First published at Uniserve Law,
Jurisdiction and ADR Clauses
John Levingston
|
Note: The High Court of Australia has now handed down its decision in the Akai Pty Ltd v The People's Insurance Company Limited case referred to in this article |
Table of Contents
EXCLUSIVE
JURISDICTION CLAUSES
EFFECT
OF INSURANCE CONTRACTS ACT
This paper is concerned with the
question of forum non conveniens or appropriate forum in the context of
exclusive jurisdiction and arbitration clauses by review of a number of recent
decisions by judges in
The leading cases in Australia on
forum non conveniens or appropriate forum are the decisions of the High Court
of Australia in Oceanic Sun Line Special Shipping Co Inc v Fay 1 and Voth v Manildra
Flour Mills Pty Ltd 2, and as the Chief
Justice of the Supreme Court of NSW observed in Goliath Portland Cement Co Ltd
v Bengtell 3:
Australian jurisprudence on the topic of forum non conveniens has
developed upon somewhat distinctive lines; our law is different from that of
It is important to note that the
High Court in Oceanic Sun declined to follow and apply the principles governing
forum non conveniens determined by the English House of Lords in Spiliada Maritime Corp v Cansulex
Ltd 4, see the judgment of Deane in Oceanic
Sun 5:
A party who has regularly invoked the jurisdiction of a competent court
has a prima facie right to insist upon its exercise and to have his claim heard
and determined...In this country, [certain] special categories of case have not
traditionally encompassed a general judicial discretion to dismiss or stay
proceedings in a case within jurisdiction merely on the ground that the local
court is persuaded that some tribunal in another country would be a more
appropriate forum.
In the argument before the Court in Voth 6 the Court was
asked to reconsider the decision in Oceanic Sun and to follow the English
decision in Spiliada on the basis that there was no
clear majority in Oceanic Sun. This approach also involved an attack on the
much earlier decision of the High Court of Australia in Maritime Insurance Co
Ltd v Geelong Harbour Trust Commissioners 7.
In examining Oceanic Sun the majority in Voth 8 set out the common ground in that decision:
First, a plaintiff who has regularly invoked the jurisdiction of a court
has a prima facie right to insist upon its exercise. Secondly, the traditional
power to stay proceedings which have been regularly commenced, on appropriate
forum grounds, is to be exercised in accordance with the general principle
empowering a court to dismiss or stay proceedings which are oppressive, vexatious
or an abuse of process and the rationale for the exercise of the power to stay
is the avoidance of injustice between parties in the particular case. Thirdly,
the mere fact that the balance of convenience favours another jurisdiction
would provide a more appropriate forum does not justify the dismissal of the
action or the grant of a stay. Finally, the jurisdiction to grant a stay or
dismiss the action is to be exercised "with great care" or
"extreme caution".
The majority in Voth
discussed the following tests:
and noted that on this issue there was no
international uniformity 13:
It has been argued that the Spiliada approach
has been adopted not only in the
The decision of the US Supreme Court
in Piper Aircraft Co v Reyno 14 adopts a test which is closer to the
"clearly inappropriate forum" test, and though the plaintiff's choice
of forum should be rarely disturbed, this is not the end of the matter:
When an alternative forum has jurisdiction to hear the case, and when
trial in the chosen forum would 'establish...oppressiveness and vexation to a
defendant...out of all proportion to [a] plaintiff's convenience', or when the
'chosen forum [is] inappropriate because of considerations affecting the
court's own administrative and legal problems,' the court may, in the exercise
of its sound discretion, dismiss the case, Koster
(1947) 330 US at 524.
However, the High Court in Voth noted that questions considered by the US Supreme
Court such as congested lists and lack of judicial resources are not matters
which are persuasive for Australian courts 15.
The High Court of Australia in Voth provided guidance on the approach to be taken by
courts in considering this issue 16:
...in the ordinary case, counsel should be able to furnish the primary
judge with any necessary assistance by a short, written (preferably agreed)
summary identification of relevant connecting factors and by oral submissions
measured in minutes rather than hours...it will be unnecessary for the primary
judge to do more than briefly indicate that, having examined the material in
evidence and having taken account of the competing written and oral
submissions, he or she is of the view that the proceedings should or should not
be stayed on forum non conveniens (ie "clearly
inappropriate forum") grounds.
Recent decisions by judges in the
Supreme Court of New South Wales deal with two aspects of exclusive
jurisdiction clauses:
The cases are Akai Pty Ltd v The
People's Insurance Company Limited 17 and
Gem Plastics Pty Ltd & Anor v Satrex
Maritime (Pty) Ltd t/as South African Express Line & Ors 18.
In the Akai Case the relevant term
was as follows:
Governing Law
This policy shall be governed by the laws of
Akai sued the insurer, who then applied
for a stay of the proceedings in
The decision then went on appeal to
the New South Wales Court of Appeal which found that the clause was an express
statement in general of the parties' intention that the policy of insurance
should be governed by English law which also determined that law to be the
proper law of the contract.
Sheller JA said:
In accordance with well established principle, the express statement...of
the parties' intention that the policy of insurance should be governed by
English law determined that law to be the proper law of the contract. In Vita
Food Products v Unus Shipping Co [1939] AC 277 Lord
Wright, giving the opinion of the Privy Council, said at 289-90:
"It is now well settled that by English law (and the law of
Parties are free to choose the law
by which a transaction is to be governed subject to a qualification that there
must be no reason for avoiding their choice on the grounds of public policy;
Augustus v Permanent Trustee Co (Canberra) Ltd (1971) 124 CLR
245at 252 and 260 per Walsh J, with whose judgment the other four members
of the High Court concurred. Vita Food Products v Unus
Shipping Company was cited with approval. In Bonython v Commonwealth of
Australia [1951] AC 201 at 219 Lord Simmonds defined the proper law of the
contract as "the system of law by reference to which the contract was made
or that with which the transaction had its closest and most real
connection". In Amin Rasheed
Shipping Corporation v Kuwait Insurance Co [1984] AC 50 at 61 Lord Diplock pointed out that the "or" in this pithy
definition of the "proper law" of the contract was disjunctive. In
speaking of a policy which contained no express provision choosing English law
as the proper law of the contract, Lord Diplock at 62
went on to say
"...nevertheless its provisions taken as a whole, in my opinion, by
necessary implication point ineluctably to the conclusion that the intention of
the parties was that their mutual rights and obligations under it should be
determined in accordance with the English law of marine insurance."
In Gem Plastics the jurisdiction
clause stated:
This insurance is subject to South African jurisdiction.
and in addition, the insurance contract was made
in
Rolfe J 19
considered the decisions in S&W Berisford PLC v
New Hampshire Insurance Co 20 which was
followed in TNT Shipping & Development Ltd v QBE insurance Ltd 21. In S&W Berisford
the clause stated:
This insurance is subject to English jurisdiction
and Hobhouse J 22 said:
An exclusive jurisdiction clause is one which imposes a contractual
obligation on one or more parties to litigate in the stated jurisdiction. The
present clause if creating an obligation would create a mutual obligation. (It
is of course possible for such clauses to impose such an obligation on only one
of the contracting parties.)
The judgments of the appeal judges
in Akai also considered the question of the proper law of the contract 23.
In Akai, Sheller J referred to Nygh Conflict of Laws in Australia 24 which contains the proposition that if the
clause expressly states:
that 'all disputes shall be submitted to the Courts of country X', there is
little room for argument.
but notes that by the time of publishing the
fifth edition of the same text 25 this
view has been modified in relation to choice of law in arbitration clauses.
Kirby P also gave his minority
judgment on the same matter, and said that the choice of forum clause was not
always a clear specification of the applicable law.
Shortly after the decision of the
Court of Appeal a similar question arose in Gem Plastics, where Rolfe J cited the decision of Austrian Lloyd Steamship Co v
Gresham Life Assurance Society 26 in which
a clause referred to the Courts of Budapest, but noted that Roma LJ held that
the clause should not be construed as exclusive so as to prevent an action
being brought in England, as the word "exclusive" did not appear.
In two recent decisions, the Supreme
Court of NSW has considered discretionary issues in determining that despite a
jurisdiction clause, the dispute should be dealt with by the court, Gem
Plastics 27 where Rolfe
J said:
Even if it is correct that the clause provides for the exclusive
jurisdiction of the South African Courts this does not preclude this Court, if
the other requirements are satisfied, from deciding that the proceedings should
go forward in it in the exercise of the discretion: Huddart
Parker Ltd v The Ship Mill Hill (1950) 81 CLR
502; Oceanic Sun Shipping Co Inc v Fay (1988) 165
CLR 259, Leigh-Marden Pty Ltd v PRC Inc (1993) 44 FCR 88 and TNT. However,
it is a matter to be taken into account in determining how the discretion
should be exercised. ...The test to be applied, once the jurisdiction nexus is
established, is now stated authoritatively for Australian Courts by the
decision of the High Court in Voth v Manildra Flour
Mills Pty Ltd (1990) 171
CLR 539.
The question of potential overseas
witnesses was considered in CE Heath Underwriting & Insurance (
In Gem Plastics Rolfe
J 29 followed the decision of the High
Court of Asutralia in Voth
v Manildra Flour Mills Pty Ltd & Anor 30 which held that a defendant must persuade the
Court that it is a clearly inappropriate forum for the determination of the
dispute. The majority in Voth, Mason CJ, Deane,
Dawson and Gaudron JJ said 31
:
Although this judgment, like the English cases, reflects a "more
appropriate forum" test rather than a "clearly inappropriate
forum" test, application to set aside service on inappropriate forum
grounds, as well as applications for leave to serve process outside the
jurisdiction, must be governed by the same principles as apply to applications
for a stay on inappropriate forum grounds.
Rolfe J went on to discuss 32 the discretionary matters which favoured the
plaintiff so that he was able to conclude that
and reference was made to the non-exhaustive
list in The Eleftheria 33
which nevertheless favoured a determination of the proceedings in NSW 34.
In relation to an issue peculiar to
However, there are categories of
insurance for which cover is given under a "marine policy", but which
do not come within the strict and limited definition of "marine
insurance" within the meaning of sections 7, 8 and 9 of the Marine
Insurance Act 1909. In general a marine insurance policy relates to sea voyages
and losses on inland waters and includes any land risk which is incidental to
the sea voyage.
In other words, a dispute concerning
loss or damage to goods insured under a marine policy but carried solely by air
or inland transit without a component of sea carriage will be subject to the
Insurance Contracts Act 1984.
The judgment of Sheller J also
contains a discussion about the applicability of the Insurance Act 1902 (NSW):
A New South Wales statute does not normally apply to a contract unless
the proper law of the contract is the law of New South Wales or unless it is an
overriding statute in the sense that it must be applied regardless of the
normal rules of the conflict of laws; Dicey & Morris 11th Ed, at 1170; Mynott v Barnard (1939) 62 CLR
68 at 79.
Sheller J dealt with this issue as
follows 36 :
The weight that the Court should attach to a clause referring disputes
arising under the contract to a foreign Court was considered by Beazley J in
Leigh - Mardon Pty Limited v PRC Inc (1993) 44 FCR
88. Her Honour referred to The Eleftheria [1970] P 94
in which Brandan J, as he then was, said at 99-100
that where plaintiffs sue in England in Breach of an agreement to refer
disputes to a foreign Court, and the defendants apply for a stay, the English
Court, assuming the claim to be otherwise within its jurisdiction, is not bound
to grant a stay but has a discretion whether to do so or not. The discretion
should be exercised by granting a stay unless strong cause for not doing so is
shown. The burden of proving such strong cause is on the plaintiff. In
exercising its discretion, the Court should take into account all the
circumstances of a particular case. His Lordship then identified particular
matters which might, in an appropriate case, be taken into account in the
exercise of discretion. At 103 his Lordship said:
"I think that it is essential that the Court should give full weight
to the prima facie desirability of holding the plaintiffs to their agreement.
In this connection I think that the Court must be careful not just to play lip
service to the principal involved, and then fail to give effect to it because
of a mere balance of convenience."
Beazley J referred also the judgment of Lord Brandan
(Brandan LJ) in The El Amria
[1981] 2 Lloyds Rep 119 at 123-4 where his Lordship again stated the principal.
At 95 her Honour said that this approach had been consistently applied by the
Court. Her Honour reviewed the cases, not only in the United Kingdom and
Australia but the United States where in The Bremen v Zapata Offshore Co 407 US
1 (1972) at 15 Chief Justice Burger said: " ... in the light of present
day commercial realities and expanding international trade we conclude that the
forum clause should control absent a strong showing that it should be set
aside." In Oceanic Sun Line Special Shipping Co Inc v Fahey (1988) 165
CLR 197 the Court held that a condition that the Courts of Greece
should have exclusive jurisdiction in any action against the shipowner did not
form part of the contract. However, at 224, Brennan J said that where the
parties to a contract agreed that the Courts of a foreign country shall have
exclusive jurisdiction to decide disputes arising under the contract or out of
its performance, the Courts of this country regard that agreement as a
submission to such disputes to arbitration and will, in the absence of count
availing reasons, stay proceedings brought here to decide those disputes: Huddart Parker Limited v The Ship "Mill Hill"
(1950) 81 CLR
502 at 508-9; Compagnie des Messageries Maritimes v Wilson (1954) 94 CLR
577 at 582, 585 and 589-591. At 230 his Honour left open the
question whether, where there was an exclusive jurisdiction clause in the
contract, there was any reason why the guidelines effecting the exercise of the
Court's discretion which the English Court of Appeal laid down in the El Amria should not be adopted in Australia ...
In the Akai Case Sheller J said 37 :
If a dispute resolution clause expressly states that all disputes should
be submitted to the Courts of a particular country, that
gives rise to a strong, though not conclusive inference that the law of that
country is the proper law of the contract.
Sheller J then discussed a number of
decisions 38, and made the following
comment:
I have engaged in this rather lengthy analysis in order to emphasise that
a dispute resolution clause which provides that all disputes be submitted to
the Courts of a particular place is not necessarily decisive in determining the
proper law of the contract. However, it raises a strong inference that the
parties intended that the law of that place should govern.
It is for this reason that a clause
drafted in an agreement should contain a clear statement of a number of
elements:
A reference to arbitration has also
recently been the subject of judicial review in
Any dispute arising under the charter to be referred to arbitration in
In this case the defendants argued
that
The most recent
Jacobs, in International Commercial
Arbitration in
(1988) 165 CLR 197.
[1990] 171 CLR 538, on appeal from the Supreme Court of NSW (1989) 15 NSWLR
513, reversed.
(1994) 33 NSWLR 414 per Gleeson CJ at 420.
[1987] AC 460.
(1988) 165 CLR at 241, cited by the majority
in Voth [1990] 171 CLR at 550.
[1990] 171 CLR at 552.
(1908) 6 CLR 194.
[1990] 171 CLR at 554.
10
[1990] 171 CLR at 560 referring to the Supreme Court of Canada decision
in Antares Shipping v The Ship "Capricorn"
[1977] 2 SCR 422 at 448, 451-454.
11
Piper Aircraft Co v Reyno
(1981) 454
12
13
14
Piper Aircraft Co v Reyno
(1981) 454
15
16
17
Unreported: NSW Court of Appeal, Kirby P;
Meagher JA; Sheller JA, 28 April 1995.
18
Unreported: Supreme Court of NSW, Rolfe J, 9 June 1995.
19
Decision of 9 June 1995, at p5.
20
21
Unreported: Supreme Court of NSW, Hunter J, 7
November 1994.
22
23
Sheller and Meagher JA at 2, Kirby P at 4ff.
24
25
26
27
28
Unreported: Supreme Court of NSW, Rolfe J, 19
October 1994 at 57 et seq.
29
30
31
32
Unreported 31 August 1995 at p10 et seq.
33
34
Unreported, 31 August 1995 at 13, 14.
35
36
37
38
Compagnie d'Armement
MAritime SA v Compagnie Tunisienne de Navigation SA [1971] AC 572, Tzortzis v Monark Line A/B [1968]
1 WLR 406.
39
40
41
Law Book Co, para 23-290.