Lawyers Briefing Notes

Fri, 16 Sep 2011

Forum Conveniens and Jurisdiction Clauses

In SMS Ship Management Services SDNBHD v Uni.Asia General Insurance Berhad [2011] EWHC 643 the ability of a foreign court to determine a case by reference to English law, under an English law jurisdiction clause, is a relevant factor to consider in determining forum conveniens.

In applying the criteria set out in the landmark decision of the House of Lords in Spiliada Consulex [1987 1 AC 460] affirmed that on an application for permission to serve outside of the jurisdiction the court will not give permission unless satisfied that England and Wales is “the proper place in which to bring the claim”.

The claimant ship owner and manager was a company incorporated and formed in Malaysia. The defendant company was the hull and machinery underwriters and was also incorporated under the laws of Malaysia. The hull and machinery policy incorporated the Institute Time Clauses 01/10/83 and were expressly stated to be “subject to English law and practice”.

In January 2009 the claimant’s vessel suffered a failure of her steering gear and was grounded off Indonesia. The claimant submitted a claim on the basis that the vessel was a constructive total loss.

Brining the clam in England, the claimant sought an order from the Commercial Court for permission to serve the claim form on the defendants out of the English jurisdiction. The application was duly granted however the defendant applied to have that order set aside.

It is not necessary to detail all of the factors which pointed to Malaysia as being the more suitable country to determine the case but the difficulty here is that although the jurisdiction clause brought the matter within the jurisdiction of England and Wales, any interference with that may interfere with the parties’ freedom to contract.

The claimant argued that the fact that the parties had expressed the chosen English law as the governing law tipped the balance in favour of England and made it the most appropriate forum. However, in Spiliada, the court held that whilst English law was the proper law of the contract, it might or might not be of any great importance in the context of the whole claim.

Furthermore, in Sawyer v Atari Interactive Inc [2006] ILPR 8 Lawrence Collins J held that the fact that a contract is governed by English law is not necessary a predominating factor. That factor would have a different weight in different circumstances. One important factor was whether the foreign forum, notwithstanding the express choice of English law, would apply its own domestic law as opposed to English law.

The court accepted the claimant’s proposition that the Malayan court was governed by the Malayan Civil Act 1956 which provides that in relation to marine insurance the law is the same as administered in England. However, the Act said nothing about the proposition where the parties have expressly agreed English law as the governing law of the contract.

Mr Justice Eder held that “in such circumstances, there is no evidence before me to suggest that the man in court would not apply English law in the ordinary way. On the contrary, the defendants have put in evidence a decision of the High Court in Malaya where the charterparty in a case was expressly governed by English law and, as one might expect, the court proceeded on the basis of applying English law”.

Undoubtedly the case provides another dimension or consideration in determining forum convenience. Clearly, notwithstanding links to a particular jurisdiction, if that jurisdiction is capable of determining a matter by reference to English law then the parties have expressly agreed under the contract that English law and practice should be applicable then this would be an important factor in determining which jurisdiction was to be the most suitable.