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Agreements on Jurisdiction and Choice of Law by Briggs, Adrian (20th March 2008)

1 Introduction and Scheme

From: Agreements on Jurisdiction and Choice of Law

Adrian Briggs

Subject(s):
Contractual agreements on jurisdiction — Choice of law clauses — Severable agreements — Validity and effect — Choice of law — Judgments from designated court under dispute resolution agreement — Jurisdiction and the English courts — Recognition and enforcement of foreign judgments – Brussels and Lugano Conventions — Jurisdictional and choice of court agreements — Consent in recognition of foreign judgments

(p. 1) Introduction and Scheme

  1. I. Introduction 1.01

  2. II. Advance conclusions 1.12

  3. III. Terms and elements 1.13

  4. IV. A snapshot from 2007 1.29

  5. V. Scheme 1.32

I. Introduction

1.01  The purpose of this book is not to challenge, question, or contradict the rules of English private international law, but to look at the way they work in support of the simple principle that it is good for parties to make contracts, good for parties to perform contracts, and good for courts to enforce contracts. To this end, we will explore the role of consent, common intention, and agreement, within the individual rules of private international law.

1.02  Where one can show the parties’ common, or mutual, intention, it is natural to suppose that it should guide the judge in the application of the rules of private international law: a judge should generally interpret the rules of private international law to give effect to what was shown to have been the common intention of the parties. The common law principles of private international law accepted the force of the intention of the parties as a reason for the law, for legal certainty and respect for expressions of adult autonomy are values which deserve support. And although the private international law of the European Union expresses its aims in its own idiom, legal certainty and predictability of the outcome of potential litigation are prominent among its ambitions, the better to secure the legal protection of those established within the community and to help complete the internal market. Giving effect to the demonstrable intention of the parties is, therefore, part of the underpinning of the statutory framework of the private international law of the European Union; and the more securely the intentions of the parties are given decisive force, the more deeply legal certainty will take root in the community as a whole.

1.03  Intention is one thing, but it may be understood as a joint appeal, subscribed to today, to be put before tomorrow’s judge. If one of the parties subsequently resiles from it, and behaves in a way which contradicts it, the other may say that ‘this is not what we intended should happen’. That may resonate with the judge, whose law may direct him to respond to the intention which existed, and to disregard the fact that someone has now turned his back on it. But that may be the limit of it. If a litigant has changed his mind, a court may decide to focus on the position which obtained before the mind was changed and say, in effect, that the change of heart came too late for it to have any effect in law. A change of mind may fail to free the party from the consequences which would have followed if he had not changed his mind. But a common intention is just that, neither imposing nor seeking to impose any additional constraint. Repudiation of a common intention may have no consequence bar the risk of ineffectiveness. A change of heart may not work, but it invites no more serious a sanction than to be ignored.

(p. 2) 1.04  To give it an extra dimension, the parties may fortify their common intention with an agreement that each will be adhere to it and will not depart from it. The scenery is instantly transformed; an examination of this phenomenon forms the core of this book. Where the parties make agreements about the jurisdiction of courts it may now be said, against the party who has changed his mind, that he has broken his promise, broken his contract, and crossed an important line. It changes everything, allowing the party who wishes to hold the other to their common intention to invoke a distinct juristic basis for doing so. A party who breaks his contract should expect a number of consequences. One is that his departure from the agreement will bring him no benefit. Another is that his breach of contract itself forms the basis for a separate legal claim, with a distinct set of legal remedies. This will guard the innocent party from the adverse consequences of breach, but will also provide the incentive for keeping the contracting parties to what they agreed.

1.05  The more pervasive or persistent the contractual analysis, and the more effective the contractual remedies available to the victim of a breach, the greater is the likelihood that certainty will be encouraged, predictability will be enhanced, and the costs of litigation, in the long run, reduced. We may now be in a transitional phase, with the contractualization of the conflict of laws being increasingly recognized for what it is, and the values which underpin the common law of contract making themselves available to support the common law principles of private international law. A question for debate is whether promises made in the sphere of private international law are as susceptible to enforcement as ordinary contractual promises, with some remedies being available as of right, while (p. 3) others lie in the discretion of the court. The more certain the enforcement, the more likely it is that parties will abide by their promises. This inveterate truth of the common law is not confined to certain areas while being played down in or excluded from some others.

1.06  By way of balance, some may apprehend that too blunt an application of the values of the general common law will come at the expense of the special, particular, common law principles of private international law, and that one should temper the impact of promise-based morality upon private international law. There are, as this approach would maintain, competing legal values, more important than personal agreements between private parties; some questions on which the judge must decide for himself, rather than simply applying the rubber stamp to what the parties agreed as between themselves; some issues on which the legitimate interest of another legal system cannot be treated as lying outside the contract and therefore as irrelevant.

1.07  Private international law may wrestle with its contractual soul, but the law of commercial arbitration underwent a development which had the potential to reach very far indeed. The courts have long accepted that agreements to proceed to arbitration rather than adjudication were agreements which ought to be enforced, and which would be enforced by staying contradictory legal proceedings as well as by damages actions. But there was also a sense in which the parties’ right to exercise their autonomy was limited by the right of the court, if asked, to take certain questions out of the hands of the arbitrator and decide them itself. But a series of international conventions and model laws, and domestic legislation implementing the former and inspired by the latter, has cut back the role of the courts to its irreducible minimum, and accepted that where the parties had made an agreement, or appeared to have made an agreement, to proceed by way of arbitration, that agreement1 would be enforced without much further ado. Not every judgment, and not every judge, seems to have felt wholly comfortable abdicating primary responsibility for the adjudication, but on the whole, parties to a plausible agreement to arbitrate who brought legal proceedings designed to undermine the integrity and primacy of that agreement receive increasingly short shrift and a nasty costs order to boot.2 Moreover, parties who make an agreement to arbitrate have a choice of tribunal, place, and procedure, which is entirely in their hands. They can generally design their own rules for choice of law, (p. 4) or authorize the arbitrators to devise their own; and the law will generally enforce their right to have done so. Now this is not without its problems. If all arbitration is fundamentally contractual, someone has to decide whether the contract was valid; and someone has to take the decision about who will decide whether the contract was valid. Contractual autonomy is all very well until it is questioned, at which point a robust methodology is needed. Autonomy may be recognized, may be granted; but autonomy cannot vouch for its own validity or exercise. The law of commercial arbitration tries to provide simple answers, not always successfully; it is unsurprising that the law on judicial adjudication runs into similar difficulty.

1.08  But arbitration also shows us that whatever one may conclude about the substantive obligations which the parties undertook, with forethought or by accident or otherwise, they may write their own rulebook for the settlement of disputes. It is not a question of ticking a box for standard-form arbitration. The parties may devise their own agreement, which may be very detailed indeed, or adopt a standard form. The parties may choose the law to be applied by the tribunal to assess the validity or invalidity of the claim and defence. The extent to which a court will respect this exercise of adult freedom is a separate question, but the answer is increasingly that it will. The result is that the agreement for dispute resolution is contractual in nature; is enforced as though it were a contract which is fit for summary enforcement; and treats the autonomy of the parties as the highest of legal values.

1.09  Now if parties may exercise this freedom in relation to dispute resolution by an arbitral tribunal, one may ask what sensible justification exists for taking a different view when they agree, in terms otherwise the same, on dispute resolution by a judicial, rather than an arbitral, body. One response may be immediately mentioned. It is sometimes said that if parties want a particular kind of dispute resolution, tailored to their individual needs, they are free to have it, but are required to take it in the form of arbitration, and cannot expect it in the form of judicial determination. Judicial determination, it is said, comes in a standard, plain vanilla, form, which is not obligatory (because arbitration is an option) but which must be taken more or less as it is given. Judges cannot be made the mere servants of parties who have devised their own procedures and rules of law. The rigour of adjudication, and the dignity of the whole process of adjudication,3 requires its own hierarchy and judges, not private parties, to be at the top of it. There is sense in this, but it does not follow that the private (p. 5) international law rules of the common law should not take and assimilate from the law of arbitration that which it is good and convenient to take and assimilate. This may involve further recognition of the right to make choices in the form or agreements, and enforcement of choices made in the form of agreements. After all, if a court is bound to trust tribunals to enforce the parties’ agreement, there is little obvious justification for trusting the judges any less.

1.10  So the question is how far the conflict of laws has become contractualized, or been rendered liable to being restated in contractual terms. If nothing else, we may find that private international law and its organization might be made clearer and more rational if it drew a preliminary distinction between (on the one hand) issues of jurisdiction and choice of law which are covered by agreement because the parties have exercised their autonomy, and (on the other) the issues of jurisdiction and choice of law where the right to exercise autonomy went unexercised. This is not the first time writers have pondered aspects of the broad issue. Some years ago, Dr North delivered a significant and most important paper entitled ‘Choice in Choice of Law’,4 which prompted an early version of some of the arguments in a paper entitled ‘Choice of Choice of Law’.5 Around the same time, Dr Nygh was converting his 1995 Hague Lectures, given under the title ‘The Reasonable Expectations of the Parties as a Guide to the Choice of Law in Contract and Tort’6 into his book Autonomy in International Contracts.7 These looked, in various ways, at the extent to which the parties come to a common intention which the courts would honour. Less attention was directed to whether it would make any difference for this common intention to be fortified by a promise, an agreement, not to depart from it; and even less was devoted to whether such an agreement could or should be reinforced by causes of action and remedies for breach or wrongdoing. These are the directions which now need to be explored. Accordingly this book will seek to examine the role of agreement in private international law. Its principal source material is agreements on jurisdiction and on choice of law, always acknowledging the contribution provided by the law of arbitration. It does not aim to offer a comprehensive manual containing all the jurisprudence available on a particular point: in a world in which nothing goes unreported any more, individual writers must now make the editorial decisions which the law reporters once did. There are other books which perform the encyclopaedia function, (p. 6) and which are more than sufficient for that task.8 Instead, it does ask why the law is as the law appears to be, and whether its current state is rational.

1.11  In reflecting the evolution of the law this book will aim to point out where we have come from, where we are, and how the law should develop further. It cannot ignore developments taking place in legislation, most of this being European in origin and genetically alien to the structure of the common law. The European material is directly authoritative only where the organs of the European Union have authority, but so long as it is properly understood, it does offer a valuable and alternative insight into common contemporary problems in international commercial litigation. Perhaps the most pressing issue for practitioners (in both senses) of private international law is to work at the interface of these distinct schemes. If it is true, as this book will seek to show, that the basis of the common law principles of private international law is as different from that of the European legislation as it appears to be, issues of mixed parentage will be liable to look a little unplanned. But in the Europe of the twenty-first century, this is taken as given; and it is certainly not true that it is always a curse.

II. Advance Conclusions

1.12  To anticipate conclusions is dangerous, but to ask a reader to trust that after several hundred pages he or she will see the point is arrogant. Two broad themes will emerge from this account. The first is that rules of private international law may be organized or reorganized to draw a more systematic distinction between agreements and non-agreements, in jurisdiction as well as in choice of law, and that much may be understood by (p. 7) treating jurisdiction and choice of law by agreement as coherent, and as separate from jurisdiction and choice of law where agreement is absent. This would make it easier to see the contribution which may, and should, be made to private international law by private commercial law reasoning. The second is that agreements on jurisdiction and on choice of law, are, along with arbitration agreements, components of a more or less comprehensive agreement for the resolution of disputes. This is ancillary to but distinct from the substantive legal relations in which the parties may also stand. We are accustomed to accept arbitration agreements as separable from the substantive contracts to which they relate. We accept that the subject matter of the arbitration agreement is distinct from the subject matter of the relationship which may have brought the parties to the point of dispute. The idea of separability is also making some headway as a useful tool in the law of jurisdiction agreements. Its application to choice of law has yet to be established, but there is a plain sense in which parties, when they choose a law to govern a relationship, are in fact nominating the law to be applied by a court or tribunal if ever it comes to the resolution of disputes. The organizational consequence of this is that the entire agreement upon how the parties will conduct themselves if a dispute breaks out is a separate and distinct agreement. It is intended to be given effect in the first resort by the promised observance of the parties; in the second resort, by order for its specific enforcement by a court; and in the last resort by an order for monetary compensation. The world has become accustomed, with remarkable uniformity,9 to accept that this is how arbitration agreements work. There is no reason to suppose that these values—that agreements should be enforced, that courts should reinforce them where they can, that adults may exercise freedom to decide how their disputes will be resolved, that the instances in which the intention of the parties may be overridden should be few and well understood as questions over which individuals do not enjoy autonomy—should be taken less seriously when parties agree to bring their disputes before a court. To be sure, courts are not tribunals, and on occasion this will necessitate a difference in approach. But the expectation surely ought to be that where parties make an agreement for the resolution of disputes, that agreement should be respected where possible and reinforced where necessary. This is the sense in which the conflict of laws is becoming contractualized. It will also enable a number of loose ends to be tied: the application of terms despite the rescission or termination of a contract; the (non-)relationship between the proper law of a contract and the place of dispute resolution; the rules for (p. 8) incorporation from one contract to another, and so forth. It will aim to put the law on dispute resolution in private international law on a clearer footing than that which it currently has, the better to see how it works alongside the new European regulation of the same issues.

III. Terms and Elements

It may be useful to identify some specific issues with which this book will be concerned.

Agreements on jurisdiction; agreements on choice of law; and agreements

1.13  The law on jurisdiction agreements and agreements on choice of law ought to be simple, but increasingly it shows itself to be more complex than one might expect. Both the case-law and the doctrinal writing have minor shares in the blame; but it is apparent that the increasing activity of legislators in London and Brussels, and the inventiveness of counsel, have all contributed to the complexity which has come to pass. The pervasive question is whether it is appropriate, or possible, or dangerous, or misconceived, to treat these agreements as ordinary private contractual undertakings which give rise to ordinary civil contractual consequences. The common law, at any rate as practised in commercial cases, appears increasingly to say so, though it is not always clear that the magnitude of the development is appreciated. By contrast, the intellectual tradition of private international law has been to be more wary of appeals to plain contractual reasoning, on the footing that the international element in conflicts cases calls for special attention and different sensitivity. From time to time a clash of legal cultures will result, even if this happens gradually and unwittingly.

Jurisdiction agreements and their validity

1.14  Questions concerning the scope, validity and enforceability of jurisdiction agreements usually arise early in the litigation, commonly in the context of applications for jurisdictional relief. A mature system of international commercial litigation will aim to provide a speedy and efficient determination of such challenges;10 a court will sometimes be attracted to a path (p. 9) of reasoning which avoids complications. For example, a jurisdictional application may be disposed of by finding there to be a ‘good arguable case’ that an agreement on jurisdiction was valid or invalid. If that is all that is required, some of the potential analytical difficulties may be side-stepped by finding that the claimant’s arguments are good enough to justify the court in accepting jurisdiction. But once jurisdiction has been dealt with, if the claimant then relies on the jurisdiction agreement to contend that he has a legal right not to be sued in a foreign court, applying for a final injunction to prevent the defendant from suing overseas, he will not obtain the relief he seeks simply by showing a good arguable case that he has a right to the relief he seeks. What may appear to be a single question—was there a valid and binding agreement on jurisdiction?—will be answered differently, according to the context.

1.15  Where the parties to litigation admit that they are bound by a jurisdiction agreement, but dispute the legal consequences which follow from the fact, the framework within which the issues are to be debated is straightforward. Where the parties to litigation accept that they are contractually bound but dispute whether the contract contained or was accompanied by an agreement on jurisdiction, the bounds of the analysis may still be drawn with some reasonable degree of certainty. But where one party to litigation denies being party to a contract, still less one which contained an agreement on jurisdiction, it is more challenging to devise a robust structure for the analysis. On the one hand, a court should avoid taking either litigant’s side on the very issue in dispute. On the other, a judge must resist being drawn into a trial of the merits: a court should not try the question whether there is a contract containing a jurisdiction agreement by which the parties are bound in order to decide whether to exercise jurisdiction to decide whether there is a contract by which the parties are bound. It is no surprise that the courts find themselves pulled in several directions at once; and when it comes to analysis, constant vigilance is needed to prevent the best becoming the enemy of the good.

What jurisdiction agreements mean

1.16  It is now clear that jurisdiction clauses may themselves be more complex organisms. True, the principal question is whether they are successful in prorogating or derogating the jurisdiction of courts. But the question of how they are to be enforced has raised its profile as parties to agreements on jurisdiction who fail to obtain an order for specific enforcement of the agreement turn their attention to pecuniary relief by way of substitute enforcement. Nothing is more fundamental to the common law than the fact that breach of contract gives rise to a right to damages: that pacta sunt (p. 10) servanda, contracts are to be performed, and that damages for breach are a matter of right and entitlement.

1.17  This development, which arrived in private international law rather late in the day, invites reflection on the nature of a contractual term which specifies the jurisdiction of a court. It 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 direct control or autonomy of the parties. If it is, the extent to which the agreement can be enforced at the behest of a claimant is limited by matters which lie beyond his power or control. It may be said that where legislators have established jurisdictional rules for a court, it is not for the parties as individuals to make private agreements which assert priority over that public law. But from another vantage point the agreement is promissory, made between individuals who have bargained for undertakings about whether and where each will issue or accept service of process. Even if such agreements do not tie the hands of a judge, for whether there is jurisdiction is the business of the legislator who laid down the law, they still embody private compacts as to mutual behaviour and for the enforcement of which either party may look to the court. If this is correct, one must ask whether there are any particular rules, affecting the enforcement of such agreements by an order made under the inherent jurisdiction of the court, or by an order granting equitable relief, or by an order for the payment of money. How does the nature of the contractual promise bear on the relief which may be claimed when it is shown to have been breached? Does the common law acknowledge that there are contractual promises which do not give rise to a secondary obligation to pay compensatory damages when they are broken? The answer to these and other questions requires proper examination of the legal nature of an agreement on choice of court.

1.18  Agreements on jurisdiction have provoked some creative thinking. The law governing their enforcement by specific order has become more complicated, and in some respects, more restrictive, and this may have provoked the party denied specific enforcement to fight back. The fact that these questions are now arising in relation to jurisdiction agreements makes unavoidable a parallel enquiry into the nature of an agreement on choice of law.

Agreements on choice of law

1.19  Hitherto there has been little interest in a parallel investigation of agreements on choice of law. However, if an agreement on choice of law may be or may contain a promissory obligation, according to which each party to the contract agrees that he will accept the application of the chosen law to (p. 11) the obligations of the contract, and that he will not act in a way that will undermine that chosen law or otherwise make it impossible for that chosen law to operate, there is as much scope for the argument that there has been a breach of that promise as with an agreement on jurisdiction. The same questions will arise; the answers may not be the same. Even if choice of law rules are a higher form of law, which litigants take as they find in the court where they litigate, this need not preclude the argument that choice of law is something over which the parties to a contract have legal power to create mutually binding obligations enforceable by private litigation. It is arguable that an agreement on choice of law is a promise by which contracting parties undertake reciprocal obligations;11 and this being so it may be shown to have been broken, with the further consequence that remedies may lie in response to the breach. It is necessary to ask questions about the legal nature of a choice of law agreement, and to consider whether the answers to these questions are to be found in English law or in some foreign law. It will be necessary to look beyond the agreement on choice of law in its role as law which governs a contract, tort, or other legal relationship, to ask whether it has a wider role, and to consider whether it produces obligations which, even if ancillary or supportive, are independently enforceable as promissory obligations.

Severability

1.20  Legislative, judicial, and scholarly analysis so far has tended to focus on the question of whether a jurisdiction agreement is severable or separate from the contract of which it may appear to be a part. This is particularly important in the context of cases in which a challenge to the jurisdiction agreement is founded on the contention that the contract of which the jurisdiction agreement is alleged to be part never came into legal existence, or came into existence only to be rescinded or terminated. When this conundrum arose in the context of agreements to arbitrate, the solution was to adopt, and then to legislate to confirm, a principle of severability.12 Such a solution in incomplete, for though it means that the invalidity of the substantive contract is not fatal to the arbitration agreement, it does not provide the framework by reference to which the validity of the arbitration agreement may be tested: severability gets one only so far. Where jurisdiction agreements are concerned there is, quite unexpectedly, less authority and less legislation to vouch for the doctrine. The intuition that (p. 12) a jurisdiction agreement should work even though the main contract is impugned does not so easily translate into convincing legal reasoning. Various patterns of argument may be deployed to support the conclusion; none completely stills the doubts.

1.21  Severability is a technique13 which protects the jurisdiction agreement, or other severable provision, from attacks upon the validity of the contract to which it belongs. It takes the severed element outside and clear of the substantive contract; it insulates the jurisdiction agreement from the remainder of the parties’ bargain. Different issues are presented when one asks whether a jurisdiction clause may have legal effects on more than one level: to prorogate or derogate jurisdiction in relation to the substantive dispute but also, and distinctly, to impose privately enforceable restrictions on the behaviour of the other contracting party. This too may involve a form of severability, but it is a distillation of legal functions, rather than severability of contractual obligations.

Contractual autonomy

1.22  One characteristic of a mature legal system is that persons who have legal capacity should be able to make agreements in such terms as they consider to serve their interests, and should be able to expect the courts, or other dispute resolution tribunals, to be prepared to enforce them according to their terms. In principle, the degree to which the law should intrude on or override these private agreements should be no more than is necessary to serve and secure a broader public interest. So, for example, contracting parties should be able to make, and to expect the courts to enforce, agreements on jurisdiction and choice of law. Those contracting parties liable to occupy a position of comparative economic vulnerability, such as employees, consumers, and those taking out insurance, should be protected from exploitation. This may involve reducing or removing the power to make, or to hold the weaker party to, a choice of jurisdiction or law. There may be other areas in which the choice of the parties will be denied specific effect. Some jurisdictional policies and prohibitions are too important to yield to contradictory private agreement: in such cases it is not open to one litigant to insist that a court accept jurisdiction, or insist that it decline jurisdiction, simply because the contracting parties provided for it. But to say this is not, or is not necessarily, to say that a promise to accept or to not assert jurisdiction may not give rise to a personal obligation, legally distinct from the question of whether the court (p. 13) has jurisdiction in law, and separately enforceable as an obligation binding the parties to it. This book will seek to determine whether an agreement on jurisdiction may have such secondary effects; and it will apply the same questions to agreements on choice of law.

1.23  The autonomy of contracting parties is not boundless. The frameworks of private international law—whether civil jurisdiction (its existence, its exercise, its non-exercise), or the recognition of foreign judgments, or choice of law—are established by higher authority than, and are not subordinated to, the private agreement of parties to litigation. Though originally found in rules of the common law, much of the conflict of laws is now governed by statute and international legislation.14 Even if the rules of the common law conflict of laws were in substantial part defined by the agreement of parties to litigation, it is clear that the principle that pacta sunt servanda cannot coexist with a view that rules of the conflict of laws are rules of a public law character. The interesting task is to explore whether the relationship between the rules of the conflict of laws, and the law of agreements, can be made to be harmonious.

Consent and agreement

1.24  The focus on the construction and enforcement of agreements may disguise the broader significance of consent, as distinct from agreement, as a motivating force and organizing tool in private international law. Another of the common law’s basic truths is that a gulf separates those who consent to a particular event or outcome from those who do not. The enforcing of agreements overlaps with, but is not congruent with, the law of consent. Those of full age and capacity who make agreements can hardly be heard to complain when they are held, by one means or another, to the obligations inherent in performance of those agreements. Yet if an agreement is a pre-requisite for a cause of action to enforce an expectation, there are other cases in which the consent of one litigating party, even though falling short of a legally enforceable agreement, may suffice for the conclusion contended for. Take a person who is sued in a foreign court, who defends the claim made against him on its merits and loses. The judgment may be recognized and enforced against him in England, for having consented to the adjudication of the foreign judge, he cannot generally be heard to complain when the decision made in that adjudication is said to be enforceable in England. The same is true of the claimant who raises a (p. 14) claim in a foreign court but loses: he cannot be heard to contend that he is not bound by the judgment adverse to him, and cannot ask the English court to pretend that it never happened. Such results cannot be ascribed to an agreement which the parties made, save in the rather artificial sense that there may be said to be a tacit agreement between parties to litigation to abide by the outcome of that process. It is better understood as resting on the principle of consent: that a person who volunteers to participate in a foreign trial cannot generally be heard to complain of its outcome. In other words, no harm is done to the willing: volenti non fit injuria. In chapter 2 we will examine some central doctrines of the common law conflict of laws, to see the extent to which they illustrate the principle that consent is a sufficient justification for the derivation and application of rules of the conflict of laws in the context of jurisdiction and the non-exercise of jurisdiction, judgments, and on choice of law.

1.25  The identification of consent as something essentially distinct from agreement allows us to explain how intentions of parties to litigation are taken into account in the operation of rules of the conflict of laws. It is distinct from the proposition that an agreement between parties to a contract should be enforceable between them in private law. A court may enforce obligations mutually assumed by agreement because they are created by autonomous parties and are intended to bind. An obligation may be enforced because it is appropriate to enforce it as an obligation, and the only significant question is the selection of remedy suitable by way of order. This may be seen as an issue quite separate from that of whether a particular rule of jurisdiction or choice of law should be applied to parties to litigation.

1.26  This brings three principal advantages. First, it places the wishes of the parties in relation to rules of the conflict of laws in a proper perspective: they may be material to the operation of the rules but may not be decisive. Secondly, it side-steps the question, theoretically interesting but rather arid, whether parties to a contract may make a binding agreement to do something which they have no legal power to dictate. Thirdly, it accepts that there is a difference between asking whether a party to litigation has any basis for complaint if the court exercises or declines to exercise jurisdiction, and asking whether a contracting party has a cause of action against his opposite number as a party in breach of an undertaking as to his behaviour. There is a difference between asking whether a party to litigation has any basis for complaint if a particular choice of law rule is applied to resolve the dispute, and asking whether a contracting party has a cause of action against his opposite number as a party in breach.

(p. 15) Penn v Lord Baltimore

1.27  There is more than a trace of old learning in the drawing of such a distinction. In Penn v Lord Baltimore15 the court recognized and relied on the distinction between a rule of law on jurisdiction which applied to parties in litigation, on the one hand, and the separate and distinct, or separable and distinguishable, agreement made between contracting parties, on the other. The case concerned a boundary dispute between the proprietors of the colonial territories of Maryland and Pennsylvania. To settle their differences, the parties had concluded an agreement for arbitration by commissioners; but this had not been carried out, and the boundaries were still in dispute. A suit was brought for a decree of specific performance of the agreement. The defence taken was that the definition of such boundaries was a matter within the exclusive jurisdiction of the Privy Council, and that this prevented courts other than the Privy Council exercising jurisdiction. The Lord Chancellor acknowledged that it was beyond the competence of his court to make a decree in rem, settling the boundary line, for exclusive jurisdiction to make such an order was vested in the King in Council, and nothing the parties said or did could alter that legal fact. But Penn and Lord Baltimore had made an agreement providing for the delineation of the boundary; Lord Baltimore had refused to carry it into effect; and Penn was entitled to sue on the agreement and ask for a decree of specific performance of the agreement. Though the order made would not be binding on the King, and would not operate in rem, the court still had power, and had the duty, to enforce the private agreement which the parties had made and by which each was legally bound. So far as remedies were concerned, the Lord Chancellor had no power to award damages: it would take more than a century for Lord Cairns’ Act16 to alter that, and in any event he considered specific performance a far superior remedy to a monetary award. The court clearly saw, and relied on, the distinction between a rule of law defining subject-matter jurisdiction, which lay wholly beyond the power of the parties and about which the court had no power to decide or do anything, on the one hand, and a rule about the enforcing of private agreements. It may be an old principle, but it is easily adaptable to modern use. To take an example from 2007: a court, when considering whether to recognize a foreign judgment which has made a ruling about the ownership of property, may refuse to recognize it as a judgment in rem, establishing title to the property erga omnes, against all comers, but may still regard it as binding the parties to the foreign proceedings as a judgment in (p. 16) personam, creating a personal obligation, if the distinct conditions for such recognition in personam are satisfied.17 The illuminating judgment in Pattni v Ali18 demonstrates how the parties may assume, and the court enforce, a personal obligation created in relation to subject matter over which the court has no jurisdiction. It is a principle of the highest importance.

1.28  Though the parties cannot create primary rules of jurisdiction or choice of law, they can make agreements about them which may be separately enforced; and if this means that contracting parties may do by indirect means something which they cannot achieve by direct means, the proper response is to acknowledge that this is how the common law works. Whether this proves to be a sustainable distinction, and whether or not it can be made to serve in the analysis of choice of law agreements as well as those on jurisdiction, remains to be tested. It represents an opportunity to think more carefully about the way the ordinary principles of commercial contract law may be applied to the building blocks of the common law principles of private international law.

IV. A Snapshot from 2007

1.29  One of the themes of this book will be sustained by looking at the contractualization of the commercial conflict of laws. To provide a point of departure, it is instructive to look at a recent case, argued and decided in the Commercial Court. Catlin Syndicate Ltd v Adams Land & Cattle Co19 involved routine policies of insurance issued by London insurers to cover an American farming business. The paperwork revealed something of the informality which seems on occasion to characterize the way the insurance market goes about its business. When all put together, the various documentation appeared to provide for ‘UK law and jurisdiction’ and that the insured was entitled to commence proceedings in any court in the United States, to the jurisdiction of which the insurer agreed to submit. Such a contractual term is known in the trade as a ‘service of suit’ clause, the use of which is required20 for London insurers underwriting certain risks for American insureds. When it became clear that a dispute was on the cards, the English insurer began proceedings, and obtained an anti-suit injunction, in London. There quickly followed proceedings brought in (p. 17) Nebraska by the American insured, who invited the insurer to discontinue its English proceedings. The unwillingness of the insurer to do so was motivated, in part at least, by the fact that a court in Nebraska was not certain to apply English law to the principal issues in dispute. All the pieces were therefore in place for a substantial exercise in private international legal analysis. There were two jurisdiction agreements: one for the United Kingdom, and one for an American court. The reference to the ‘law and jurisdiction’ of the United Kingdom was challenging, at least in a contract which might be governed by English law, for the United Kingdom is not a ‘country’ for the purposes of private international law.21 An express choice of law had been made, but a post-contractual exercise of an option proposed to unmake it and to subject the contract to a different law. An anti-suit injunction had been obtained to enforce the contractual agreement for United Kingdom law and jurisdiction, but at the seeming expense of the other contractual agreement, and in a way which rather intruded on the proceedings in the American courts. Many of the issues of modern private international law accordingly arose.

1.30  The judge, however, saw the case as presenting a pretty straightforward problem with a pretty straightforward answer. The question was what the parties had agreed to, there being no suggestion that there were restrictions upon what they were entitled to agree to. Having worked out what they had agreed to, he made22 the orders that gave specific effect to that agreement. The choice of ‘UK law and jurisdiction’ was, as a matter of construction, a choice of English law and jurisdiction,23 and the contract read accordingly. The concurrent choice of English jurisdiction and Nebraska jurisdiction was what the parties had chosen. It meant that the English courts had jurisdiction, but that this could be superseded by subsequent choice of American jurisdiction, and there was no problem with that. The choice of English law, but which might be disregarded by the (p. 18) American court, was part and parcel of what had been agreed to.24 As to the anti-suit injunction, the insured was doing no more than its contract entitled it to do, so there was no basis to order it to restrain itself. The whole of the question was one of contractual construction, and of finding the best remedies to enforce the contract. Only at one point did private international law make an appearance. The parties had engineered a situation in which there could be concurrent proceedings, in England and America. They had said neither that they should be allowed to run concurrently and race to judgment,25 nor that the institution of proceedings in one court required discontinuance in the other.26 The contract being silent on the point which called for an answer, namely what if anything was to be done about the concurrent proceedings, the rules of private international law which govern a conflict of jurisdictions, provided the answer. What might have been seen as a significant issue for private international legal analysis was disposed of by a close examination of what the parties had agreed to, what that agreement entitled each to demand from the other, and what was the most effective remedy for fulfilling the agreement. Aside from the one issue on which the contract was silent, it is improbable that the judge’s analysis would have been significantly different if Dicey Morris & Collins27 had never been written. Where there is a contract, there is the answer, and the only real questions are questions of construction. What the parties agreed to is what the parties will get, and the only real questions are questions about remedies.

1.31  The judge had much to be grateful for. Had there been no choice of law or of jurisdiction in the contract, then if proceedings had been begun by each party in its preferred court, the analysis would have been very different. The question ‘what did the parties agree to?’ would have yielded no obvious answer; the question ‘what are the parties to be taken to have agreed to, given that they did not provide for something else which could have been agreed to?’ is frequently an exercise in self-delusion.28 The law certainly provides a set of answers which it makes available for cases (p. 19) where the parties have refrained from exercising their own autonomy; but this will sometimes struggle to project a clear image. What does seem clear, though, is that the eventual answer will depend on asking whether the parties agreed to it, in which case the agreement will be enforced, or did they not, in which case something completely different happens.

V. Scheme

1.32  The material examined in this book will therefore be presented according to the following plan. The introduction has set out the aims and scheme of the book. The infrastructure provided by the common law will be examined first. Chapter 2 will explore the role of consent as a building block in the commercial conflict of laws. It will show the considerable extent to which the conflict of laws gives effect to the consent of the parties as to the particular issue in question, or takes account of the consent of the parties in devising those rules in the first place. Chapter 3 examines the nature of agreements which deal with the resolution of disputes in general. It looks at issues of validity and invalidity, paying particular attention to the idea of severability and its role in establishing the separateness of agreements on the resolution of disputes from the relationships to which they relate. This will introduce the idea that choices of arbitration, jurisdiction, and law establish terms of the agreement for the resolution of disputes; but it will also be necessary to examine the shortcomings inherent in an approach which claims to be able to find, and then to enforce, agreements between parties when the truth is that the agreement is somewhat contrived.

1.33  Chapter 4 examines the types of clauses with which we are concerned, seeking to organize and classify them by type. It will conclude that though courts have, perhaps instinctively, tended to construct categories of clause, into which individual terms can be squeezed, this distracts attention from the simple truth that everything turns on the construction of the clause, and nothing much turns on anything else. It returns to the idea of severability within contracts, and takes a preliminary look at corresponding rules of European law. Chapter 5 will deal with the practical drafting of such agreements, by taking an example clause and looking at the issues which arise from it. If everything turns on construction, attention needs to be given to the pitfalls which result from inattentive draftsmanship or from a failure to keep precedents up to date. Becoming outdated as the law moves on is not, however, something from which chapter 5 can hope to be immune.

(p. 20) 1.34  Chapter 6 begins the enquiry into what it may mean to enforce a jurisdiction agreement, looking first at the common law and in particular at its approach to enforcement by stays and injunctions: the conclusion is that this is really an exercise in the enforcing of contracts. Chapter 7 examines the corresponding approach under the Brussels Convention and Regulation. It seeks to show that although Article 23 of the Brussels I Regulation is concerned to enforce agreements on jurisdiction, it has a view of what amounts to an agreement which is distinctly different from that of the common law: it does not look for a contract, nor treat what it considers agreements in the same way that the common law treats contracts. If the two legal foundations are different in this way, this divergence in response is not really a surprise.

1.35  The enforcement of jurisdiction agreements by orders for pecuniary relief is looked at in chapter 8. It is here that the distinction between waivers in relation to rules of public law, and contractual agreements enforceable between parties, will be picked up and shown to be most important. The relationship between consent, jurisdiction agreements, and the rules for the enforcement of foreign judgments will be covered in chapter 9.

1.36  Chapters 10 and 11 deal with choice of law as an element of the agreement for the resolution of disputes. Chapter 10 will consider the types of issue or claim for which the parties are permitted to make a choice of law which a court will respect. Chapter 11 will look at the issue of enforcement, by primary and by secondary means, of agreements on choice of law. Though there is less established case-law, the issues of how far one may expect such agreements to be effective, and the possibility of secondary enforcement, seems likely to arise for judicial examination in due course, for it is clear that the law is in a state where further development is inevitable, especially if draftsmen raise new questions for courts to answer.

1.37  Chapter 12 looks at the corresponding issues as they arise in connection with agreements to arbitrate, for it is from here that the law outside arbitration may yet derive most of its strength. Many of the questions of scope, validity, and enforcement will be answered in the same manner as with jurisdiction agreements. But some issues are specific to arbitration, and they are examined here.

1.38  Chapter 13 is where the Hague Convention on Exclusive Choice of Court Agreements is dealt with. For though this may appear to be important, the manner in which it is translated into English law will be for the European Union to decide, and the detail of this legislation lies in the unknown future. It is also the point at which conclusions are drawn or redrawn.

Footnotes:

1  Or that maybe agreement.

2  For an illustrative example, see A v B [2006] EWHC 2006 (Comm), [2007] 1 Lloyd’s Rep 237 (stay); A v B (No 2) [2007] EWHC 54 (Comm), [2007] 1 Lloyd’s Rep 358 (costs).

3  Which will be dignified by references to Her Majesty.

4  Most conveniently published in North, Essays in Private International Law (1993).

5  Briggs, [2003] LMCLQ 12.

6  Hague Recueil (1995) Vol 251, 269–400.

7  (1999).

8  One may see the broad treatment in DiceyMorris & Collins, The Conflict of Laws (14th edn, 2006; hereafter ‘Dicey’), Briggs & Rees, Civil Jurisdiction & Judgments (4th edn, 2005), and Hill, International Commercial Disputes in English Courts (3rd edn, 2005). More particular treatment of what is now Article 23 of the Brussels I Regulation may be found in Newton, The Uniform Interpretation of the Brussels and Lugano Conventions (2002), and in Layton & Mercer, European Civil Practice (2nd edn, 2005), which deals generally with the Brussels regime. On jurisdiction and arbitration agreements, see Joseph, Jurisdiction and Arbitration Agreements and their Enforcement (2005). Bell, Forum Shopping and Venue in Transnational Litigation (2003) is written from a slightly broader perspective and is excellent, not least for being less encyclopaedic and more reflective. Davies (ed), Jurisdiction and Forum Selection in International Maritime Law: Essays in Honour of Robert Force (2005) is particularly valuable in its specialist context. On arbitration, nothing comes close to Mustill & Boyd, Commercial Arbitration (2nd edn, 1989, and Companion Volume, 2001), and this book does not try.

9  Though the acceptance that breach of an arbitration agreement gives rise to a claim for damages is the least well established element.

10  This is not to say that a system must necessarily dispose of the jurisdictional question before any step is taken in relation to the merits of the proceedings, even though this is the effect of CPR, Part 11.

11  After all, there is no reason in principle why such a promise could not be made express.

12  Arbitration Act 1996, s 7.

13  Whether it is a doctrine is harder to say.

14  International convention, or instrument made by the legislative organs of the European Union and taking effect in England under European Communities Act 1972.

15  (1750) 1 Ves Sen 444. Those were the days…

16  Chancery (Amendment) Act 1858.

17  See Pattni v Ali [2006] UKPC 51, [2007] 2 AC 85 (PC IoM), esp at [38].

18  [2006] UKPC 51, [2007] 2 AC 85 (PC IoM).

19  [2006] EWHC 2065 (Comm), [2006] 2 CLC 425.

20  Whether de facto or de jure was dealt with in the evidence at [11], but ultimately the distinction was not crucial.

21  Dicey, Morris & Collins, The Conflict of Laws (14th edn, 2006), para 1–064.

22  To be precise, he invited counsel to address him on the orders which followed from his legal and factual analysis.

23  The question has arisen before: The Komninos S [1991] 1 Lloyd’s Rep 370 (CA) is an example, though there appear to be very many unreported cases in which the issue is resolved without anyone troubling to notice the technical difficulty. Though there is a slight delicacy about it, no-one in his right mind would suggest that the parties in this case, or in any other typical case, intended the law of Scotland or of Northern Ireland, with which the contract had no connection at all to apply in the case of disputes or to govern the contract. The possibility that it meant a choice of any of the legal systems within the United Kingdom is equally improbable.

24  With the consequence that the express choice of English law to govern the contract would, as a consequence of English legal reasoning, result in the application of the law of Nebraska to govern the contract, or some of the substantive issues associated with the contract.

25  Cf Royal Bank of Canada v Cooperatieve Centrale Raiffeisen-Boerenleenbank BA [2004] EWCA Civ 7, [2004] 1 Lloyd’s Rep 471.

26  Cf Sabah Shipyard (Pakistan) Ltd v Islamic Republic of Pakistan [2002] EWCA Civ 1643, [2003] 2 Lloyd’s Rep 571.

27  The Conflict of Laws (14th edn, 2006).

28  Namely, that we can deduce why a choice was not made simply from the absence of a choice.