High Court finds conspiracy claims fell within exclusive jurisdiction clauses under Hague Choice of Court Convention 2005

The High Court has found that conspiracy claims brought against a company in connection with aviation notes it had issued were "matters arising from or connected with" the underlying subscription agreements, and therefore fell within the jurisdiction provisions in those agreements, notwithstanding that they were claims in tort or for equitable remedies rather than for breach of contract. This meant that the English court was obliged to stay the claims, because they fell within the scope of exclusive jurisdiction clauses in favour of the Luxembourg court for the purposes of the Hague Choice of Court Convention 2005: Borrelli v Otaibi [2024] EWHC 1148 (Comm).

While the jurisdiction provisions in this case had to be interpreted in accordance with Luxembourg law, the decision is nonetheless interesting for its discussion of how the courts should approach the interpretation of an exclusive choice of court agreement under Article 3 of the 2005 Convention – defined as an agreement which designates the courts of one contracting state, to the exclusion of any other courts, for the purpose of deciding disputes that arise "in connection with a particular legal relationship". Although each case will turn on its facts, the decision suggests that, in a case of alleged conspiracy, the courts may find that claims against a particular defendant fall within the jurisdiction clause in an agreement which governed the part that defendant was alleged to have played within the overall conspiracy, rather than looking to the broader relationship between the parties to the conspiracy.

The decision also supports the view that an asymmetric jurisdiction clause (in which one party can bring proceedings only in the named court but the other party has a choice of where to sue) is not an exclusive jurisdiction clause for the purposes of the 2005 Convention – though that is not surprising as a similar view was expressed by the Court of Appeal in Etihad Airways PJSC v Flother [2020] EWCA Civ 1707, considered here. 

The judgment is of further interest for the judge's comments regarding a party's duty of full and frank disclosure on a "without notice" application, in particular that what is material to place before the court is not to be judged solely from the applicant's perspective. In this case the court held that the claimants' failure to draw the court's attention to the relevant jurisdiction clauses when applying to serve the proceedings out of the jurisdiction was a serious breach of the duty.

Background

The proceedings were brought in the Commercial Court by four offshore investment funds, their joint liquidators and various subsidiaries, against over 20 defendants who were alleged to have caused losses to the funds prior to their liquidation. According to the judgment, the claimants alleged conspiracy, dishonest assistance in breaches of trust and/or fiduciary duty, and knowing receipt of property belonging to the funds.

The proceedings included claims relating to subscriptions by one of the funds, GFIF, in a series of asset-backed securities secured on aircraft (the "Aviation Notes"). The claimants' case, as summarised in the judgment, is that GFIF's investment in the Aviation Notes was not in the fund's best interests as the notes were unsuitable investments, and that certain defendants acted in breach of duty and were dishonestly motivated when allegedly causing or influencing GFIF to invest in the Aviation Notes.

The allegations identified against the twenty-third defendant, FFISA, specifically were that it dishonestly assisted the other defendants by issuing the Aviation Notes to which GFIF subscribed under four subscription agreements (the "Subscription Agreements"), and that FFISA was in knowing receipt of GFIF's consideration under the Subscription Agreements.

The claimants obtained permission to serve FFISA out of the jurisdiction in Luxembourg, where it was incorporated.

FFISA issued an application seeking to set aside the order granting permission, and to stay or dismiss the proceedings against it, including on the basis that:

• the claims against FFISA fell within the scope of exclusive jurisdiction clauses in favour of the Luxembourg courts, and therefore the English court was obliged to suspend or dismiss the proceedings under Article 6 of the Hague Choice of Court Convention 2005 (the "Hague Convention"); and
• the claimants had failed to disclose the existence of those jurisdiction clauses when applying for permission to serve FFISA out of the jurisdiction, in breach of their duty of full and frank disclosure on a "without notice" application.   

In relation to the first point, the judge recorded that FFISA relied on jurisdiction clauses in the Subscription Agreements and the terms and conditions of the Aviation Notes (the "Conditions"), all of which were governed by Luxembourg law:

• Each of the Subscription Agreements provided that the "Agreement and all matters arising from or connected with it" were subject to the exclusive jurisdiction of the Luxembourg courts.
• The Conditions provided that the Luxembourg courts had jurisdiction over "any disputes which may arise out of or in connection with" the Aviation Notes, but that this submission to the Luxembourg courts was "for the benefit of the Issuer only and shall not affect the Issuer's right to take Proceedings in any other court of competent jurisdiction".

Decision

The High Court (Richard Salter KC sitting as a deputy High Court judge) set aside the service out order on grounds of non-disclosure (though he re-granted permission to serve FFISA out of the jurisdiction, subject to preservation of any limitation points which may be taken as a result of the later service). Otherwise, he stayed the proceedings against FFISA on the basis that the claims against it fell within the exclusive jurisdiction clauses in the Subscription Agreements.

The jurisdiction clause in the Subscription Agreements

FFISA argued that GFIF's claims against it in dishonest assistance and knowing receipt were "matters arising from or connected with" the Subscription Agreements, and therefore were subject to the exclusive jurisdiction of the Luxembourg courts.

As noted above, Article 3 of the Hague Convention defines an exclusive choice of court agreement as one which designates the courts of one contracting state, to the exclusion of any other courts, for the purpose of deciding disputes that arise "in connection with a particular legal relationship".

The claimants submitted that Article 3 required the court to analyse which "particular legal relationship" was in question, and whether the dispute arose from that legal relationship or a different one. This was based on the approach to what the claimants described as a "closely analogous provision" under Article 25 of the recast Brussels Regulation. Because FFISA was only "one small cog in the larger machinery", and the allegations against FFISA were only a subset of the claims advanced against the defendants, the claimants argued that the "particular legal relationship" that gave rise to the dispute was not the narrow legal relationship created between GFIF and FFISA under the Subscription Agreements. Since the broader relationship and the wider claims in the proceedings were predominantly governed by English law, they said that FFISA could not plausibly have been taken by surprise by the claims against it being referred to the English courts (which is a relevant consideration when determining whether a jurisdiction clause applies to a particular dispute).

The judge said he was reluctant to accept that, in deciding whether claims fall within the scope of an exclusive jurisdiction clause for the purposes of the Hague Convention, the court is always required to undertake the two-stage process required under the recast Brussels Regulation. However, he did not need to decide this point because the Subscription Agreements were governed by Luxembourg law and, based on the expert evidence before him, a Luxembourg court would be likely to interpret provisions of the Hague Convention by analogy with the recast Brussels Regulation.

Even on that basis, however, the judge concluded that the claims against FFISA fell within the scope of the jurisdiction provisions in the Subscription Agreements. He found that the specific activities of FFISA which were the subject of the claims, ie issuing the Aviation Notes and receiving consideration for them, were precisely those which fell within the scope of the Subscription Agreements.

The judge also pointed out that if one concentrated on the part FFISA was alleged to have played in the overall conspiracy, it was "centred on the activities provided for in the Subscription Agreements". It made no difference that the claims were in tort or for equitable remedies: that did not take the claims outside of the contractual relationship. Nor was there any reason to believe that the directing minds of FFISA would have been surprised by the idea that claims concerning FFISA's activities as issuer of the Aviation Notes would have to be litigated in Luxembourg.

Accordingly, the judge concluded that the claims against FFISA fell within the exclusive jurisdiction provisions in the Subscription Agreements and therefore had to be stayed under the Hague Convention.

The jurisdiction clause in the Conditions

Based on the judge's clear decision that the claims fell within the scope of the Subscription Agreements' jurisdiction provisions, it was unnecessary to consider FFISA's alternative argument that the claims against it were "disputes which may arise out of or in connection with" the Aviation Notes such that they were subject to the jurisdiction of the Luxembourg courts under the Conditions. However, the judge provided his conclusions briefly.

If he had found that the claims were caught by the jurisdiction clause in the Conditions rather than the Subscription Agreements, he would have found that this clause did not fall within the scope of the Hague Convention because it was an asymmetric jurisdiction clause (consistent with Etihad Airways, referred to above). Applying the common law rules, the judge would have found that there were strong reasons not to enforce the clause by granting a stay: the claims were not foreseeable to GFIF at the time of entering into the Conditions; the overarching claims have a very strong connection with England; and England would be the most appropriate jurisdiction for the trial of the claims as a whole.

Nevertheless, the judge concluded that he had no alternative but to suspend the proceedings against FFISA based on the jurisdiction clause in the Subscription Agreements.

Non-disclosure of the jurisdiction clauses

It was common ground between the parties that the first three claimants (the funds' official liquidators) were aware of the existence of the Subscription Agreements for at least four months before their application for permission to serve FFISA. Yet, the Subscription Agreements had not been exhibited to the application, and the judge who heard the application was not told about the jurisdiction provisions they contained.

As the judge explained, the claimants initially asserted that the non-disclosure was not material because their position was that the claims against FFISA did not fall within the scope of the jurisdiction clauses. They later accepted that the clauses ought to have been drawn to the judge's attention, but pointed to the difficulties they faced getting to grips with the funds' history from "a mass of documents" when they became provisional liquidators, which meant that their solicitors did not review the Subscription Agreements before making the application. 

The judge found that the claimants' initial response to the allegations of non-disclosure "entirely misunderst[ood] the nature of the duty of full and frank disclosure" on a without notice application. In particular, he said that what is material is not to be judged solely from the applicant's point of view. While the claimants had later adopted a more sensible approach, and the judge had some sympathy for the difficulties they said they faced in piecing together the relevant events, he said it is well established that an applicant must make proper enquiries before making a without notice application, and the duty of disclosure extends to matters the applicant would have been aware of if they had done so.

Applying these principles, the judge found that there had been "a serious failure to comply with the duty placed on an applicant", sufficient to warrant the immediate discharge of the order granting permission to serve FFISA. The judge said "it should have been obvious" to the liquidators and their advisors that the Subscription Agreements might contain jurisdiction clauses, which would be of great importance in the context of an application for permission to serve out of the jurisdiction.

However, he re-granted permission to serve FFISA out of the jurisdiction and to dispense with re-service, subject to limitation issues.

 

_{Note: Whilst HSF represents certain defendants to the action, those parties were not respondents to the application which is the subject of the judgment on jurisdiction issues.}