Choice of English law / jurisdiction will not always mean a dispute will be heard in England and English law applied

Two recent Court of Appeal decisions are a reminder that an exclusive English jurisdiction clause and choice of English law clause will not always ensure that any disputes are heard in England and that English law is applied.

In the first case, Swiss law applied to the critical issue of whether the signatory to the contract was authorised to bind the company, despite the express choice of English law in the contract: Integral Petroleum S.A. v SCU-Finanz AG [2015] EWCA Civ 144. This illustrates the importance of ensuring contracts have been properly entered into in accordance with the law of a company's place of incorporation and, where possible, obtaining a legal opinion confirming this.

In the second case, the English courts did not have jurisdiction over a claim for the tort of inducing a breach a contract, where the underlying contract contained an exclusive choice of English jurisdiction and English choice of law clause: Marzillier, Dr Meier & Dr Gunter Rechtanwaltsgesellschaft mbH v AMT Futures Limited [2015] EWCA Civ 143. This shows that torts connected with a contract will not necessarily be heard by the court chosen in the contract. The Court of Appeal's decision was not reached "with any great enthusiasm" as there was much to be said for the contrary view, but Article 5(3) the Brussels I Regulation, as interpreted by the European court, did not allow for any other conclusion.

Law governing questions of authority to bind a company

In Integral, two Swiss companies purported to enter into a supply contract for the sale of oil and gas. The contract provided for English law and exclusive English jurisdiction. The contract was signed on behalf of the supplier by one of the two officers of the company. Under Swiss law, and as noted in the Swiss Register of Commerce, the power of signature on behalf of the company could only be exercised by the two officers jointly. The supplier argued that the contract was not binding because it bore only one of the two authorised signatures required by Swiss law.

Upholding the first instance decision, the Court of Appeal considered Swiss law applied as this was a matter for the company’s constitution and therefore determined, according to English conflict of laws rules, by the law of the place of incorporation. The contract was therefore not binding on the supplier.

The key issue in the Integral case was how the issue of the missing signature should be characterised. If it was a matter of formal validity, then English law could be applied as the law governing the contract, pursuant to the provisions in Article 11 of the Rome I Regulation (No 593/2008). If on the other hand it was a matter of authority to bind the company, then this did not come within the concept of formal validity under Rome I or, in any event, was excluded entirely from the Rome I regime pursuant to Article 1(2). In that case, it fell to be decided under the English common law conflict of laws rules, which apply the law of incorporation to issues of the company's capacity and internal management, including questions of who is authorised to act on the company's behalf.

On the face of it, the argument that Rome I applied had support from the Giuliano/Lagarde report on the Rome Convention, which was admissible as an aid to construction of the Regulation. The report referred to a requirement for two signatures as an example of formal validity. The Court of Appeal rejected that argument, however, saying the report was not entirely clear – the authors may have had in mind a requirement for the contracting party to sign in two places or for a witness to sign. In the case of a company, a prior question arose as to whether the company had validly expressed the will to be legally bound at all. The wording of  Article 11 suggested that the contract had in substance been concluded save for some lack of formal validity, whereas the absence of a signature in this case went to the question whether there was agreement at all – it could not be assumed that the second officer would have been prepared to enter into the contract.

The purchaser also sought to rely on The Overseas Companies (Execution of Documents and Registration of Charges) Regulations 2009 as modifying the common law position. Under the Regulations, a document is deemed, in favour of a purchaser, to have been duly executed by an overseas company if it purports to have been signed by a person who, in accordance with the laws of the territory in which the company is incorporated, is acting under the authority (express or implied) of the company.

The purchaser accepted that the contract had not been signed by a person with authority, but sought to rely on it having "purported" to be so signed. The supplier argued that the Regulations were concerned only with issues of formalities of execution but even if that were wrong, the Regulations did not assist the purchaser as a matter of interpretation.

The Court of Appeal did not express a concluded view on the supplier's first argument, although it  noted that it gained support from the analysis in Habas Sinai Ve Tibbi Istihsal Endustrisi SA v VSL Steel Co Ltd [2013] EWHC 4071 (Comm) at 122 – 130. The court agreed however with the second argument. It could not see how it could be suggested that the contract purported to be signed by a person who, in accordance with Swiss law, was acting under the authority, express or implied of the company: Swiss law required the signature of two officers and the document did not purport to be so signed.

Jurisdiction over claim for inducing breach of contract

In Marzellier the issue was whether an action alleging inducement of a breach of contract could be brought before the English courts against a German firm of lawyers. The breach relied on was inducing the claimant's former clients to bring proceedings against it in Germany, despite English choice of law and exclusive English jurisdiction clauses in their contracts.

Overturning the first instance decision, the Court of Appeal held that the English court had no jurisdiction over the claim. Both the event giving rise to the damage and the damage itself occurred in Germany, not in England. That was the place of the "harmful event" for the purposes of Article 5(3) of the Brussels I Regulation (No 44/2001). (The relevant provision is identical under the recast Brussels Regulation, No 1215/2012, which applies to proceedings commenced from 10 January 2015.)

The court rejected an argument that the harm suffered was the loss of the benefit promised to the claimant – that they would only be sued in England. The harm was the commencement of proceedings in Germany and the damage suffered was the cost and expense caused by the litigation, which was suffered in Germany.

The Court of Appeal commented that it did not reach this conclusion with any great enthusiasm, since there was much to be said for the determination of a claim for inducement of breach of contract to be made in the court which the contract breaker agreed should have exclusive jurisdiction in respect of that contract, rather than in the courts of the country where the inducement and breach occurred. However, that was not a determining factor in the allocation of jurisdiction under the Brussels I Regulation.

Note: The decision in Marzillier, Dr Meier & Dr Gunter Rechtanwaltsgesellschaft mbH v AMT Futures Limited [2015] EWCA Civ 143 was upheld on appeal. See our post on the Supreme Court decision here.