TREATMENT OF MULTI-COURTS JURISDICTION AGREEMENTS

• Citation: (2001) 13 SAcLJ 120
• Published date: 01 December 2001
• Date: 01 December 2001
• Publication year: 2001
• Author: TAN SEOW HON*

An increasingly popular manner of drafting jurisdiction clauses in cross-border contracts involves, the selection of the courts of more than one jurisdiction. Traditionally, parties would submit all disputes to the courts of a particular country under an exclusive jurisdiction agreement, or agree that the transaction is subject to a particular jurisdiction1 without intending to create an obligation to proceed there and nowhere else. Of late, the Singapore courts have encountered litigation over multi-courts jurisdiction agreements.2 A common form involves the naming of a particular court with one of the parties being given the option to proceed anywhere else.

The Spectrum of Cases from Spiliada to The Eastern Trust

The most recent of these cases, Baiduri Bank Bhd v. Dong Sui Hung,3 is of particular interest because the learned judge attempted to present a summary of the approach towards the exercise of jurisdiction in a spectrum of cases.4 On the one end were the cases involving no prior jurisdiction agreement (the first scenario) in which the forum non conveniens principles set out in Spiliada Maritime Corporation v. Cansulex Ltd5 would apply; on the other were the cases dealing with exclusive jurisdiction agreements (the second scenario) in which the Singapore

Court of Appeal in The Eastern Trust6 clearly enunciated the differences in the approach, as compared with forum non conveniens cases. Perhaps most significantly for our purposes, the Singapore Court of Appeal in The Eastern Trust held that a distinction should be drawn between those cases in which the parties knew or should have known at the time of contract that they were agreeing to litigate disputes in a particular forum, and those in which they could not easily have known. In the former cases, the requirement that the party in breach of the jurisdiction agreement show strong cause why the agreement should not be upheld should apply with full rigour; in the latter, the burden on the party was less onerous.

Two main reasons are usually offered by the courts to justify the different approach in cases involving jurisdiction agreements, as the Court in Baiduri Bank suggested. One reason is contractual: Parties must generally abide by their own agreement, and the focus of the courts is on the construction of the nature and scope of the jurisdiction agreement. If, as a matter of contractual interpretation, the parties have conceded to certain disadvantages and inconveniences of proceeding in the contractual forum, strong reasons are required by the party seeking to resist the proceedings in a contractual forum when the party proceeding there is merely invoking his contractual right. In the case in which the contractual forum is a foreign court, jurisdictional considerations (the second reason) influence the equation. As the Court noted in Baiduri Bank, the plaintiff (who was the party in breach locally) would have, apart from the jurisdiction agreement, established the jurisdiction of the local court. The contractual

principle (in favour of the defendant) had to be balanced against the right of the plaintiff to proceed locally, which he had established under the lex fori. This, the Court noted, explained why the burden on the plaintiff to resist a stay application in the face of an exclusive foreign jurisdiction agreement was not as onerous as would have been under usual contractual principles to avoid a contractual clause.7

It may be noted that the question could also arise when the local forum is the contractual forum. The plaintiff who proceeds in the local forum is merely invoking his contractual right, and should be allowed to do so. On a contractual analysis, if the jurisdiction agreement in favour of the local forum is interpreted as a designation of the local forum as the most appropriate forum and a promise on the part of the defendant not to object to the local forum’s jurisdiction, then strong reasons are required from the defendant when he seeks to stay the action in the local forum. While the Court did not deal with the cases involving exclusive forum jurisdiction agreements, it is submitted that jurisdictional considerations should likewise influence the equation. On the one hand, it may be argued that in addition to his contractual right to proceed locally, the contract involves submission of the defendant to the jurisdiction of the local court. The jurisdictional consideration would thus strengthen the plaintiff’s case for proceeding locally. However, it must not be forgotten that the defendant may, under foreign jurisdictional law, have the right to proceed in what would, apart from the jurisdiction agreement, be the natural forum for the dispute. While technically the jurisdiction of the foreign court is irrelevant to the assumption of jurisdiction by the local court, the right of the defendant, which he has under the foreign procedural law, to proceed in the foreign court should, by parity of reasoning, be borne in mind. If the Court protects its own jurisdiction despite the contractual agreement in favour of foreign courts, it should also accord some weight to the otherwise legitimate jurisdiction of the foreign courts despite a contractual agreement in favour of the local court.

Thus, whether the agreement is in favour of the local or a foreign court, the following considerations are relevant: First, strong reasons are required when a party seeks to act in breach of the contract which is interpreted to amount to the designation of the appropriateness of the contractual forum and a waiver of the objection to the jurisdiction of the contractual forum on such ground; second, the strength of the case required to persuade the Court to sanction the breach of the contract is mitigated by jurisdictional considerations which may be in favour of a non-contractual forum.

At this juncture, it may be queried whether the courts in The Eastern Trust and other cases dealing with exclusive foreign jurisdiction agreements (many of which also involved a foreign proper law) were really employing the contractual analysis (the effect of which was to be mitigated by the jurisdictional analysis) as the Court in Baiduri Bank claimed. If the contractual analysis was the first consideration of these courts, it may be asked why the scope, nature, and effect of the jurisdiction agreements were not overtly tested by reference to the proper law of the contract, which should govern issues of interpretation of contract and contractual obligations. That the Court in Baiduri Bank would not dispute that contractual interpretation was governed by the proper law may be seen from its judgment.8 One possible reason why there was no lengthy discussion of the proper law of the contract in these cases is that in the absence of the proof of foreign law, foreign law was assumed to be the same as local law. But if so, perhaps such reasoning could be more clearly indicated in future cases. Similarly, if the strength of the “cause” required is mitigated (or reinforced, depending on the situation) by jurisdictional considerations, the fact that this is determined by the lex fori could also be more clearly indicated.

Jurisdiction Clauses in Favour of Courts A, B and C

One category in the spectrum between forum non conveniens cases and exclusive jurisdiction agreement cases was that involving “semi-exclusive jurisdiction clauses” (the third scenario). These involved a submission to the jurisdiction of several countries (assume one of these is Singapore), without any specific right of election or option to either of the parties to select which of those countries to proceed in. The Court held that the Amerco Timbers test9 was inappropriate in such a situation and it was more correct to apply the forum non conveniens principles. Neither party would be in breach in choosing to proceed in one of the contractual fora, but the defendant who wishes to proceed in one of the contractual fora other than Singapore has to show that the other forum is clearly and distinctly more appropriate than Singapore in his application for a stay. Several comments may be made.

It is not immediately apparent why the Amerco Timbers/(Eastern Trust) analysis is deemed inapplicable. One possibility is that such agreements are in reality not better than ordinary non-exclusive jurisdiction agreements in favour of one forum. Possibly, when parties state that they submit to the jurisdiction of courts A, B and C, they are doing no more

than in the case when they non-exclusively submit to court A (being one of the many courts in the world).

It was probably not the Court’s intention to treat the third scenario of cases as being similar to cases involving non-exclusive jurisdiction agreements. If indeed the Court was of the view that the clause was similar to a non-exclusive jurisdiction clause, the Court presumably would not have held that the forum non conveniens analysis applied because the Singapore Court has held that the S&W Berisford“strong case” approach applied for non-exclusive jurisdiction agreements.10 A party desiring to stay an action in a contractual forum in the case where there was a non-exclusive jurisdiction agreement had to show a strong case why the contractual right to sue in the contractual forum should not be recognised and the plaintiff had to sue elsewhere. The contractual designation, albeit non-exclusive, created a “strong prima facie case” that the jurisdiction was an appropriate one to which neither party to the contract could object as inappropriate as they had both implicitly agreed it was appropriate.11

This, however, brings us to the next question. If indeed the Singapore Court’s approach to a non-exclusive jurisdiction agreement in favour of court A is to require “strong reasons” from the party desiring to proceed in a non-contractual forum, it may be questioned why semi-exclusive jurisdiction agreements do not call for the same kind of analysis...