalty from the plaintiff in respect of all sales of patented CDs to Imation and its subsidies. Thus, this current petition seeking anti-suit injunction was filed by the plaintiff in the Delhi High Court.
The court relied heavily on the Modi Entertainment case as well as other judgments such as – British India Steam Navigation Co. Ltd. v. Shanmughavilas Cashew Industries , British Aerospace Plc v. Dee Howard Co. , Donohue v. Armco Inc ., etc and evolved the following principles –
(i) In exercising discretion to grant an anti-suit injunction the court must be satisfied of the following aspects:
(a) the defendant, against whom injunction is sought, is amenable to the personal jurisdiction of the court;
(b) if the injunction is declined, the ends of justice will be defeated and injustice will be perpetuated; and
(c) the principle of comity – respect for the court in which the commencement or continuance of action/proceeding is sought to be restrained – must be borne in mind.
The Court also stated that in cases where there are more than one forum available, the court can exercise its discretion to grant anti-suit injunction after examining as to which is the appropriate forum (forum conveniens) with reference to the convenience of the parties and may grant antisuit injunction in regard to proceedings which can be oppressive and vexatious or in a forum non-conviniens.
Further, when the jurisdiction of a court is invoked on the basis of a jurisdiction clause in an agreement, the jurisdiction with regard to exclusive or non-exclusive jurisdiction of the court of choice are not determinative but are relevant factors. When a question as to the nature of the jurisdiction agreed upon arises, the court has to decide on the same on the true interpretation of the contact based on the facts and circumstances of each individual case.
When parties have agreed to approach a neutral foreign court under a non-exclusive jurisdiction, ordinarily no anti-sit injunction to be granted in regard to proceedings in such a forum conveniens and favoured forum for it will be presumed that the parties have deliberated upon their convenience and all other important factors before submitting themselves to the non-exclusive jurisdiction of the court of their choice, which shall not be treated as an alternative forum. When one of the parties to the jurisdiction clause approaches the court of choice on which non-exclusive or exclusive jurisdiction was created, the proceedings in that court cannot be treated as vexatious or oppressive per se, nor can the court be said to be forum non-conveniens.
The burden of proof to establish if the court of choice is a forum non-conveniens or the proceedings commencing there are oppressive or vexatious is on the party so contending to prove the same.
CONCLUSION
This project has in great detail discussed the case of Orchard Capital v. Ravindra Jhunhjunwala, in which a lot of important question pertaining to “non exclusive jurisdiction clauses” were answered. The scope and the way a ‘non exclusive jurisdiction clause” is to be interpreted was answered in great detail in the project. We can conclude that “non exclusive jurisdiction clauses” in international contracts have to be drafted with a great deal of caution and attention to detail is very important while drafting the “non exclusive jurisdiction clause” of an international contract. While drafting the “non exclusive jurisdiction clause”, parties have to keep in mind the larger commercial intent of the parties. Parties should make a commercial decision to opt for “non exclusive jurisdiction clause” only when they want greater flexibility and want more options in hand with regard to the forum of adjudication of the dispute. This project has also in quite detail covered the validity of “non exclusive jurisdiction” clauses in India. As, India becomes more integrated in global commerce, parties should look at the leading judgements by the appellate courts in India with regard to the interpretation of “non exclusive jurisdiction clauses”.
 

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