When international contracts go wrong, typically one of the first issues to resolve is where the dispute should be heard. In general terms, the approach of the English courts has been to discourage parties from what is known as "forum shopping", seeking to litigate your dispute where you think you will get the best result: the parties should stick to their agreement on jurisdiction or, if there is no agreement, the dispute should be heard in accordance with the courts of the state with the closest links to the litigation.
Broadly speaking, this result is achieved in disputes involving parties from EC or EFTA states, through the relevant EC Regulations and Conventions. More difficulties arise in non-convention cases where the court rules are more flexible. A common problem in non-convention cases is where there is a case that one party will not obtain a fair hearing in a foreign court. How are the English courts to enter into any kind of qualitative assessment as to the quality of justice abroad? Two recent cases give some indication as to the court’s approach.
Sabah Shipyard v The Islamic Republic of Pakistan (14 November 2002) was a claim by Sabah against the Government of Pakistan under the terms of a Guarantee. The claim was for various payments relating to an electricity facility in Karachi. The Guarantee, which was governed by English law, included a "nonexclusive" jurisdiction clause to the effect that each party consented to the jurisdiction of the English courts.
The Government brought declaratory proceedings in Pakistan and successfully obtained an injunction from the Pakistani court preventing Sabah from making a demand under the Guarantee. In effect, this prevented Sabah from commencing its claim in England. Sabah then applied to the English courts seeking to pursue its claim under the Guarantee here, also seeking an injunction preventing the claim from proceeding in the Pakistani courts.
The Court of Appeal’s view was that, although their agreement was "nonexclusive" (and so did not compel the parties to litigate in this jurisdiction), the parties had agreed to litigate in England. The court took the (generous) view that the Pakistani court, in granting its own injunction, could not have been aware of the terms of the jurisdiction clause. It saw the Government’s proceedings in Pakistan, notwithstanding the factual connections with that country, as a clear instance of a pre-emptive strike in the hope of frustrating Sabah’s claim. As such, the conduct of the Pakistani Government was "vexatious". The Court of Appeal granted Sabah an injunction restraining the Government from continuing with the Pakistani proceedings.
The second case, Ceskoslovenska Obchodni Banka v Nomura (9 December 2002), was a dispute arising out of the financial operations of Nomura in the Czech Republic. The Claimant brought proceedings in England. The Defendant applied to have those proceedings stayed since it was more appropriate for the dispute to be heard in the Czech Republic.
The Claimant argued that Czech judges had little experience of commercial litigation, that civil claims took far too long and that there was limited scope for crossexamination or disclosure. The English court took the view that the Czech Republic was the only appropriate place for the trial to be heard. All the factual issues related to the Czech Republic; Czech law would apply to the dispute. The potential for delay was not unusual, nor was the limited provision for crossexamination and disclosure. All judicial systems were imperfect and there was no reason why justice could not be obtained in the Czech Republic.
Both cases illustrate the difficulties in balancing questions of fairness to the parties with issues of international comity. The Sabah case is an example of how an English court will refuse to allow a party to defeat an otherwise meritorious claim by ensuring that it is heard in its own courts. Plainly, a driver behind the decision was that a claim against the Pakistani Government in the Pakistani courts stood little prospect of success. On the other hand, where the strongest factual connection is with the courts of another state, the English court will be slow to allow proceedings to go ahead in this jurisdiction unless it can be shown that substantial justice will not be done.
The content of this article does not constitute legal advice and should not be relied on in that way. Specific advice should be sought about your specific circumstances.