The Singapore Court of Appeal gives guidance on the interpretation of non-exclusive jurisdiction clauses

In the recent decision in Orchard Capital I Ltd v Ravindra Kumar Jhunjhunwala the Singapore Court of Appeal has overturned the decision of the High Court and confirmed that a non-exclusive jurisdiction clause in favour of the Hong Kong courts did not mean that proceedings brought in the Singapore courts instead were to be stayed.  Depending on the contractual context the non-exclusive jurisdiction clause allowed proceedings to be brought in jurisdictions other than the named jurisdiction. Maurice Burke and Alastair Henderson analyse the decision below.  

Background:

A common clause in most international contracts is the jurisdiction clause in which the parties to a contract agree at the outset of their contractual relationship which country's or countries' courts are to have legal authority ('jurisdiction') to hear disputes arising from that contract.

A jurisdiction clause may take one of three forms:

• non-exclusive jurisdiction clause – this type of clause allows the parties to submit a dispute arising from an agreement to a particular country's courts, while leaving the parties free to commence proceedings in another country's courts. 
• exclusive jurisdiction clause – this type of clause provides a more restrictive framework by stipulating that any dispute can only be submitted to an agreed country's courts. 
• one-way jurisdiction clause – a less commonly used clause, this type of clause stipulates that one of the parties must always bring any claim in the courts of one particular country, whereas the other party retains flexibility to bring a claim in any courts it may choose (such a clause is predominantly seen in finance agreements in which the borrower is required to bring a claim in a particular forum whilst the bank retains the right to bring a claim in any forum, most likely where the borrower's assets are located.) 

Although often considered a "boilerplate" provision and sometimes not given much attention during the negotiation of an agreement, the recent Singapore Court of Appeal case Orchard Capital I Ltd v Ravindra Kumar Jhunjhunwala [2012] SGCA 16 highlights the importance of ensuring jurisdiction clauses accurately reflect the parties' intentions. 

Facts of Orchard Capital I Ltd v Ravindra Kumar Jhunjhunwala 

The parties in this case entered into a Settlement Agreement in relation to Ravinda Kumar Jhunjhunwala's ("Ravinda") breach of various contracts with Orchard Capital I Ltd ("Orchard"). The Settlement Agreement provided that the parties submit any disputes to the non-exclusive jurisdiction of the courts of Hong Kong, SAR. 

Ravinda subsequently breached the Settlement Agreement and Orchard brought proceedings in the Singapore courts in relation to this breach. Ravinda applied to stay the proceedings in Singapore on the grounds that, although the jurisdiction clause in the Settlement Agreement was non-exclusive, nevertheless the presence of that clause in the Agreement indicated the parties' primary intention that the courts of Hong Kong, not Singapore, were the most suitable to hear the claim. 

The Singapore Court of Appeal overturned the decision of the High Court (which had stayed the Singapore proceedings) and decided instead to allow the claim to continue in the Singapore courts. The Court cited two main arguments for its decision: 

Contractual Interpretation

The Court noted that the jurisdiction clause, which was labeled as non-exclusive, could nonetheless be given the effect of an exclusive jurisdiction clause if that was determined to be the true intention of the parties, applying legal rules of contract interpretation. 

However, in this case the Court decided that the parties' intention was clearly not to enter into an exclusive jurisdiction clause. As evidence of this, the Court considered the Settlement Agreement as a whole and decided that its main purpose was to ensure that Ravinda (and not Orchard) discharged its obligations. The jurisdiction clause was interpreted in a manner consistent with such an approach: it was understood to have been intended to give Orchard the benefit of flexibility in enforcing the terms of the Settlement Agreement in various jurisdictions. The Court also noted that Ravinda had provided no evidence to suggest that the parties intended for the jurisdiction clause to operate like an exclusive jurisdiction agreement. 

Forum Non Conveniens Test

Having first concluded that the jurisdiction clause was intended to be non-exclusive (as reflected in the express words of the clause), so that the parties were not required by contract to litigate any disputes in the Hong Kong courts, the Court then undertook a forum non conveniens analysis in order to determine whether Hong Kong was nevertheless clearly or distinctly a more appropriate forum to hear the dispute. This involved considering all relevant factors in order to decide which courts were the most appropriate or convenient in this particular case. 

Whilst the presence of a non-exclusive jurisdiction clause was a relevant factor, in that it might indicate the parties' acceptance of Hong Kong as the appropriate forum to resolve their disputes, the Court decided that, in determining this issue, the weight to be attributed to the non-exclusive jurisdiction clause depended on the precise facts and circumstances. While a non-exclusive jurisdiction clause would make it difficult for one party to argue that the courts of the jurisdiction(s) listed in a non-exclusive jurisdiction clause should not have jurisdiction over a claim, this does not mean that the courts of other jurisdictions not listed in the clause would not have jurisdiction to hear such a claim. In this case there was no evidence to suggest that the jurisdiction clause was a strong indicator that Hong Kong was clearly or distinctly a more appropriate forum than Singapore. Other factors relevant to the case suggested that Singapore was an appropriate alternative forum. 

Practical Effects on Contracting Parties

This case highlights that the parties' choice of jurisdiction clause should be carefully considered before entering into an agreement, in order to ensure that disputes will be decided in the courts which the parties prefer. Simply designating the courts of one jurisdiction in a non-exclusive jurisdiction clause does not necessarily mean that that jurisdiction's courts will be deemed to be the most appropriate to hear a dispute. As the clause is non-exclusive, claims may also be heard elsewhere. 

Whilst an exclusive jurisdiction clause provides the most contractual certainty, many parties to commercial contracts will nevertheless want to opt for a nonexclusive jurisdiction clause which provides parties with the freedom to bring proceedings in various jurisdictions, for example, one in which the counterparty has assets. 

When bringing a claim subject to a non-exclusive jurisdiction clause, the presence and terms of that jurisdiction clause will be only one factor which the courts will take into account when considering which country's courts are the most suitable to hear a claim. Therefore, even if a non-exclusive jurisdiction clause specifies a forum other than Singapore, proceedings brought in Singapore will not be stayed if other factors do not prove that the other forum is "clearly or distinctly" more appropriate. 

The key message for businesses is that clarity is critical when entering into contracts. As was shown in this case, 'non-exclusive' choice of jurisdiction leaves open the possibility that claims will be heard in some other courts. If a party wants to ensure that only one jurisdiction's courts can take jurisdiction over a claim, then this must be stated clearly in the contract, leaving no room to interpret the clause differently.