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Choice of jurisdiction confirmed
PRACTICE AREA GROUP: Commercial Litigation and Dispute Resolution
In the recent decision in Grosso v Lamsouguer,(1) the High Court has confirmed the basis on which jurisdiction will be determined for disputes between parties where the relevant agreement specifies the courts of a particular jurisdiction for hearing disputes. Here, the defendants disputed the jurisdiction of the Irish courts to deal with an action for damages relating to a share transfer agreement signed in Italy in the Italian language, dated November 5 2010, which provided for the jurisdiction of the Irish courts, but Italian governing law. In the circumstances, Justice Charleton found that he had no option but to dismiss the defendants' jurisdictional challenge.
The plaintiff was a lawyer, Italian by nationality and qualified in Italy, Ireland and England and Wales. The first defendant was a German businessman and the second defendant was a company in which both the plaintiff and first defendant had shares. The plaintiff was appointed as legal adviser to both defendants after an agreement, written in English, was signed in Italy in April 2010. A clause in that agreement stated that the Italian courts were to have jurisdiction, but were to apply Irish law in the event of a dispute.
An equivalent undertaking to the second named defendant had been established by the defendants in Italy by late 2010 and the plaintiff had a shareholding in that Italian entity. Against a background of disputes regarding fees due to the plaintiff under the April 2010 agreement, the parties agreed that the plaintiff's shareholding be transferred to the second named defendant. At this point, the court suggested that the relationship had become confused.
Ultimately, the plaintiff drafted an agreement in Italian providing for transfer of the shares. Lawyers acting for the defendants had drafted a notarised share transfer agreement, but it made no provision for jurisdiction. The object of that document was to make the share transfer enforceable as a matter of Italian law. It was dated November 5 2010, as was the agreement drafted by the plaintiff on which it was based. This agreement made provision for the jurisdiction of the Irish courts, subject to Italian governing law, and the defendants sought to challenge that jurisdiction as part of these proceedings.
The court started by acknowledging that the law governing the choice of jurisdiction is exclusively contained in Article 23 of EU Regulation 44/2001 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters. The issue for determination was whether the parties had contracted into a legally binding choice of jurisdiction under Article 23.(2) The court noted that contract doctrines such as unilateral mistake, mutual mistake or non est factum may be of assistance in approaching an issue as to an agreement on jurisdiction; the sole issue in this case was whether, for the purpose of Article 23, a consensus had been reached between the parties. It relied on authorities in support of the proposition that the issue for the court was to determine the facts in order to decide whether the parties had bound themselves into a choice of jurisdiction in accordance with Article 23. This, it stated, may be indicated by a clause which expressly refers to the choice of jurisdiction, in conjunction with communication that similarly conveys this choice. The court also referred to the Supreme Court authority of O'Connor v Masterwood (UK) Limited,(3) where Justice Fennelly held that a clause in a written contract, signed by the parties, is sufficient effectively to ascertain a choice of jurisdiction under Article 23: "It would be to overlook the obvious, if the court were to ignore the admitted signature of the first named plaintiff on a set of printed conditions containing a clear and express jurisdiction clause."
On the facts, the court found that the agreement the plaintiff drafted was given to the first named defendant and his adviser with ample opportunity to review and propose changes. Indeed, it was only two pages long and the court felt that even a cursory glance at the signature page, which was executed by the parties (and the first named defendant, who had a good working knowledge of Italian), would have alerted the defendants to the reference to Dublin and to Ireland.
Further, the court felt that it was impossible to conclude that there was any vitiating factor undermining consent to jurisdiction, such as mistake, unawareness, fraud or concealment. The court acknowledged that these were not applicable legal principles to determine jurisdiction itself, but they were a means of approaching the fundamental question as to whether jurisdiction was chosen. It opined that, in turn, this depended on the reality of any notice given and the "requirement of ordinary prudence in commerce". Here, the court concluded that there was a choice of jurisdiction here and the parties concurred on that jurisdiction. In particular, the court felt that the defendants could have raised the issue at the time if they had exercised reasonable care, and noted that this was not a contract with separate terms and conditions containing the jurisdiction clause. Rather, it was within the body of the contract they signed and, as such, the court was obliged to give effect to it.
This case builds upon the decision of O'Connor v Masterwood (UK) Limited, and confirms that where a jurisdiction clause is contained within a single contract, even in a party's second tongue, it will be difficult for a party to deny jurisdiction. The decision also confirms that, in accordance with the object of certainty envisaged by Article 23, where a choice as to jurisdiction is made, the parties will be held to that agreement.
For further information please contact Gearoid Carey (email@example.com or on +353 1 232 2000).
(1)  IEHC 230.
(2) For example, Leo Laboratories Ltd v Crompton BV  2 IR 225 and Case-C 420/97, Leathertex v Bodetex  ECR 16747.
(3)  IESC 49.