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13th Mar 2012
The applicant (M) applied to dispute the court's jurisdiction to hear a claim by the respondent (P) for delivery up of certain machinery.
The parties had entered into a non-exclusive distribution agreement which provided that the applicable law and jurisdiction for all disputes, other than those requiring injunctive relief, arising from the agreement should be decided in accordance with the rules of the London Court of International Arbitration, and that the agreement was to be governed by English law. The parties later entered into an agreement for the sale of three machines by M to P, which P contended M had not fulfilled. The sale agreement contained various terms and stated that all other conditions remained under the existing distributor agreement. P obtained an injunction without notice to prevent M from selling, charging or disposing of the machinery until trial or further order. It was common ground that, M being based in Spain and the goods being physically in Spain, Regulation 44/2001 art.2(1) gave the Spanish court jurisdiction unless under art.23(1), the parties had agreed that the English courts should have jurisdiction.
M argued that the terms of the distributor agreement had not been incorporated into the sale agreement, but if they had the jurisdiction clause did not expressly confer jurisdiction on the English court as required by art.23. M also argued that it was not the owner of two of the machines, and that P had begun proceedings in Spain at the same time. P argued that the proper construction of the jurisdiction clause, as a matter of inference, was that the English court had jurisdiction in those circumstances for which arbitration was not provided.
(1) If it was appropriate to apply English law to the sale contract, the terms of the distributor agreement had been incorporated into the sale agreement, Coys of Kensington Automobiles Ltd v Pugliese  EWHC 655 (QB),  2 All E.R. (Comm) 664 applied. (2) On a proper construction of the distribution agreement the parties had not agreed that the English court was to have jurisdiction to settle any disputes arising out of the sale agreement. The way in which the distributor agreement was structured showed that the jurisdiction was not intended to deal with all issues that might arise out of the relationship. There was also a subdivision between those disputes requiring injunctive relief and those not requiring injunctive relief, about which the contract was silent. It was not appropriate to construe the jurisdiction clause as meaning that the default provision was that the English court had jurisdiction. It was plain that the parties had contemplated that it was most likely that all disputes would be appropriate for arbitration, and that those not suitable for arbitration would be exceptional. Consequently, on the proper construction of the jurisdiction clause there was a lacuna in a case in which a dispute had arisen and it was thought that it might require injunctive relief. Accordingly, for the purposes of art.23(1) the parties had not agreed for the English court to have jurisdiction and the effect of art.2 was that the Spanish courts had jurisdiction to deal with such an exceptional case as the claim sought to be brought by P. The claim form was set aside and the interim injunction discharged. (3) M was entitled to its costs of the application as the successful party, but it should recover only 50 per cent of those costs to reflect the time spent on the issues of ownership of the machines, and the proceedings in Spain, which were irrelevant to the jurisdiction issue.
A claim form was set aside and an interim injunction discharged where the claimant had failed to show that the parties to a distribution agreement had agreed to confer jurisdiction on the English courts in respect of claims in which injunctive relief might be required.
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