1009Scottish Private International Law, Choice of Court Rules in Commercial Proceedings, and HCCA in Scots Courts

Zia Akhtar

LL.B. (Lon), LL.M. (Lon), Gray’s Inn, PhD, Coventry University

Abstract

The Scottish law has autonomy under the Scotland Act 1998 to enact its own laws that concern the rules of private international law which enables to enforce foreign judgments under its own legislative framework. The jurisdictional framework in Scotland is that if there is no express choice of law stated the Regulation (EC) No 593/2008 of 17 June 2008 on the law applicable to contractual obligations (Rome I) will prevail and, in Article 4, further rules for determining the governing law, which is often tied to the habitual residence of the party which is not making payment for the product or service[1]. The framework of private international law in Scotland has been impacted by the UK ratifying the Hague Convention on Choice of Court Agreements (HCCH 2005), which will enable the courts in the UK jurisdiction to review cases that will involve jurisdictional clauses concerning foreign parties. The adoption of the Recognition and Enforcement of Judgments (2019 Hague Convention etc.) Regulations 2024 requires an assessment of the jurisdiction in reviewing cases under the forum non conveniens principle. There needs to be an evaluation of the asymmetrical clauses that restrict the jurisdiction of the UK courts in commercial agreements and the possibilities have to be examined how a claim that involves a foreign party may have their jurisdictional clauses enforced by civil litigation.

Introduction

The domain of private international law is part of non reserved jurisdiction in Scots law under the Scotland Act 1998. This falls under section 126(4)(a) and includes law relating to choice of law, choice of jurisdiction, recognition of judgments and 1010enforcement of decisions[2]. This brings it within the legislative competence of the Scottish Parliament which can legislate under its implied jurisdiction agreements in international commercial contracts. The general application of this area of law is governed by the UK’s accession to the Hague Conference of Private International Law which has a section that is Convention on Choice of Court Agreements (HCCH) in 2005, which also binds Scotland to the treaty[3]. After Brexit the UK has become a signatory in its own right and Scots law is also impacted by the adoption of this international treaty. The issue is the Scots legislature enacting its own competence that may have a bearing in the conflict of laws that and how these may be addressed by the courts.

The conflict of laws is important in private international law because a judgment obtained in a foreign court may need to be enforced by a domestic one. This requires certain harmonisation and bilateral and multilateral forms of acknowledgment in the local courts. There are two main areas where the conflict of law rules are applicable, which are commercial law and family and inheritance. In commercial and civil matters the rules derive from the directly applicable EU Regulations. These are Regulation 593/2008 (Rome I) on the law applicable to contractual obligations and Regulation 864/2007 (Rome II) on the law applicable to non-contractual obligations.

The Contracts (Applicable Law) Act 1990 (which implemented the Rome Convention 1980) remains relevant in relation to contracts entered into before 17 December 2009 (the Rome I Regulation applies to contracts entered post its implementation). The Private International Law (Miscellaneous Provisions) Act 1995 is only relevant to circumstances not covered by the Rome II Regulation (the Regulation applies to cases in which damage occurred after 11 January 2009).

In family law, including divorce and adoption, and inheritance, the common law generally applies and the source of laws are statute (often following recommendations made by the Scottish Law Commission); and EU and international obligations. The Hague Conference on Private International Law framed in 1955 has the objective of the progressive unification of the rules of private international law. It has facilitated the adoption of the Convention of 25 October 1980 on the Civil Aspects of International Child Abduction; Convention of 29 May 1993 on Protection of Children and Co-operation in Respect of Intercountry Adoption; Convention of 19 October 10111996 on Jurisdiction, Applicable Law, Recognition, Enforcement and Co-operation in Respect of Parental Responsibility and Measures for the Protection of Children; and Convention of 19 October 1996 on Jurisdiction, Applicable Law, Recognition, Enforcement and Co-operation in Respect of Parental Responsibility and Measures for the Protection of Children.

In other areas of private law, the multilateral international conventions have contributed to enforcement across jurisdictions; the Hague Convention on the Conflicts of Laws Relating to the Form of Testamentary Dispositions 1961; the Rome Convention 1980 on the Law Applicable to Contractual Obligations (replaced by the Rome I Regulation in relation to contracts entered into on or after 17 December 2009); and the Hague Convention of 1 July 1985 on the Law Applicable to Trusts and on their Recognition.

The HCCH 2005 will be effective when judges in parallel proceedings in EU countries and in the Scottish jurisdictions disagree as to which court has the jurisdiction to hear a case or enforce judgments by making choice of court agreements binding on courts in countries where it is in force [contracting state(s)]. Article 3(a) states an agreement will be exclusive if it appoints only one court with jurisdiction. Furthermore, article 3(b) deems an agreement to be exclusive “unless the parties have expressly provided otherwise”. The parties’ ability to seek interim relief in non chosen courts is precluded such as issuing interlocutory and anti-suit injunctions; Article 3(b). Finally, Article 22 provides that the contracting states can make declarations on the applicability of the HCCH 2005 to non-exclusive choice of court agreements if an agreement between the parties meets the requirements of Article 3(c) and designates a court of one or more contracting states.

The key provisions of the HCCH are as follows: “(i) A choice of court agreement must be respected by the courts of a contracting state unless the contract in dispute is null and void under the laws of that contracting state (Article 5), (ii) Any court not chosen must decline to hear the case or suspend or dismiss proceedings, unless limited exceptions apply (Article 6), (iii) Any judgment made by a designated court must be recognised and enforced in other contracting states, except in very limited circumstances (Articles 8 and 9)”.

The road map of this paper is as follows: Part A will consider the background and history of private international law in the commercial areas in Scotland and its governing principle established under case law; and Part B examines the HCCH 2005 transposition into Scottish law, and the UK rule of forum non conveniens and the EU which practices the lis abili procedure in enforcing the court judgments when the another court in a different court is seised with the matter. Part C examines the anti-suit injunction that prevent litigation in the courts seised of the matter and it will explore the antisymmetrical clauses in commercial agreements in order to determine if they preclude the jurisdiction of the UK courts and if there is a possibility of circumventing them in civil litigation.

10121. Conflict of law in commercial contracts

The integration of law as to commercial and civil judgments in the UK and EU countries began with the Brussels Convention on jurisdiction and the enforcement of judgments in civil and commercial matters 1968[4]. The Convention which was signed into law by the original Contracting States (Belgium, France, Germany, ltaly, Luxembourg and the Netherlands) on September 27, 1968 and came into force between them on February 1, 1973. The Protocol concerning the interpretation by the Court of Justice of the European Communities (“The Court of Justice”) of the Convention. The Protocol came into force on September 1, 1975. In accordance with Article 3 of the Act of Accession of the three new Member States of the European Communities, the nine Member States negotiated an adjustment to the Convention and the Protocol, taking into account the particular requirements of the legal systems of the Member States, revising certain provisions and, in certain cases, adding to the substance of the text of the Convention[5].

The purpose of the Brussels Convention was to facilitate the protocol governing the “reciprocal” recognition and enforcement of judgments between Member States under Article 220 (4) of the EEC Treaty and to harmonise the direct rules and conflicts of jurisdiction in contemplation with intra-EU cases[6]. The Convention established an order of priority when the litigation involved the same parties in two courts of Member States and the same cause of action. Article 21 states “Where proceedings involving the same cause of action and between the same parties are brought in the courts of different Contracting States, any court other than the court first seised shall of its own motion decline jurisdiction in favour of that court. A court which would be required to decline jurisdiction may stay its proceedings if the jurisdiction of the other court is contested”.

The Brussels regime led to a new framework to reduce concurrent proceedings before the courts of various Member States and to avoid irreconcilable decisions. This was enforced by Regulation No 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (the “Brussels Regulation”). Article 27(1) provides “Where proceedings involving the same cause of action and between the same parties are brought in the courts of different Member States, any court other than the court first seised shall of its own motion stay its proceedings until such time as the jurisdiction of the court first seised is established. 1013(2) Where the jurisdiction of the court first seised is established, any court other than the court first seised shall decline jurisdiction in favour of that court”.

There was a compromise achieved between the first in the queue approach of lis abili pendens (the main principle of the Brussels Convention) and the discretionary approach of forum non conveniens which allows either the court first or second seised to decline jurisdiction[7]. EU adopted a more robust approach by revising the Brussels I Regulation (Regulation 44/2001 which had retained similar rules to the Brussels Convention 1968 on lis abili pendens and related actions) that included endorsing some of the concepts of the HC 2005 into its internal provisions on the choice of court.

The recourse to the lis abili pendens rule and the Articles 21 and 22 of the Brussels Convention were revisited and “adapted to become discretionary provisions in relation to cases where a dispute is pending in an EU court and in a non-EU court. Articles 33 and 34 of the (recast) Brussels Ia Regulation (Regulation 1215/2012) allow a kind of forum non conveniens within EU law where the EU court is second seised and a non-EU court is first seised”[8]. The Brussels Regulation and Brussels Regulation (recast) ceased to apply to the UK following the end of the Brexit transition period (although they continue to apply in the case of proceedings commenced on or before 31 December 2020). The Regulation continues to apply to all other Member States of the EU.

In the UK there are sources of commercial and civil contracts that are still retained despite its departure from the EU. These are applicable in Scotland in the commercial law in both contractual and non-contractual matters where the choice of governing law had been determined principally by EU Regulations Regulation (EC) No 593/2008 (Rome 1)[9] and Regulation (EC) No 864/2007 (Rome II)[10]. Rome I establishes the rules which determine the law that governs non-contractual obligations arising between parties in most civil and commercial matters. Rome II is on the law applicable to non-contractual obligations that require the courts in all EU Member States to recognise commercial parties’ choice of governing law regardless 1014of where that law emanates from. As such, a choice of Scottish governing law will be recognised in much the same circumstances by EU member state courts as they are now[11].

Article 2 provides guidance as to what is to be understood by ‘non-contractual obligations’ and provides that damage shall cover any consequence arising out of, among others, a tort. The Regulation also applies to pre-emptive actions of non-contractual obligations that are likely to arise or where damage, or an event giving rise to damage, is likely to occur. There are four elements that are necessary to apply which are a situation involving a conflict of laws; a civil and commercial matter; a non-contractual obligation; and a ‘non-excluded’ matter. If pursuing a commercial activity, parties can agree what law will determine an event giving rise to the damage. The parties can also agree what law will apply after the event that gave rise to the damage (Article 14). The principles set out under Rome II (and Rome I) will continue to apply as the UK has introduced legislation to incorporate the two regimes into domestic UK law[12].

The Scottish jurisdiction has ruled in a private international law matter concerned with commercial law. In Caledonia Subsea v Microperi SA[13], where a contract existed between a Scottish company and an Italian company for the provision of diving services in relation to project in Egypt. The issue was whether Scots law or the law of Egypt was the law applicable to the contract. The claimant Caledonia Subsea Limited whose place of business was located in Aberdeen brought an action in the Court of Session against Microperi SRL for payment of monies allegedly due under a contract between the parties for the provision of diving services. The defenders were an Italian company based in that country. The services were retained in relation to a construction project in Egyptian jurisdiction, where the Italian company was subcontracted by the Egyptian company. The issue was whether the Scots or the Egyptian law applied in the case.

Lord Hamilton in giving his judgment held that the applicable law was the Contracts (Applicable Law) Act 1990 which provides that “the Rome Convention, will with certain exceptions have the full force of the law. shall have the force of law in the UK”[14]. 1015Article 4 of the Rome I provides the “rules for determination of the applicable law and that in the absence of choice, the governing law is that of a country with which the contract is most closely connected (an objective criteria not apparently restricted to foster in existence when the contract was concluded). The use of presumptions is a material departure from the approach adopted by the British courts prior to the 1990 Act”[15].

This involved a “marked departure from the principles which inter alia that where the contracting parties have not exercised a choice of law, the contract shall be governed by the law of the country with which it is most closely connected”[16].

Lord Hamilton ruled that the presumption is that a contract with the proximity with the country where the performance is to be executed will be the source of the agreement and, if the “contract is entered into in the course of that party’s trade or profession, its principal place of business”. In this instance, the “applicable law is Scots law”[17].

The jurisprudence of Scotland is a fusion of the civil and common law system. This area of ‘applicable law’ has been particularly influenced by the continental systems, as well as the common law. It has been argued that as Scotland forms a separate jurisdiction within the UK, and the adoption of European laws will be more receptive and that there was “a risk that harmonisation or unification—the triumph of pragmatism over idealism—will undermine small jurisdictions”[18]. This is in essence when the UK becomes a party to an international treaty it then extends the same law to other regions of the UK and that includes the mixed legal system in Scotland.

2. Recognition of Court judgments and enforcement

The competence of UK courts has increased since the accession to the Hague Convention on Choice of Court Agreements (HC 2005), which has enabled the hearing of claims that have been initiated in foreign courts and to give binding effect to their judgments where the parties have agreed to an exclusive choice of courts. The Hague Convention only applies to exclusive choice of court agreements (Article 1), which implies that the issue of whether a choice of court agreement is ‘exclusive’ or not is critical as to whether the convention applies. It will impact on the interpretation of asymmetric clauses where it will be possible to stay proceedings by an anti-suit injunction against a court of an EU Member State and involve the application of national law.

The HC 2005 provides that judges in contracting states will no longer be able to declare the court a forum non conveniens of their own accord if it is contrary to what the parties agree on in a choice of court agreement. The Convention replaces the 1016provisions in the Brussels Regulation Recast which were applicable prior to Brexit. The HC 2005 will have effect where judges in parallel proceedings in separate jurisdictions disagree as to which court has the jurisdiction to hear a case or enforce judgments by making choice of court agreements binding on courts in countries where it is in force [contracting state(s)].

Article 3(a) states an agreement will be exclusive if it appoints only one court with jurisdiction. This will also cover asymmetric jurisdiction such as between part of the dispute being adjudged in one jurisdiction and the another in a different jurisdiction in a commercial contract[19]. Article 3(b) deems an agreement to be exclusive “unless the parties have expressly provided otherwise”. The parties’ ability to seek interim relief in non chosen courts is precluded such as issuing interlocutory and anti-suit injunctions.

The key provisions of the HC 2005 are as follows: “(i) A choice of court agreement must be respected by the courts of a contracting state unless the contract in dispute is null and void under the laws of that contracting state (Article 5). (ii) Any court not chosen must decline to hear the case or suspend or dismiss proceedings, unless limited exceptions apply (Article 6). (iii) Any judgment made by a designated court must be recognised and enforced in other contracting states, except in very limited circumstances (Articles 8 and 9)”.

The HC 2005 also prescribes that the judges must also refuse to hear disputes if the courts of their jurisdiction have not been designated as the exclusive court in the choice of court agreement[20]. While many asymmetric clauses exist in international finance agreements, there is no consensus among jurisdictions about whether they are exclusive or non-exclusive for the purposes of the HC 2005. While there exists a clear distinction with regards to simple choice of court agreements, ‘asymmetric’ or ‘unilateral’ agreements are not easily distinguished[21].

These types of jurisdictional agreements are considered “Asymmetric jurisdiction clauses which contain different provisions regarding jurisdiction for each party. They are widely used in international financial markets”[22]. These clauses are likely to be included alongside the dispute resolution clauses in commercial transactions which “commonly 1017seek to regulate all aspects of a dispute including mechanism for service of notice, waiver of right to object to the venue or enforcement, indemnities, etc.”[23].

There are conflicting perspectives as to whether asymmetric clauses in choice of court agreements are exclusive or non-exclusive for the purposes of the HC 2005. The UK has indicated in the declaration that accompanied its deposit of the instrument of accession by stating: “the United Kingdom considers that the 2005 Hague Convention entered into force for the United Kingdom on 1 October 2015 and that the United Kingdom is a Contracting State without interruption from that date”[24]. The issues around its material and temporal scope has led to disputes because of their varying interpretation by the UK and EU which have to be resolved in the courts.

The framers had the object to avoid irreconcilable rulings in different Member States of the EU and the legal certainty in the conflicts of law rules was reduced by allowing courts, other than the court first seised, a discretion to decline jurisdiction for related actions under Article 22 of the Brussels Recast Convention (where there was a risk of irreconcilable judgments) applied even though the parties in the cause of action were not the same. This stated: “For the purposes of this Article, actions are deemed to be related where they are so closely connected that it is expedient to hear and determine them together to avoid the risk of irreconcilable judgments resulting from separate proceedings”.

The HC 2005 will also consider the service out of jurisdiction and the issues of competence for the court; and the restraint of foreign proceedings by use of an anti-suit injunction applying the test of forum non conveniens. The origins of the forum non conveniens rule appertains to the conflict of laws that have been under focus since the UK’s adoption of European law through its membership of the EU. This has been of particular impact in the commercial law in both contractual and non-contractual matters where the choice of governing law has been determined principally by EU Regulations 593/2008 (Rome I) and 864/2007 (Rome II)[25].

The instrument provides standard rules across the EU in cross border civil and commercial disputes and unlike the statutes that relate to the recognition and enforcement of jurisdiction clauses they do not require reciprocity between states[26]. 1018The HC 2005 is intended to ensure the effectiveness of choice of court agreements made between parties in international commercial contracts which are formed in different jurisdictions. These are for disputes to be settled in courts and not by way of arbitration hearings to which a separate treaty applies[27]. The preamble to the HC 2005 states it is “aimed at ensuring the effectiveness of choice of court agreements (also known as ‘forum selection clauses’) between parties to international commercial transactions. By doing so, the Convention provides greater certainty to businesses engaging in cross-border activities and therefore creates a legal environment more amenable to international trade and investment”[28].

The requirement is whether a court seised is the forum non conveniens and the case brought before the court is not sufficiently connected to the local justice system. The impact on the legal system is that it continues to be applied to dismiss litigation claims by foreign commercial and civil parties who have a clause appertaining to this jurisdiction. It has been traditionally deemed as an exclusive common law doctrine against the lis abili pendens rule in civil law jurisdictions, and it is now of international recognition[29].

It needs determination by the court as to when and under which circumstances the application of forum non conveniens amounts to a lack of access to justice, a long standing rule of customary international law[30]. In the issues that arise in the framework of transnational litigation claims, this doctrine has a substantive element and where there is a negative conflict of jurisdictions, such as alternative jurisdiction cases, it is of regular application. An exercise by the court of a contrary act as to issue its certificate of jurisdiction will amount to a breach of international law and rule of law towards foreign litigants.

The choice of law issue is likely to arise regarding asymmetric clauses when there are certain mandatory provisions of local law that apply regardless of the choice of UK law to resolve the dispute. This may arise where two or more counterparties 1019have opted for English law to apply but are resident in the same EU state in which the proceedings have been commenced. This can be a domestic court of a foreign court which hears a dispute based on UK law and it may declare that non-derogable principles of local law apply in such a manner that key commercial provisions (for instance limitation of liability clauses) apply in a different manner than they would under English law, or in certain circumstances even abrogate the clause. These non-derogable provisions of domestic law of a EU court could therefore fundamentally reverse the shape of established commercial agreements. The “jurisdiction agreements are severable from their host contracts, and have a procedural effect for jurisdictional purposes independent of their contractual effect between the parties’ conceptualised as procedural law”[31].

This is an inherent risk, as where they consider it appropriate courts in the EU Member State have applied non-derogable provisions of local law to UK commercial contracts. This could render the clauses relating to HC 2005 exposed to an increased likelihood of challenges to choice of jurisdiction clauses by means of anti-suit injunctions, leading to an increasing number of UK law contracts being adjudged before EU courts, and the possibility that UK law may diverge from the European laws in commercial areas of jurisdiction[32].

Article 27 of the HC 2005 states: “(1) Where proceedings involving the same cause of action and between the same parties are brought in the courts of different States bound by this Convention, any court other than the court first seised shall of its own motion stay its proceedings until such time as the jurisdiction of the court first seised is established. (2) Where the jurisdiction of the court first seised is established, any court other than the court first seised shall decline jurisdiction in favour of that court. This allows one party to commence legal proceedings in a slow moving jurisdiction in order to stay proceedings in the contractually designated court. However, it does prevent the expense of parallel proceedings in different states over the same subject matter and is restatement of the lis abili pendens rule”[33].

The definition of parallel proceedings in the application of the lis abilipendens rule meets the objection that the civil law tradition has been described as adopting 1020“a formal and deductive method when applying its codes and statues. Common law reasoning, on the other hand, has been said to be inductive, giving the judge a great discretion in order to be able to take all relevant and particular facts of the case into consideration. A civil law judge would, in contrast, first have to categorize the case at hand, to be able to proceed and try to make the case fit into a rule ”[34].

3. Asymmetric jurisdictional clauses and enforcement powers

The HC 2005 is intended to ensure the effectiveness of choice of court agreements made between parties in international commercial contracts. These are for disputes to be settled in courts and not by way of arbitration hearings to which a different treaty applies[35]. The preamble of the treaty states it is “aimed at ensuring the effectiveness of choice of court agreements (also known as ‘forum selection clauses’) between parties to international commercial transactions. By doing so, the Convention provides greater certainty to businesses engaging in cross-border activities and therefore creates a legal environment more amenable to international trade and investment”[36].

The HC 2005 provides that judges in contracting states are no longer able to declare the court a forum non conveniens of their own accord if it will be contrary to what the parties agree on in a choice of court agreement[37]. The judges must also refuse to hear disputes if the courts of their jurisdiction have not been designated as the exclusive court in the choice of court agreement[38]. While many asymmetric clauses exist in international finance agreements, there is no consensus among jurisdictions about whether they are exclusive or non-exclusive for the purposes of the HC 2005. The litigation in the UK courts has brought the matter into contention as to exclusivity of jurisdiction.

In Commerzbank v Liquimar[39] the court had to decide whether of the three loan agreements entered into between Commerzbank and the Defendants, the second and third of which was a loan agreement to finance shipbuilding agreements contained asymmetric jurisdiction clauses. The asymmetric jurisdiction clauses permit one party to an agreement to sue in a specific court only, whilst allowing the other 1021party (generally a financial institution) to issue proceedings in any court with jurisdiction under its local rules. The court ruled that Commerzbank was entitled to bring proceedings against the Defendants (the borrower and guarantor under the loans) in any jurisdiction, while the Defendants could only bring proceedings in the UK.

Cranston J stated “where a clause confers exclusive jurisdiction on the court or courts of a Member State when one party sues, the clause will still be an exclusive jurisdiction clause for the purposes of Article 31(2) even where, if the other party to the clause sues, the clause shows the parties to have agreed that jurisdiction is to be conferred differently, or allowed to engage differently”[40].

The agreements in the underlying loans and guarantees were exclusive jurisdiction clauses for the purposes of Article 31 of the Brussels Regulation (recast). Article 31 (2) states “Without prejudice to Article 26, where a court of a Member State on which an agreement as referred to in Article 25 confers exclusive jurisdiction is seized, any court of another Member State shall stay the proceedings until such time as the court seized on the basis of the agreement declares that it has no jurisdiction under the agreement”.

Article 29 of the Brussels Regulation (recast) I did not apply because “to overlook that in these asymmetric jurisdiction clauses the parties have designated the English court as having exclusive jurisdiction when the defendants sue. There is nothing in Article 25 that a valid jurisdiction agreement has to exclude any courts, in particular non EU Courts. Article 17, penultimate paragraph, of the Brussels Convention recognised asymmetric jurisdiction clauses. To my mind it would need a strong indication that Brussels I Recast somehow renders what is a regular feature of financial documentation in the EU ineffective”[41].

The case was one of characterisation of the clause under EU law, not Scots or English law, because Brussels Regulation (recast) was intended to enhance the effectiveness of jurisdiction clauses and to avoid tactical misuse. The validity of clauses would only be upheld even if asymmetric jurisdiction clauses were treated as exclusive and therefore fell within the scope of article 31(2)[42]. Cranston J concluded there were “good arguments […] that the words of the definition of exclusive jurisdiction clauses in Article 3(a) of the Hague Convention cover asymmetric jurisdiction clauses”[43].

The issue was whether the jurisdiction clauses in the second and third loan agreements were valid, and if so, whether an asymmetric clause was an exclusive 1022jurisdiction clause for the purposes of Brussels Regulation (recast). If the clause was deemed to be exclusive, the English courts could decide the case and the Greek courts would be obliged to adjourn their proceedings under article 31(2). However, if the clause was found to be non exclusive, the English courts would be obliged to stay the English proceedings under Article 29, allowing the Greek courts, which were first seised, to proceed in their ruling.

In Clearlake Shipping Pte Limited v Ziang Da Marine Pte Limited[44], where the facts did not involve a typical asymmetric clause, a typical asymmetric jurisdiction clause and merely stated that sums over a certain limit would be decided by the court rather than by arbitration. Clause 49 of the agreement stated: “The construction, validity and performance of this Charter shall be governed by English law. The High Court in London shall have exclusive jurisdiction over any dispute which may arise out of this Charter”[45].

Clause 5. Law and Litigation stated: “This charter shall be construed and the relations between the parties determined, in accordance with the Laws of England. Any dispute arising out of or in connection with this charter, involving amounts in excess of US $ 50,000 … shall be subject to the jurisdiction of the English High Court”.

The defendant Xiang Da Marine were the owners of the vessel Chang Hang and subsequent to a particular voyage they were sued before the Singapore High Court by cargo receivers, China Base. They sought to transfer the claims made by China Base to Clearlake (the Vessel’s voyage charterers) and Gunvor (the Vessel’s sub voyage charterers) by way of third-party proceedings in Singapore. The claimants Gunvor and Clearlake obtained without notice anti-suit injunctions in the High Court[46]. The Clearlake claim was based on the Singapore Proceedings, which at that time included contractual claims under the charter, constituting a breach of the exclusive London High Court jurisdiction clause (exclusive English jurisdiction clause - “the EJC” clause) in the charter between them and Xiang Da (the “Charter”). It was also based on the argument that claims under a letter of indemnity pursuant to which Xiang Da’s claims were in part being advanced were similarly caught by the Charter’s EJC.

The Court interpreted the litigation clause to establish that: “There is a close link between those claims and the tort claim brought by Xiang Da against Gunvor and it is in the interests of Clearlake to avoid forum-fragmentation (and the waste of resources involved) by having all third party proceedings (by Xiang Da against Clearlake and Gunvor) heard in the same jurisdiction (i.e. England)”[47]. The presiding judge Andrew Burrows, 1023QC commented obiter that he considered clauses drafted in the usual terms would not be ‘exclusive jurisdiction clauses under the Convention’[48].

This decision is significant as it establishes that the UK courts will in certain cases act to restrain foreign proceedings which are incompatible with an EJC, even where a foreign defendant is not itself a party to the jurisdictional clause, and is not being sued pursuant to the contract in which the EJC exists. This is therefore a broader jurisdiction than the quasi-contractual injunction which has been considered by the courts in recent times. The claimants had also argued that the tortious claims against defendants should be restrained at the commencement of legal proceedings on the grounds that they were a breach of the exclusive jurisdiction clause. This, they argued, prevented claims against themselves as party to the contract but also provided protection against connected claims against third parties. This effect of jurisdiction clauses with regard to claims against third parties has been disputed where the issue of forum non conveniens has been raised before the court.

In Etihad Airways PJSC v Flother[49] the claimant entered into various finance agreements with Air Berlin, including the origins of a Comfort Letter issued by Etihad to the directors of Air Berlin. The Facility Agreement contained an asymmetric jurisdiction clause under which for the benefit of Etihad only the UK courts had exclusive jurisdiction over any disputes arising from connection with it. The Comfort Letter did not contain a jurisdictional clause and Air Berlin subsequently became bankrupt and the Insolvency Administrator issued proceedings against Etihad in Germany alleging breach of the Comfort Letter and, alternatively, breach of its duty under German law to negotiate in good faith.

The defendant then issued proceedings in the UK for declarations relating to the validity and scope of the jurisdiction clause. The Insolvency Administrator sought adjournment of the English proceedings on the grounds that the jurisdiction clause did not apply to the German litigation. The High Court in London held that “Choice of Court agreements could be acceptable in English law” and that there were good arguments that “the rules in the Hague Convention are engaged by an asymmetric clause”[50]. The Court of Appeal upheld the first instance decision and concluded that the Brussels Regulation (recast) does apply to asymmetric clauses under Article 9 such as in the present case and confirmed the analysis in Commerzbank AG v Liquimar Tankers Management Inc. It interpreted the asymmetric clause as containing two distinct agreements, one by Air Berlin to bring claims only in the English courts as an exclusive clause, and an agreement by Etihad to issue proceedings in any court with jurisdiction[51].

1024The Court made no express finding on the application of the HC 2005 to asymmetric jurisdiction clauses, which was not in contention in this case. However, LJ Henderson ruled: “I am prepared to proceed on the basis that the Hague 2005 Convention should probably be interpreted as not applying to asymmetric jurisdiction clauses”[52]. The court also referred to the Explanatory Report and the Diplomatic Minutes of the Convention and referred to the following extracts as providing a “strong indication” that the framers of the HC 2005 took a deliberate decision not to include asymmetric agreements within its scope without prejudice to Article 31(2) so as not to construe it narrowly as being an exception to Article 29 and that the guiding rule for the application must be party autonomy[53].

LJ Henderson stated further that Etihad’s position was in line with the policy of Article 31(2). Otherwise, the job of abolishing “torpedo actions” would be “half done”. Further, this conclusion was more in line with the wording of Article 31(2). In particular, if a clause was given effect by Article 25, as was conceded in this case, there should be no difficulty in holding that Article 31(2) would apply to the extent it was exclusive[54]. The Court rejected the argument that the scope of the Hague Convention, which only extends to exclusive clauses, should influence matters and that Brussels I had a wider scope, and different lis abili pendens provisions. The inference was that the consistency of interpretation should not be treated as a “controlling principle”[55].

LJ Henderson ruled that the application of the Brussels Regulation (recast) formulated in Regulation (EU) 1215/2012 will be limited to cases covered by the provisions of the contract under the “provision of Article 31(2)”[56]. This is because the agreement was made prior to Brexit and the transition period coming into effect. There is a basis to argue that there will be changes after the UK accedes to the HC 2005 and it would be a “a highly speculative exercise to predict the future shape of private international law in the UK in these circumstances”[57].

In arriving to its judgment, the Court was influenced by the explanatory report authored by Trevor Hartley and Masato Dogauchi that served as an explanatory note to the HC 2005. This states that it was the intention of the framers to exclude asymmetric jurisdiction clauses from the operation of the convention. The report also mentions that it was “agreed by the Diplomatic Session that, in order to be covered by the Convention, the agreement must be exclusive irrespective of the party bringing 1025the proceedings. So agreements of the kind referred to in the previous paragraph [that is, asymmetric agreements] are not exclusive choice of court agreements for the purposes of the Convention”[58].

However, the Court concluded that the asymmetric clauses were within Article 31(2) Brussels Directive and that, while the HC 2005 deals solely with jurisdiction agreements, the Recast Brussels Directive contained a comprehensive system of allocation of jurisdiction based on various potential grounds for raising a claim based on forum non conveniens. There is a potential for the interpretation of the asymmetric clauses when the dispute next comes before a court when the jurisdiction of an English court is disputed in a commercial case[59]. The issues that need determination all concern asymmetric clauses that have the potential to test the court’s ability to decide jurisdictional issues by construing the legislative framework of the HC 2005. The issue that needs to be addressed is that while there is a clear distinction with regards to simple choice of court agreements, “asymmetric” or “unilateral” agreements are not easily distinguished[60]. These types of jurisdictional agreements are considered “asymmetric jurisdiction clauses which contain different provisions regarding jurisdiction for each party. They are widely used in international financial markets”[61]. These clauses are likely to be included alongside the dispute resolution clauses in commercial transactions which commonly seek to regulate all aspects of a dispute including mechanism for service of notice, waiver of right to object to the venue or enforcement, indemnities etc.[62].

The rejection of the UK’s application to the Lugano Convention which is the “On jurisdiction and the recognition and enforcement of judgments in civil and commercial matters” means that Scottish courts have been denied the provision where the court first seised of a matter takes priority and all other states. It must stay any proceedings subsequently commenced until the first court has decided the issue of jurisdiction. The separate systems of jurisdictions affect the manner in which legal 1026proceedings are conducted under the common law and civil law traditions and will impact the asymmetric clauses that have been refused a forum conveniens in the UK.

The denial of the benefits of the Lugano Convention 2007 include the guarantees of the recognition and enforcement of judgments in civil and commercial disputes of the contracting parties in the EU, the European Economic Area, and the European Free Trade Association. The Lugano system is based on the assumption that the judicial regimes in Europe are substantially equivalent. The EU has issued a communication that states the UK should instead of being a member of the Lugano Convention be governed by the HCCH 2005. It is stated in the memorandum that although the Convention is “open to accession of ‘any other State’ […] it is not the appropriate general framework for judicial cooperation with any given third country”[63].

In order to circumvent its exclusion from the Lugano Convention, the UK is adopting the Hague Convention on the Recognition and Enforcement of Foreign Judgments in Civil and Commercial Matters (the Hague Judgments Convention) 2019[64]. The Hague Convention is complementary to the HCCH and has the purpose to facilitate a single global framework for the recognition and enforcement of civil and commercial court judgments given in accordance with jurisdiction clauses, including non-exclusive and asymmetric clauses[65].

Article 1.2 states “This Convention shall apply to the recognition and enforcement in one Contracting State of a judgment given by a court of another Contracting State”. Under the Hague Judgments Convention a state may refuse to recognise and enforce a judgement on certain grounds. This Convention would, however, allow qualifying judgments to circulate under a convention framework between the UK and the continuing EU27, should both become party to the Hague Judgments Convention. Article 16 of the Hague Judgments Convention makes clear that judgments created in the UK or the EU before the Convention comes into effect are excluded.

1027It is being implemented in the UK by means of the ‘Recognition and Enforcement of Judgments (2019 Hague Convention etc.) Regulations 2024’ . The Scottish government has had two formal consultations with the Westminster government and it has been determined that “all Scottish and UK stakeholders were in favour of Hague Convention being ratified and implemented into domestic law”. These have included the “Scottish stakeholders including the Law Society of Scotland, the Faculty of Advocates and SCTS have engaged with this consultation and were broadly in agreement with the proposals put forward by the UK Government”. There is currently a protocol being devised in the Scottish Parliament which is considering in order to prepare the ground for legislation that will be by statutory instrument to implement the Hague Convention[66].

Conclusion

The issues in conflict of law cases before the forum courts require considerations of justiciability based on the foreign party, the laws under which the agreement was framed and the enforceability in the UK jurisdiction. In commercial contracts, the rules have been defined by Conventions that the EU has been proactive in developing. These consist the Brussels Convention which was the initial framework for harmonising the contract laws of the members countries of the EU. This is no longer of application in the UK and has become defunct upon Brexit and after a transitional period when cases will be heard in the Scottish courts it will no longer be relevant.

The Scots law is still governed by the Rome I and II Regulation that is effective and which has provided a particular set of laws that exceeds the traditional British paradigm of conflict of laws. The case law has determined that the relevant law will be determined by the close proximity of the parties and that Article 4 will determine which law shall be the governing based on an objective criteria. It exceeds that of the common law perspective and the text of the contract will be considered and the Contract (Applicable Act) 1990 will be relevant in its interpretation.

The Hague Conference for the Choice of Court Agreements (HCCA) 2005 does provide a mechanism for the implementation of judgments. It has a provision for forum non conveniens to make a ruling based on the substantive content of the claim and it has made the process enforcement possible in the UK. The Hague Convention for Enforcing judgments is now on the statute in the UK and its effectiveness in Scotland will simplify the process of commercial and non commercial cases in jurisdictions outside the UK.

[1] Caledonia Subsea v Microperi SA [2001] ScotCS 56.

[2] The Scotland Act 1998 Section 28(8): the UK Parliament will not normally legislate with regard to matters that are within the legislative competence of the Scottish Parliament without the consent of the Parliament.

[3] The Convention of 30 June 2005 on Choice of Court Agreements (HCCH 2005 Choice of Court Convention) is aimed at ensuring the effectiveness of choice of court agreements (also known as «forum selection clauses») between parties to international commercial. HCCH, Choice of Court Section transactions, ˂https://www.hcch.net/en/instruments/conventions/specialised-sections/choice-of-court˃.

[4] OJ L 299, 31.12.1972, p. 32-42.

[5] A. McCellan, The Convention of Brussels of September 27, 1968 on Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial Matters, Common Market Law Review 15(2)/1978. 228-243.

[6] Article 220 (4) of the EU Treaty which states that “ the — the simplification of the formalities governing the reciprocal recognition and execution of judicial decisions and of arbitral awards”. EU notice. ˂https://ec.europa.eu/info/sites/info/files/brexit_files/info_site/civil_justice_en.pdf˃.

[7] It has been submitted that the doctrine of lis abilis pendens “is a fundamental principle of procedural fairness and justice which is normally considered to form part of procedural public policy in most legal systems”. Moreover, the doctrine prevents the waste of resources that result from multiple proceedings, thus also serving efficiency purposes. Hobér, Parallel Arbitration Proceedings – Duties of the Arbitrator, 2013, p. 332. Born supra 14 at 3793.

[8] Paul Beaumont, Forum non conveniens and the EU rules on Conflicts of Jurisdiction: A Possible Global Solution, Revue critique de droit international privé 2018/3 (N° 3). 447-457.

[9] Regulation (EC) No 593/2008 of 17 June 2008 on the law applicable to contractual obligations (Rome I) L177/6, 4.7.08, ˂https://eur-lex.europa.eu/legal-content/EN/ALL/?uri=celex%3A32008R0593˃.

[10] Regulation (EC) No 864/2007 of 4 July 2007 applies to situations involving a conflict of laws to non-contractual obligations in civil and commercial matters. L/99/40, ˂https://eur-lex.europa.eu/legal-content/en/ALL/?uri=CELEX%3A32007R0864˃.

[11] The Private International Law (Miscellaneous Provisions) Act 1995 is only relevant to situations not covered by the Rome II Regulation (the Regulation applies to cases in which damage occurred after 11 January 2009). The Law Applicable to Non-Contractual Obligations (Scotland) Regulations 2008 (S.S.I. 2008/404), regs. 1(1), 2(a) have amended Section 15 b (1) which states “Nothing in this Part applies to affect the determination of issues relating to delict which fall to be determined under the Rome II Regulation”.

[12] UK Statutory Instrument No 834, The Law Applicable to Contractual Obligations and Non-Contractual Obligations (Amendment etc.) (EU Exit) Regulations 2019, ˂https://www.legislation.gov.uk/uksi/2019/834˃.

[13] [2001] ScotCS 56.

[14] § 17.

[15] § 22.

[16] § 25.

[17] § 34.

[18] Sue Farrar, Scots law: A system in search of a family, NLIQ 61 (4). 311-327.

[19] This will replace Article 29 of the Brussels Recast which stated: “Without prejudice to Article 31(2), where proceedings involving the same cause of action and between the same parties are brought in the courts of different Member States, any court other than the court first seized shall of its own motion stay its proceedings until such time as the jurisdiction of the court first seized is established [...]”.

[20] Explanatory Memorandum of the European Commission on 30 January 2014, p. 2. ˂https://data.consilium.europa.eu/doc/document/ST%205445%202014%20INIT/EN/pdf˃.

[21] A. Mills, Party Autonomy in Private International Law, Cambridge University Press, 2018, p. 91-174.

[22] Louise Merrett, The Future Enforcement of Asymmetric jurisdiction agreements, International and Comparative Law Quarterly, 67( 1)/2018. 37-61.

[23] R. Fentiman, International Commercial Litigation2, Oxford University Press, 2015, p. 2.

[24] HCCA 2005, Declaration/ Reservation/Notification, ˂https://www.hcch.net/en/instruments/conventions/status-table/notifications/?csid=1318&disp=resdn˃.

[25] The Regulation 593/2008 sets out the rules which determine the law that governs non-contractual obligations arising between parties in most civil and commercial matters (Rome I) and Regulation 864/2007 on the law applicable to non-contractual obligations (Rome II) require the courts in all EU member states to recognise commercial parties’ choice of governing law regardless of where that law emanates from. As such, a choice of English governing law will be recognised in much the same circumstances by EU Member State courts as they are now.

[26] The UK government has retained in its domestic legislation both Rome I and Rome II such that they apply as before. This has been given effect by the Law Applicable to Contractual Obligations and Non-Contractual Obligations (Amendment etc.) (EU Exit) Regulations 2018.

[27] The New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958.

[28] Choice of Court section, HCCH, ˂https://www.hcch.net/en/instruments/conventions/specialised-sections/choice-of-court˃.

[29] “Other measures that can be taken in addition to lis abili pendens include, inter alia, anti-suit injunctions, consolidation of proceedings, and the application of the doctrine of forum non conveniens”; Denise Forstein, Parallel Proceedings and the Doctrine of Lis Pendens in International Commercial Law, Department of Law, Spring Term 2015, Masters Thesis in Procedural Law (Arbitration), Uppsala Universitet, p. 10, ˂https://www.diva-portal.org/smash/get/diva2:813565/FULLTEXT01.pdf˃.

[30] RV Lopez, The inconvenience of forum non conveniens: State responsibility and denial of justice, Leiden Law blog, 20.10.2020, ˂https://www.leidenlawblog.nl/articles/state-responsibility-due-to-forum-non-conveniens˃.

[31] See R. Fentiman, International Commercial Litigation (n 1) [2.169]:. p 2.

[32] “A contractual term which specifies the jurisdiction of a court […] may be regarded as a part of procedural or public law, on the basis that whether a court has jurisdiction is always a matter of public law which lies beyond the control or autonomy of the parties […] But from another vantage point the agreement is promissory, made between individuals who have bargained for undertakings about where each will accept service of process”: Adrian Briggs, The Conflict of Laws4, Oxford University Press, 2019, p. 1.

[33] The civil law approach has been subject to massive critique, primarily from common law scholarly writers. It has been accused to be too mechanical and strict, encouraging a “race to the court houses”. See for this critique, for instance, Hay/Weintraub/Brochers, Conflict of Laws, 2000, p. 183 et seq., and Brand/Jablonski, 2007, p. 121.

[34] James P. George, International Parallel Litigation – A Survey of Current Conventions and Model Laws, Texas International Laws Journal 37/2002. 494-540.

[35] The New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958.

[36] Choice of Court section, HCCH, ˂https://www.hcch.net/en/instruments/conventions/specialised-sections/choice-of-court˃.

[37] Article 29 “Without prejudice to Article 31(2), where proceedings involving the same cause of action and between the same parties are brought in the courts of different Member States, any court other than the court first seized shall of its own motion stay its proceedings until such time as the jurisdiction of the court first seized is established ...”.

[38] Explanatory Memorandum of the European Commission on 30 January 2014, p. 2. ˂https://data.consilium.europa.eu/doc/document/ST%205445%202014%20INIT/EN/pdf˃.

[39] [2017] EWHC 161 (Comm).

[40] § 68.

[41] § 80.

[42] Cranston J found support for this proposition in Nikolaus Meeth v Glacetal Sarl [1979] CMLR 520 in which the European Court of Justice held that a jurisdiction clause requiring a French party to sue in Germany and a German party to sue in France conferred exclusive jurisdiction on Germany in proceeding brought by the French party and exclusive jurisdiction on France in proceedings brought by the German party; § 65.

[43] § 101.

[44] [2019] EWHC 2284 (Comm).

[45] § 3.

[46] Bryan J [reported as Gunvor Singapore Pte Ltd v Xiang Da Marine Pte Ltd (2019) EWHC 1536 (Comm)].

[47] § 37 (iv).

[48] Ibid.

[49] [2020] EWCA Civ 1707.

[50] Jacobs J, § 217.

[51] § 52.

[52] Ibid.

[53] § 68.

[54] §§ 73-76.

[55] §§ 87-88.

[56] § 94.

[57] Andrew Dickinson, Back to the future: the UK’s EU exit and the conflict of laws, Private International Law, 12 (2)/2016. 195-210.

[58] Trevor Hartley/Masato Dogauchi, 37 Explanatory Report on the Choice of Court Agreements, June 2005, p. 106, ˂https://www.hcch.net/en/instruments/conventions/full-text/?cid=98˃.

[59] The Court of Appeal gave cognisance at § 5 to the article by Dr Louise Merrett, who had stated asymmetric clauses “are widely used in international financial markets”. Their aim is to “ensure that creditors can always litigate in a debtor’s home court, or where its assets are located”, and they “also seek to reassure the creditor that it can only be sued in its preferred jurisdiction”; The future enforcement of asymmetric jurisdiction agreements, ICLQ 67(1)/2018. 37-61 at 40.

[60] Alex Mills, Party Autonomy in Private International Law, Cambridge University Press, 2018, p. 91-174, ˂https://doi.org/10.1017/9781139941419˃.

[61] Louise Merrett, The Future Enforcement of Asymmetric jurisdiction agreements, International and Comparative Law Quarterly 67(1). 37-61.

[62] R. Fentiman, International Commercial Litigation2, Oxford University Press, 2015, p. 2.

[63] Document COM (2021) 222. Communication – Assessment on the application of the UK of Great Britain and Northern Ireland to accede to the 2007 Lugano Convention, 21 May 2021, ˂https://www.eumonitor.eu/9353000/1/j4nvhdfcs8bljza_j9vvik7m1c3gyxp/vliigch422su˃.

[64] The EU Commission has stated that, instead of the Lugano Convention, it considers “the Hague Conventions should provide the framework for future cooperation between the European Union and the United Kingdom in the field of civil judicial cooperation”, COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL. Assessment on the application of the UK of Great Britain and Northern Ireland to accede to the 2007 Lugano Convention, ˂https://eurlex.europa.eu/legalcontent/EN/TXT/?uri=CELEX%3A52021DC0222˃.

[65] The preamble states that “such enhanced judicial co-operation requires, in particular, an international legal regime that provides greater predictability and certainty in relation to the global circulation of foreign judgments, and that is complementary to the Convention of 30 June 2005 on Choice of Court Agreements”.

[66] Siobhian Brown, Letter to Scottish Parliament, Re ‘Recognition and Enforcement of Judgments (2019 Hague Convention etc.) Regulations 2024’, ˂https://www.parliament.scot/-/media/files/committees/equalities-human-rights-and-civil-justice-committee/correspondence/2024/uk-si-the-recognition-and-enforcement-of-judgments-2019-hague-convention-etc-regulations-19-march-20.pdf˃.