Mauritius Commercial Bank Ltd v Hestia Holdings Ltd & Anor [2013] EWHC 1328 (Comm)

Case No 2013 FOLIO 67[2013] EWHC 1328 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Venue Royal Courts of Justice, Rolls Building, Fetter LaneDate 24/05/2013
London EC4A 1NL
Before
THE HON. MR JUSTICE POPPLEWELL
Between
Mauritius Commercial Bank LimitedClaimant/Hestia Holdings LimitedDefendants/Sujana Universal Industries LimitedApplicants
Emily Wood (instructed by Bird & Bird LLP) for Claimant/RespondentHenry Forbes Smith and Sophie Weber (instructed by Reed Smith LLP) for Defendants/ ApplicantsHearing Hearing dates: 17 May 2013
JudgmentThe Hon. Mr Justice Popplewell :
[1]This is an application by the Defendants for an order setting aside the Claim Form and staying all further proceedings on the grounds that the English court does not have jurisdiction to try the claim.

The Claim

[2]The Claimant (“MCB”) is a bank registered in Mauritius. The First Defendant (“Hestia”) is a Mauritian registered company. The Second Defendant (“Sujana”) is Hestia’s parent company and registered in India.[3]MCB, as lender, entered into a facility agreement dated 9 November 2010 with Hestia, as borrower, (“the Original Facility Agreement”), under which MCB established a trade finance banking facility in favour of Hestia up to a limit of US$10 million. On 9 December 2010 Sujana entered into a guarantee of Hestia’s obligations under the Original Facility Agreement for up to US$10 million. On 12 July 2011 MCB and Hestia agreed to amend the Original Facility Agreement by increasing the limit of the facility thereunder to US$20 million. Sujana entered into a further guarantee dated 3 August 2011 to cover the additional US$10 million.[4]Article 9 of the Original Facility Agreement, which was unamended by the 2011 amendment, and paragraph 16 of each of the guarantees given by Sujana, provided that they were governed by the law of Mauritius and that disputes were to be referred to the exclusive jurisdiction of the courts of Mauritius.[5]By 22 June 2012 Hestia had drawn down almost US$20 million, effectively the full amount of the loan available on the facility. Hestia defaulted on sums which became due and payable in August 2012. On 6 September 2012 the parties agreed by a “Notice of Default and Waiver and Consent” that MCB would waive its rights against Sujana for 7 business days pending the repayment of the facility by Hestia. Hestia failed to repay within the 7 days.[6]Following further negotiations, on 11 October 2012 MCB, Hestia and Sujana entered into an Amendment and Restatement Agreement (“the ARA”) whose terms are at the heart of the dispute on the application before me. Its purpose was a further indulgence granted by MCB to Hestia by providing for a revised repayment schedule and interest amounts.[7]Recital 5 recorded that MCB, Hestia and Sujana had agreed to terms and conditions for the settlement, rescheduling and restructuring of the defaults by entering into that agreement with an intention “to amend, replace and restate the terms of the Original Facility Agreement.”[8]Clause 2 provided:
“With effect from [11 October 2012] the Original Facility Agreement shall be amended and restated so that it shall be read and construed for all purposes as set out in Schedule 2 (Restated Agreement)”
[9]Clause 3 provided that Sujana undertook to execute fresh guarantees on the terms set out in the Restated Agreement, and was released from its obligations under the previous guarantees on and from the date of the ARA. Sujana did not execute fresh guarantees, but its guarantee obligations were contained in clause 7 of the Restated Facility Agreement scheduled at Schedule 2 (“the RFA”), to which it was party by signing the ARA.[10]Clauses 18, 23 and 24 were in the following terms: Clause 18 - Partial invalidity If, at any time, any provision of this agreement or related documents is or becomes illegal, invalid or unenforceable in any respect under any law of any jurisdiction, neither the legality, validity or enforceability of the remaining provisions nor the legality, validity or enforceability of such provision under the law of any other jurisdiction will in any way be affected or impaired. Clause 23 - Governing Law This Agreement and any dispute or claim arising out of, or in connection with, it or its subject matter or formation (including non-contractual disputes or claims) shall be governed by and construed in accordance with English Law. Clause 24 - Enforcement24.1 Jurisdiction(a) The courts of England have exclusive jurisdiction to settle any dispute arising out of or in connection with this Agreement (including a dispute regarding the existence, validity or termination of this Agreement) (a "Dispute").(b) The Parties agree that the courts of England are the most appropriate and the most convenient courts to settle Disputes and accordingly no Party will agree [sic, obviously a typographical error for argue] to the contrary.(c) This Clause 24.1 is for the benefit of the Lender only. As a result the Lender shall not be prevented from taking proceedings related to a Dispute in any other courts in any jurisdiction. To the extent allowed by law the Lender may take concurrent proceedings in any number of jurisdictions.24.2 Service of Process (a) The Borrower and the Guarantor shall irrevocably appoint 'Progress Corporate Services Private Limited' presently located at 2, Lansdowne Road, Croydon, Surrey, London CR9 2ER. Clause 18 - Partial invalidity Clause 23 - Governing Law Clause 24 - Enforcement (a) The courts of England have exclusive jurisdiction to settle any dispute arising out of or in connection with this Agreement (including a dispute regarding the existence, validity or termination of this Agreement) (a "Dispute"). (b) The Parties agree that the courts of England are the most appropriate and the most convenient courts to settle Disputes and accordingly no Party will agree [sic, obviously a typographical error for argue] to the contrary. (c) This Clause 24.1 is for the benefit of the Lender only. As a result the Lender shall not be prevented from taking proceedings related to a Dispute in any other courts in any jurisdiction. To the extent allowed by law the Lender may take concurrent proceedings in any number of jurisdictions. (a) The Borrower and the Guarantor shall irrevocably appoint 'Progress Corporate Services Private Limited' presently located at 2, Lansdowne Road, Croydon, Surrey, London CR9 2ER.

The Proceedings

[11]Hestia defaulted on the repayment of the loan pursuant to the RFA. MCB brings a claim for the outstanding amounts, some US$15 million plus interest, against Hestia as borrower and Sujana as guarantor. The Claimant issued its Claim Form on 16 January 2013 marked not for service out of the jurisdiction, relying upon clause 24.2 of the RFA, and serving it on Progress Corporate Services Pte Ltd in England pursuant to CPR 6.11(1). By its application notice dated 27 February 2013 the Defendants challenge jurisdiction. The grounds of relief are that clause24.1 of the RFA is invalid under Mauritian law. It is to be noted that the grounds in the application notice do not challenge the validity of clause24.2 of the RFA. The Defendants have not identified at this stage any defence to the merits of the claim.

The Defendants’ submissions

[12]The Defendants argue that clause 24.1 is invalid under its proper law, whether that of Mauritius or England, and that in the absence of a valid English jurisdiction agreement, the court does not have jurisdiction over Hestia and Sujana. The Defendants’ challenge to the validity of clause 24.1 rests on two alternative grounds. They allege that the jurisdiction agreement contained in clause 24.1 of the RFA remained subject to Mauritian law, notwithstanding clause 23; and that under Mauritian law the jurisdiction agreement is ineffective, as a result of the decision of the French Cour de cassation in Banque Privee Edmond de Rothschild Europe v X (26 September 2012), because it is one sided: it allows MCB to sue, or insist on being sued, in any jurisdiction in the world, but binds Hestia and Sujana to litigate in England if MCB so choose. Alternatively, it is submitted that if clause 24.1 is governed by English law, it is too one sided to be compatible with fundamental principles regarding equal access to justice and should not be upheld under English law.

First argument: (a) choice of law

(a) choice of law

[13]Pursuant to the Contracts (Applicable Law) Act 1990, the RFA is subject to the provisions of Regulation (EC) No 593/2008 of the European Parliament and of the Council dated June 17 2008 (“the Rome 1 Regulation”).[14]Article 3.2 of the Rome 1 Regulation permits the parties to change the governing law of their agreement:
‘Article 3.2. The parties may at any time agree to subject the contract to a law other than that which previously governed it, whether as a result of an earlier choice made under this Article or of any other provision of this Regulation. Any change to the law to be applied that is made after the conclusion of the contract shall not prejudice its formal validity under Article 11 or adversely affect the rights of third parties.’
[15]By Article 1(2)(e), however, there are excluded from the scope of the Regulation “agreements on the choice of court”.[16]Accordingly there is no dispute that clause 23 of the RFA is effective to render all of it subject to English law by reason of Article 3.2, apart from the jurisdiction provisions in clause 24.1. Whether parties are permitted to change the governing law of a jurisdiction agreement is governed by English rules of private international law apart from the Rome 1 Regulation.[17]The Defendants’ submission that the validity of clause 24.1 is governed by Mauritian law proceeds in two stages:(1) Under English rules of private international law parties cannot amend the governing law of their agreement, unlike the position under Article 3.2 of the Rome 1 Regulation. They can change the governing law by discharging the agreement and entering into a new one, but cannot do so by amending an existing agreement. Accordingly it is not possible for parties to amend the law governing their jurisdiction agreement.(2) Since the parties in this case did not discharge the Facility Agreement and replace it with a new one, but amended and restated it, their jurisdiction agreement (as amended and restated in clause 24.1) remained governed by Mauritian law despite clause 23.[18]In my judgment the argument breaks down at each stage.[19]A conclusion that the parties should not be allowed to amend an agreement so as to change the law governing a jurisdiction agreement would be a surprising one. It is common ground that they may change a jurisdiction agreement by amendment. It is common ground that they may change the law governing their substantive rights by amendment. The governing law of a jurisdiction agreement is, like any other contractual provision, to be determined by the parties’ express choice if they have made one, and in general the parties’ intention will be taken to be that it is to be governed by the law applicable to the contract of which it forms part (Dicey Morris & Collins on the Conflict of Laws 15th Edn paragraph 12-103.). The effect of the Defendants’ argument is that English law treats the parties as incapable of applying English law to the choice of forum clause in the RFA notwithstanding that it was their intention to do so. Moreover such a conclusion would be a triumph of form over substance. The same result could validly be achieved by replacing the agreement with a new one on identical terms save as to governing law, but not apparently by amending the existing agreement to have that effect. Such a conclusion is not supported by authority or principle.[20]In paragraph 32-053 of Dicey Morris & Collins, it is stated that:
“Article 3(2)… provides that the parties may at any time agree to subject the contract to a law other than that which previously governed it, whether as the result of an earlier choice under Art. 3 or of other provisions of the Regulations. This follows the precedent of the Rome Convention Art. 3(2). Practice in the Contracting States to the Convention on variation in the governing law was not uniform. In England the parties were probably free to vary the proper law by choosing a different legal system to govern the contract.”
[21]In James Miller and Partners Limited v Whitworth Street Estates (Manchester) Limited [1970] AC 583 Lord Reid said at page 603:
“It has been assumed in the course of this case that it is proper, in determining what was the proper law, to have regard to actings of the parties after their contract had been made. Of course the actings of the parties (including any words which they used) may be sufficient to show that they made a new contract. If they made no agreement originally as to the proper law, such actings may show that they made an agreement about that at a later stage. Or if they did make such an agreement originally such actings may show that they later agreed to alter it.”
[22]In a passage at p 608C Lord Guest also contemplated that there could be a variation of the proper law.[23]In Armar Shipping Co Ltd v Caisse Algerienne [1981] 1WLR 207, [1980] 2 Lloyds Rep 450, the claimant shipowner sought permission to serve out of the jurisdiction on the grounds that a contract contained in a Lloyds average bond was governed by English law. The average bond had been provided by an Algerian insurance company at the behest of cargo interests against whom, as those entitled to the cargo under the bills of lading, the Cypriot shipowners would have a claim for general average arising out of the grounding of the vessel. The average bond had no express choice of law, but the bills of lading provided for the shipowner to be able to elect the place at which the average adjustment was to take place. The shipowner contended that its subsequent election for the average adjustment to take place in England, made pursuant to its option under the bill of lading, made English law that with which the average bond had its closest connection. The essence of Mustill J’s reasoning in accepting that submission was set out in the only judgment of the Court of Appeal, given by Megaw LJ, at p215:
“the proper law can be regarded as “floating” until such time as the exercise of a choice by the carrier had the effect of fixing both governing laws at the same time”
. Megaw LJ continued:
“(The other governing law to which Mustill J. refers is, I assume, the governing law of the average adjustment provisions in the bill of lading contract introduced by clause 10.) But can this really be so? Counsel for the defendants submits, with what seems to me to be unanswerable legal logic, that there must be a proper law of any contract—a governing law—at the time of the making of that contract. If, as is the case here, at the time when the contract was made, the question remained undecided whether the average adjustment was to be in England or in the United States or in Germany or somewhere else, then the fact that it was subsequently decided by one of the parties that the venue should be England cannot be a relevant factor in the ascertainment of the proper law at an earlier date. As a matter of legal logic, I find insuperable difficulty in seeing by what system of law one isto decide what, if any, is the legal effect of an event which occurs when a contract is already in existence with no proper law: but, instead, with a " floating " non-law. But in my opinion the difficulty goes beyond mere technicality or legal logic. Under the terms of this Lloyd's average bond contract, things had to be done by the parties forthwith and disputes under the contract might well, as a matter of commercial reality, arise forthwith. For example, there might be an immediate dispute as to whether freight was payable, or, if so, how much freight. There might be a dispute as to whether the shipowner had duly delivered the right cargo, in the right amount, or at the right time, to the right person. Those disputes, if they were to arise, would be disputes under the terms of this contract, involving, it may be, questions as to the construction and effect of those contractual terms. It cannot be that the contract has to be treated as being anarchic: as having no governing law which the court, taking jurisdiction in respect of such a dispute under the contract, would apply in deciding the dispute. There must be a governing law from the outset: not a floating absence of law, continuing to float until the carrier, unilaterally, makes a decision. The governing law cannot fall to be decided, retrospectively, by reference to an event which was an uncertain event in the future at the time when obligations under the contract had already been undertaken, had fallen to be performed and had been performed. Nor is it, I think, an attractive, or a possible, concept of English private international law that the governing law, initially being, say, the law of Algeria, should thereafter change into the law of England.”
[24]Mr Forbes Smith relies upon the last sentence as support for his argument. Megaw LJ’s objection to the concept of the average bond starting as subject to Algerian law and becoming governed by English law may have been no more than a consequence of the defendant insurers being unaffected by the terms of the bill of lading, of which they had no actual or constructive notice, rather than a general principle of private international law that parties cannot change the governing law of their contract by express agreement. But however that may be, his objection comes in the context of his explanation of the rationale for rejecting the notion of a floating proper law. In the passage quoted he explains that the juridical objection to the concept of a floating proper law is the conceptual difficulty that at the time of its making or for a period of time a contract has no ascertainable proper law: it was as he put it “floating non law” or “a floating absence of law”. In that context, his objection to the concept of the average bond starting as subject to Algerian law and becoming governed by English law can only be understood as an objection to the retrospective changing of the proper law of a contract; to that extent it might be said to suffer from the floating absence of law problem, because its applicable proper law at any earlier time would be a matter of uncertainty, being subject to retrospective change. But nothing he said would justify an objection to the agreement of the parties to effect a prospective change of the proper law governing their contract. There is no policy ground or rationale for such objection expressed in his reasoning.[25]In the Iran Vojdan [1984] 2 Lloyds Rep 380, Bingham J was concerned with a bill of lading which expressly provided for the possibility of either Iranian law or German law or English law at the option of the carrier, each of which carried with it a concomitant election of jurisdiction. The option was to be declared after the contract was entered into and at the request of the person entitled to sue under the bill of lading. When sued in England, the carrier exercised the option for German law and jurisdiction, and sought a stay. In refusing a stay, Bingham J said at p 385, column 1:
“As a matter of English law, it is, I think, clear and not disputed that this clause in the bill of lading is bad insofar as it envisages what may be called a “floating proper law”
. So much appears from the Court of Appeal decision in The Armar [1982] Lloyd’s Rep 450; [1981] 1 WLR 207. That appears to me, with respect to the Court of Appeal, to be an obviously correct decision. The proper law is something so fundamental to questions relating to the formation, validity, interpretation and performance of a contract that it must, in my judgment, be built into the fabric of the contract from the start and cannot float in an indeterminate way until finally determined at the option of one party.”[26]In this passage Bingham J was doing no more than endorsing the objections to a floating law in the sense in which Megaw LJ had articulated them, namely a floating non law or absence of law. This is apparent from E I Dupont de Nemours and Co and Endo Laboratories Inc. v I C Agnew and Others [1987] 2 Lloyds 585, in which as Bingham LJ he said at p 592 col 2:
“But this is not a concept to which an English court could give effect, since the rights and obligations of contracting parties crystallise when a contract is made (subject to consensual variation thereafter) and contracts can only crystallise with reference to an existing proper law since they cannot exist in a legal vacuum: Amin Rashid at pp.370 and 65c; Armar Shipping Co Limited v Caisse Algerienne D’Assurance et de Reassurance [1980] 2 Lloyds Rep 450; 1981 1 WLR 207. It may, I suppose, be theoretically possible for a proper law to be retrospectively varied on exercise of a contractual option, but that does not dispense with the need for a pre-existing proper law, and since the option has not been exercised it is not in any event this case.”
[27]It is apparent from this passage that Bingham LJ was treating the floating law objection as one which derived from there being no identifiable applicable law, a legal vacuum, not an applicable law which was subject to change. On the contrary, he envisaged that even retrospective change would be permissible.[28]In BP Plc v National Union Fire Insurance Co and Others [2004] EWHC 1132 (Comm) Colman J was concerned with a claim brought under an Open Cover to which declarations could be made. The Open Cover provided that the insurance would be subject to English law and practice, or USA law and practice, at the discretion of the principal insured. At paragraph 34 he held that when the Open Cover was entered into its current proper law, not having been expressly chosen, was to be inferred from the terms of that transaction, and that when the principal insured indicated that it was selecting a body of law under the discretion provided in the Open Cover, the implied proper law which had hitherto prevailed would be retrospectively replaced by either English law or USA law so selected. The validity of declarations made up to that time would be determined by reference to that selected body of law. He went on at paragraph 35:
“I have considered whether the Open Cover and therefore the contracts of insurance already made by supposedly valid declarations could be unilaterally varied in this way by substitution of a replacement proper law. There can be no doubt that parties to a contract can effectively agree to empower one of them to vary it without agreement of the other party or parties, although terms may be implied to limit the scope of the variation or the circumstances in which the option may be exercised: see Paragon Finance plc v Nash[2002] 1 WLR 685. There can be no doubt, however, that if an option to vary the proper law is exercised in good faith in the commercial interests of an insured such as BP and if it is exercised with sufficient clarity, such a variation would be effective.”
[29]It is not necessary on this application to decide whether Bingham LJ and Colman J were correct in treating retrospective change as permissible, because the RFA purports to operate only prospectively. There is nothing in the authorities to suggest that such prospective change is objectionable.[30]Leaving aside authority, I find it difficult to identify any rationale or policy reason why a prospective change in governing law should be objectionable, especially given that, as Mr Forbes Smith accepted, the same result could be achieved by making a new agreement on amended terms rather than simply amending the terms. Indeed the adoption in English law of Article 3.2 of the Rome 1 Regulation is itself a powerful indicator that there is, at least now, no policy of English law which is opposed to the parties agreeing to change the governing law of their contract. On the contrary, there is a strong countervailing policy that they should be permitted to do so, which is to be found in the principle of contractual autonomy. One can imagine a variety of good commercial reasons why the parties might wish to change their governing law. There may be changes in the law first chosen which are unwelcome; or they may only discover unwelcome aspects of that law after conclusion of their contract. The commercial circumstances of the parties may change, for example with a change of control, by reason of which they may wish to choose a new governing law with which they are more familiar. They may desire to change an agreement on jurisdiction which would make it appropriate for the courts of the newly chosen jurisdiction to be applying their own system of law. If commercial parties freely agree to change their governing law, the court should strive to give effect to their bargain unless there are overwhelming policy objections. None apply in this context.[31]The Defendants’ submission fails at the second stage also, because the ARA replaces the Original Facility Agreement with the RFA as a new agreement. This is a case of discharge of an old agreement and replacement with a new one. That is clear against Sujana as guarantor from the terms of clause 3 of the ARA which expressly provides for discharge from existing obligations under the previous guarantees. It is less clear in relation to Hestia, where the applicable language in clause 2 is that of amendment and restatement. But Recital 5 requires this to be interpreted against the parties’ stated wish to “replace” their existing agreement; and the tripartite nature of the ARA and RFA, which is a new agreement as between MCB and Sujana as well as Hestia, and contains new payment and interest provisions, is more consistent with an analysis of a fresh agreement between MCB and Hestia than with a mere amendment to the Original Facility Agreement.[32]For these reasons the law of Mauritius is irrelevant and the validity of clause 24 falls to be considered in accordance with English law as its proper law.

First Argument: (b) Mauritian Law

(b) Mauritian Law

[33]Although I have held that Mauritian law is irrelevant, I should deal briefly with my conclusions as to what its effect would have been if applicable.[34]Each side adduced reports from qualified Mauritian lawyers. Mauritian law is based on French law, and the Mauritian courts are guided by, and usually follow, French jurisprudence, but do not always do so. In Rothschild, the bank’s customer, Mme X, brought a claim against the bank in Paris alleging negligent management of her investments. The bank relied on a jurisdiction clause which provided for exclusive Luxembourg jurisdiction subject to the bank’s right to sue the customer elsewhere. The Cour de cassation held that the jurisdiction clause did not fulfil the requirements of Article 23 of the Judgment Regulation and refused a stay. In its very brief reasons for doing so it described the clause as “potestativite”, a concept of French droit commun based on provisions of the Civil Code, provisions which have an equivalent in the Civil Code in Mauritius. It is not necessary in this judgment to explain and explore the concept of potestativité, or to set out the extensive argument rehearsed in the reports as to whether a Mauritius court would apply the Rothschild decision so as to treat clause 24.1 of the RFA as void. The decision is controversial and has been subjected to criticism by commentators, both domestically and in the context of Article 23 which requires an autonomous interpretation. It is arguably inconsistent with previous decisions of the Cour de cassation, although consistent with decisions of the lower courts. The Defendants’ expert’s opinion was that for these and a number of other reasons it was a matter of controversy and difficult to predict whether it would be applied in this case by a Mauritius court so as to treat clause 24.1 as invalid. His opinion was that the likelihood of it doing so was 50/50. MCB’s expert, on the other hand, opined that he saw no compelling reason why the Mauritian courts would follow Rothschild.[35]Miss Wood on behalf of MCB argued that the Defendants had failed to discharge the burden of proof on the relevant foreign law issue, which was a question of fact, because their own evidence suggested no more than a 50/50 prospect. This is to mistake the interlocutory nature of the inquiry. The issue of Mauritian law is a disputed question of fact which the Court cannot resolve upon the application. The hypothesis upon which this aspect of the argument proceeds (albeit a mistaken one for the reasons given below) is that jurisdiction can only be established by MCB by establishing the validity of the jurisdiction provisions in clause 24.1. On that hypothesis, the relevant threshold would be a good arguable case as to the validity of the clause, which connotes that MCB has much the better of the arguments: Canada Trust Co v Stoltzenberg(No 2) [1988] 1 WLR 547, 555-7; Bols Distilleries BV v Superior Yacht Services [2007] 1 WLR 12 at [26]-[28]; Altimo Holdings and Investments Ltd v Kyrgyz Mobil Tel Ltd [2012] 1 WLR 1804 at [71].[36]On that issue I will simply state my conclusion. From the material in the reports to which my attention was drawn, I would have concluded that there was a good arguable case that under Mauritian law clause 24.1 would be treated as valid and effective notwithstanding the decision in Rothschild.

Alternative Case: English Law

[37]It was contended on behalf of the Defendants that clause 24.1(c) confers a power on MCB to sue the lender and guarantor in any court in the world, rather than those courts which would otherwise regard themselves under their own rules of private international law as having competent jurisdiction. This is an erroneous reading of the clause. Sub-paragraph (c) merely provides that sub-paragraph (a) shall not prevent MCB from taking proceedings other than in England. It is not an agreement to confer jurisdiction on a foreign court where none would otherwise exist. It preserves MCB’s right to sue in any court which would regard itself as of competent jurisdiction, notwithstanding what would otherwise have been the effect of clause 24.1(a), which, if it had stood alone, would have required MCB to sue in England.[38]I regard this as the natural construction of the sub-clause and the permissive language linking it to sub-clause (a) (“As a result the lender shall not be prevented…”). If there were any doubt, it would be necessary to keep in mind that it would be unlikely that the parties could have intended to submit their disputes to any court in the world however exorbitant. Indeed the Defendants’ argument was that their construction, which bound them to litigation in any forum in the world of MCB’s choosing, however inappropriate, was so unreasonable as to be invalid as contrary to English public policy. In the oft cited words of Lord Reid in Schuler (L) A.G. v Wickman Machine Tool Sales Ltd[1974] AC 235, at 251:
"The fact that a particular construction leads to a very unreasonable result must be a relevant consideration. The more unreasonable the result the more unlikely it is that the parties can have intended it, and if they do intend it the more necessary it is that they shall make that intention abundantly clear."
[39]I have not overlooked an argument by the Defendants that their construction is supported by the different wording in the preceding Notice of Default and Waiver and Consent of 6 September 2012, which contained at clause 3 a Mauritian law and jurisdiction clause with a permissive provision akin to clause 24.1(c) referring to “courts with jurisdictions”. It was argued that the omission in 24.1(c) of a reference to courts with jurisdiction indicated an intention to permit a wider range of courts to be available to MCB. This argument cannot bear the weight Mr Forbes Smith seeks to put on it. Clause 24.1 is drafted in a different format from the previous clause 3, and the change in wording does not indicate any change of intention.[40]It was further contended on behalf of the Defendants that clause 24.1(a) confers no rights on Hestia or Sujana, because MCB’s freedom to litigate in any forum under clause 24.1(c) applies regardless of whether MCB is sued or is being sued. The argument is that clause 24.1(c) operates defensively to enable MCB to resist any suit brought by Hestia or Sujana in England because it provides that 24.1(a) is only for MCB’s benefit. Accordingly, it is said, the clause is entirely one-sided because it confers no rights on Hestia or Sujana to sue in any forum whilst subjecting them to any forum at the suit of MCB. That too is, in my view, an erroneous reading of the clause. Clause 24.1(c) refers to the lender taking proceedings. Clause 24.1 is for the benefit of MCB in the sense that Hestia and Sujana are obliged to sue in England but MCB is not. But that does not disapply clause 24.1(a) to MCB completely. Where it is Hestia or Sujana which brings suit against MCB in England, clause 24.1(a) is not disapplied by the operation of clause 24.1(c). MCB is thereby agreeing to be sued in England subject to the liberty conferred by clause 24.1(c). In those circumstances MCB has agreed to be subjected to the exclusive jurisdiction of the English courts, subject to its right to bring claims (which may overlap) abroad pursuant to clause 24.1(c). Were it otherwise, clause 24.1(a) would be superfluous: if clause 24.1(c) permitted MCB to insist on suing or being sued anywhere, or anywhere of competent jurisdiction, that would include England (given that this is an English law agreement and forum conveniens is conclusively determined by sub-clause (b)).[41]Mr Forbes Smith relied on NB Three Shipping Ltd v. Harebell Shipping Ltd [2005] 1 Lloyds Rep 509 and Law Debenture Trust Corporation plc v. Elektrim Finance BV [2005] EWHC 1412 for the proposition that the beneficiary of a one-sided jurisdiction agreement may use it defensively as well as offensively. Expressed in such general terms the principle is unobjectionable. But the clauses in those cases were in materially different terms from clause 24.1, and the cases are merely examples of where that different wording had that effect. More relevant is the decision of Gloster J in Lornamead Acquisitions Limited v Kaupthing Bank HF [2011] EWHC 2611 (Comm), in which a clause in materially identical terms was construed in the way I have indicated clause 24.1 is to be construed.[42]That is sufficient to dispose of the Defendants’ application, because Mr Forbes Smith accepted that there is no basis for challenging clause 24.1 if it is to be construed in this way. Such asymmetric provisions have regularly been enforced by the court. As Professor Fentiman has observed in a recent article in the Cambridge Law Journal entitled “Universal jurisdiction agreements in Europe” (CLJ (2013) 72 (1) 24-27) :
“Such unilaterally non-exclusive clauses are ubiquitous in the financial markets. They ensure that creditors can always litigate in a debtor’s home court, or where its assets are located. They also contribute to the readiness of banks to provide finance, and reduce the cost of such finance to debtors, by minimising the risk that a debtor’s obligations will be unenforceable. Such agreements are valid in English law . . . Indeed despite their asymmetric, optional character it is difficult to conceive how their validity could be impugned or what policy might justify doing so . . .”
[43]Moreover I would not have acceded to Mr Forbes Smith’s argument that the clause is invalid even if it bore the construction for which he contends. If, improbably, the true intention of the parties expressed in the clause is that MCB should be entitled to insist on suing or being sued anywhere in the world, that is the contractual bargain to which the court should give effect. The public policy to which that was said to be inimical was “equal access to justice” as reflected in Article 6 of the ECHR. But Article 6 is directed to access to justice within the forum chosen by the parties, not to choice of forum. No forum was identified in which the Defendants’ access to justice would be unequal to that of MCB merely because MCB had the option of choosing the forum.

Jurisdiction apart from any jurisdiction agreement

[44]I have held that the Defendants’ challenge to jurisdiction fails on its given premise, namely that whether the court has or should assume jurisdiction depends upon the validity of the jurisdiction agreement in clause 24.1. But the premise is in any event a false one.[45]Be it assumed that clause 24.1(a) and (c) are invalid by their proper law. Clause 24.2 is not thereby invalidated. This is implicit in the terms of the application notice, which challenges the validity of clause24.1 only, and was conceded by Mr Forbes Smith at the outset of the hearing. He later withdrew the concession, and argued that as a matter of construction clause24.2 was inextricably linked with clause 24.1 and its validity depended on the validity of clause 24.1. But in my view the concession was rightly made. Clause 24.2 is not expressed to be dependent on clause 24.1 and it is not necessary so to construe it. It is an independent provision for service of suit which applies whether suit is commenced in England or elsewhere. Moreover the presumption is in favour of severability by reason of the express terms of clause 18.[46]That being so, MCB established jurisdiction as of right by serving on the Defendants’ designated agent in England under CPR 6.11(1). That is sufficient to establish that the court has in personam jurisdiction by the equivalent of in personam service: see Dicey Morris & Collins Rule 29(1) and 11-002 and 11-003. The question then becomes whether the court should assume and exercise its undoubted jurisdiction. The burden therefore falls on the Defendants to show that there is an alternative forum which is clearly more appropriate: Spiliada Maritime Corp v Cansulex [1987] AC 460, 475-478, Dicey Morris & Collins Rule 38(2). This is not a burden which they have sought to discharge in the evidence. The only factor raised by Mr Forbes Smith as pointing towards another jurisdiction was that enforcement would have to take place in India or Mauritius. That does not make either of them an appropriate jurisdiction for determination of the claim. On the contrary England is clearly an appropriate forum for suit by a bank under a loan agreement governed by English law where no defence has been advanced which suggests there will be any need for factual inquiry beyond formal documentary proof. This is put beyond doubt by clause 24.1(b), by which the Defendants agreed that England is the forum conveniens. This sub-clause is severable from any agreement to submit to jurisdiction under clause 24.1(a) or (c) and would survive any invalidity of those sub-clauses.

Conclusion

[47]For all these reasons the Defendants’ application will be dismissed.

Cited in 8 later judgments