BRIAN McGOWAN v. SUMMIT AT LLOYDS
| EXTRA DIVISION, INNER HOUSE, COURT OF SESSION |
| Lord Marnoch Lady Cosgrove Lord Reed | X16/02 OPINION OF THE COURT delivered by LORD REED in APPEAL From the Sheriffdom of North Strathclyde at Paisley in the cause BRIAN McGOWAN Pursuer and Respondent; against SUMMIT AT LLOYDS Defenders and Appellants: _______ |
Act: Hofford; H.B.M. Sayers
Alt: Love; The Anderson Partnership
12 June 2002
[1]The pursuer is a bus operator. According to his pleadings, a number of his buses were destroyed in a fire in January 2000. He brought the present action in the Sheriff Court at Paisley against the defenders, seeking indemnification for his losses under a policy of insurance. The defenders pleaded in limine that the court had no jurisdiction, on the basis that the policy contained a clause conferring exclusive jurisdiction on the courts of England. That plea was repelled by the sheriff, and the present appeal has been brought against his decision.
[2]The pursuer's case proceeds upon the basis that the Sheriff Court has jurisdiction under article 5 of schedule 4 to the Civil Jurisdiction and Judgments Act 1982. Before considering that provision in particular, however, it may be helpful to place it in the context of the overall purpose and scheme of the 1982 Act.
[3]The 1982 Act radically altered the law of the United Kingdom, and that of Scotland in particular, in relation to the jurisdiction of courts and tribunals and the recognition and enforcement of external judgments. Its primary purpose was to give the force of law within the United Kingdom to the Brussels Convention of 1968 and related instruments. The 1968 Convention in turn had as its primary object to facilitate the reciprocal recognition and enforcement of judgments within the European Community . That objective was to be achieved inter alia by harmonising the rules of jurisdiction within the Community. The 1982 Act however went further than giving effect to the 1968 Convention. In particular, a potential difficulty arose from the fact that the Convention assigned jurisdiction to the courts of Contracting States, one of which was the United Kingdom: the Convention did not (in general) address the issue whether the courts of England and Wales, Scotland or Northern Ireland were to have jurisdiction. To solve this problem, the 1982 Act adopted a modified version of the scheme of jurisdiction set out in the 1968 Convention as the basis of a new set of rules for the allocation of jurisdiction among the courts of the different parts of the United Kingdom, in cases where the courts of the United Kingdom were entitled to assume jurisdiction under the 1968 Convention. Further, in relation to Scotland, the 1982 Act introduced a new set of rules of jurisdiction applicable when the rules of the 1968 Convention, or those of the scheme for the allocation of jurisdiction within the United Kingdom, did not fall to be applied. This new set of rules was itself largely based upon the rules of the 1968 Convention.
[4]At the risk of over-simplification, the scheme of the 1982 Act can be summarised as follows. Part I of the Act gives effect to the 1968 Convention, which is set out in schedule 1. Part II of the Act gives effect to the intra-United Kingdom scheme, the rules of which are set out in schedule 4. Part III of the Act gives effect to the new Scottish rules of jurisdiction, which are set out in schedule 8. It is Part II of the Act, and the scheme contained in schedule 4, which are relevant to the present case. Because these proceedings were begun before 1 March 2002 they are unaffected by the Civil Jurisdiction and Judgments Order 2001, by virtue of the transitional provisions contained in article 6.
[5]Schedule 4 is given effect by section 16 of the Act, which provides inter alia that schedule 4 is to have effect for determining, for each part of the United Kingdom, whether the courts of law of that part, or any particular court of law in that part, have or has jurisdiction in proceedings falling within the scope of the section. The section applies to proceedings where the subject-matter falls within the scope of the 1968 Convention and the defendant or defender is domiciled in the United Kingdom or the proceedings are of a kind mentioned in article 16 of the 1968 Convention. In the present case, the subject-matter falls within the scope of the 1968 Convention and the defender is domiciled in the United Kingdom (in England). Schedule 4 is therefore applicable. It contains a modified version of Title II of the 1968 Convention.
[6]In schedule 4, the general principle laid down by article 2 is that, subject to the provisions of Title II, persons domiciled in a part of the United Kingdom are to be sued in the courts of that part. Subject to the provisions of Title II, the defenders are therefore to be sued in the English courts. Article 3 permits persons domiciled in a part of the United Kingdom to be sued in the courts of another part of the United Kingdom, but only by virtue of the rules set out in sections 2, 4, 5 and 6 of Title II. Section 2 is headed "Special jurisdiction" and contains inter alia Article 5, on which the pursuer relies in the present case. Article 5 begins:
"A person domiciled in a part of the United Kingdom may, in another part of the United Kingdom, be sued:
(1)in matters relating to a contract, in the courts for the place of
performance of the obligation in question...".
(the words printed in heavy type are those resulting from modifications of Title II of the 1968 Convention by way of addition or substitution: section 16(2)(b)).
The pursuer's case that article 5 confers jurisdiction over the present proceedings on the Sheriff Court at Paisley proceeds on the basis that the place of performance of the defenders' obligation to indemnify him is his home address, which is within the Sheriffdom of North Strathclyde.
[7]Schedule 4 also contains provisions concerned with exclusive jurisdiction and with prorogation of jurisdiction. Section 5 is headed "Exclusive jurisdiction", and contains article 16. That article provides that, in certain specified proceedings, particular courts "shall have exclusive jurisdiction, regardless of domicile." An example is proceedings which have as their object the dissolution of a company: the courts of the part of the United Kingdom in which the company has its seat have exclusive jurisdiction. Section 6 is headed "Prorogation of jurisdiction", and contains inter alia article 17. The first paragraph of that article is in the following terms:
"If the parties...have agreed that a court or the courts of a part of the United Kingdom are to have jurisdiction to settle any disputes which have arisen or which may arise in connection with a particular legal relationship, and, apart from this Schedule, the agreement would be effective to confer jurisdiction under the law of that part, that court or those courts shall have...jurisdiction...".
(the dots indicate modifications of Title II of the 1968 Convention by way of omission: section 16(2)(a)).
[8]Article 17 of schedule 4 has been considered on a number of occasions in the Sheriff Court, and conflicting opinions have been expressed as to its effect. One view is that where schedule 4 is applicable, article 17 has the effect that a jurisdiction clause in a contract cannot create an exclusive jurisdiction, even if the clause purports to do so: any jurisdiction referred to in the clause must be concurrent with that of any other court which would have jurisdiction apart from the clause. Before this court, parties were agreed that this approach was mistaken. In view of the divergence of opinions expressed in the reported cases, however, we asked to be addressed on the point, with a view to offering guidance to lower courts. As this issue is logically anterior to the question of interpretation of the particular clause with which the present case is concerned, we shall begin by considering the effect of article 17.
[9]Article 17 of schedule 4 does not expressly stipulate that the jurisdiction to which it refers is necessarily non-exclusive: it merely provides that the court whose jurisdiction has been prorogated "shall have...jurisdiction". The argument that it prevents an exclusive jurisdiction from being created by agreement depends upon a comparison of article 17 of schedule 4 with other provisions. In particular, article 17 of schedule 4 is a modified version of article 17 of the 1968 Convention, which (as we have mentioned) appears in schedule 1 to the Act. In the 1968 Convention, article 17 begins as follows:
"1.If the parties, one or more of whom is domiciled in a Contracting State, have agreed that a court or the courts of a Contracting State are to have jurisdiction to settle any disputes which have arisen or which may arise in connection with a particular legal relationship, that court or those courts shall have exclusive jurisdiction."
The modified version of article 17 which appears in schedule 4 omits the word "exclusive".
[10]The effect of the word "exclusive" in article 17 of the 1968 Convention is a less straightforward question than it might seem at first sight. It appears, from a series of decisions of the European Court of Justice, that jurisdiction under article 17 is "exclusive" in the sense that it operates to the exclusion of any jurisdiction which might otherwise arise under articles 2 to 6 of the 1968 Convention (see e.g. Case 24/76, Estasis Salotti v. RUWA [1976] E.C.R. 1831; Case 23/78, Meeth v. Glacetal [1978] E.C.R. 2133). Differing views have been expressed on the effect, under article 17, of a non-exclusive jurisdiction clause, i.e. a clause providing for jurisdiction to be possessed by a particular court in addition to any other jurisdiction which might otherwise exist. One view is that such a clause comes within article 17 and can be given effect in accordance with its terms (see e.g. Kurz v. Stella Musical GmbH [1992] Ch. 196; Dicey & Morris, The Conflict of Laws, 13th ed., para. 12-107). Another view is that such a clause falls outside the scope of article 17, and is therefore ineffective in circumstances where jurisdiction is governed by the 1968 Convention (see e.g. Cheshire & North, Private International Law, 13th ed., pp. 239-240). We were not addressed on this controversy, and it is unnecessary for us to express any opinion upon it.
[11]The difference in terminology between article 17 of schedule 4 and article 17 of the 1968 Convention itself is clearly intentional. Parliament must have intended the effect of the modified version of article 17, in schedule 4, to be different from the effect which it considered the original article 17 to have, or at least potentially to have. That conclusion is fortified by a comparison between schedule 4 and schedule 8, which concerns jurisdiction in Scotland (subject inter alia to schedule 4: see section 20(1)) and enacts another modified version of the 1968 Convention. Rule 5(1) of schedule 8, which is based on article 17 of the 1968 Convention, provides:
"If the parties have agreed that a court is to have jurisdiction to settle any disputes which have arisen or which may arise in connection with a particular legal relationship, that court shall have exclusive jurisdiction."
[12]In British Steel Corporation v. Allivane International Ltd. 1989 S.L.T. (Sh. Ct.) 57, the sheriff proceeded on the basis that the original article 17, by reason of the word "exclusive", prevented jurisdiction from arising under the earlier provisions of the Convention in a case where there was a jurisdiction agreement; and that Parliament, by omitting the word "exclusive" from the modified version in schedule 4, must therefore have intended that an agreement on the jurisdiction of the courts of one part of the United Kingdom (whether expressed to be exclusive or not) should not prevent proceedings from being brought in any other part of the United Kingdom whose courts had jurisdiction under the earlier provisions of schedule 4. The sheriff put the matter in this way (at p. 59):
"Where the question involves the allocation of jurisdiction within the United Kingdom, the agreed prorogation of the courts of one constituent part is not exclusive. This is so even where the agreement expressly provides to the contrary. The mandatory character of articles 2 and 3 of Schedule 4 overrides contractual stipulations to a different effect...In my opinion Parliament deliberately declined to invest the prorogated jurisdiction described in the first paragraph of article 17 of Schedule 4 to the Act with an exclusive complexion. That must mean that that jurisdiction is concurrent with the domiciliary jurisdiction prescribed in article 2."
The approach taken in British Steel was not followed in Jenic Properties Ltd. v. Andy Thornton Architectural Antiques 1992 S.L.T. (Sh. Ct.) or in McCarthy v. Abowall (Trading) Ltd. 1992 S.L.T. (Sh. Ct.) 65, but those decisions contain no detailed analysis of the issues, and it is possible, as the editors of Dicey & Morris observe (at p. 440), that the reasoning of the British Steel decision may not have been understood.
[13]We were not addressed on any materials extrinsic to the 1982 Act which might assist in determining what Parliament's intention may have been when it enacted article 17 of schedule 4, and in particular in determining why the word "exclusive" was omitted. The issue is not made any easier by the fact that the effect of article 17 of the 1968 Convention, and in particular its application to non-exclusive jurisdiction agreements, is itself a matter of difficulty and controversy. We are, however, aware that the application of article 17 of the Convention to non-exclusive jurisdiction agreements has long been a matter of uncertainty. One possible view, at the time the 1982 Act was enacted, was that article 17 had no application to such agreements, because of the presence in article 17 of the term "exclusive", and that such agreements were therefore ineffective in circumstances where jurisdiction was governed by article 17. The alternative view - that such an agreement could be given effect under article 17 in accordance with its terms - did not receive any judicial support in the United Kingdom, so far as we are aware, until the decision in Kurz in 1991, long after the enactment of the 1982 Act. In these circumstances, it would be understandable if Parliament had omitted the word "exclusive" from article 17 of schedule 4 so as to ensure that non-exclusive jurisdiction agreements should continue to have effect in the allocation of jurisdiction as between the courts of the United Kingdom. In other words, by omitting the word "exclusive", Parliament may have intended to imply that the jurisdiction conferred by article 17 of schedule 4 need not be exclusive, and therefore that that provision extended to non-exclusive as well as to exclusive jurisdiction agreements. If that were Parliament's intention, then it would be incorrect to infer, as the sheriff did in British Steel, that Parliament must have intended that the jurisdiction conferred by article 17 must necessarily be non-exclusive of jurisdiction arising under the earlier articles.
[14]The alternative view is that Parliament omitted "exclusive" from article 17 of schedule 4 because it did not intend that if it should be possible for parties, by agreement, to confer jurisdiction on the courts of one part of the United Kingdom to the exclusion of jurisdiction which would otherwise be possessed by the courts of another part of the United Kingdom. We are not persuaded that this is what Parliament intended. It would mean, in the first place, that an agreement to confer exclusive jurisdiction would have to be treated as if it were an agreement to confer non-exclusive jurisdiction, contrary to the intention of the parties (cf. the observation of the European Court of Justice in Meeth v. Glacetal, supra, at p. 2141, that "article 17 is based on a recognition of the independent will of the parties to a contract in deciding which courts are to have jurisdiction to settle disputes falling within the scope of the Convention"). This rule would in addition apply only to agreements governed by schedule 4: a clause conferring exclusive jurisdiction on the Scottish courts, for example, would be effective if the case fell within schedule 1 or schedule 8, but not if it fell within schedule 4. It is not apparent to us what rationale there might be for such an approach. Finally, we note that section 49 of the 1982 Act (as amended) provides:
"Nothing in this Act shall prevent any court in the United Kingdom from staying, sisting, striking out or dismissing any proceedings before it, on the ground of forum non conveniens or otherwise, where to do so is not inconsistent with the 1968 Convention or, as the case may be, the Lugano Convention."
In a case falling within the scope of schedule 4, it would not be inconsistent with the 1968 Convention for the Scottish courts to dismiss an action on the ground that the parties had agreed that the English courts should have exclusive jurisdiction. That being so, and given the terms of section 49, it appears to us that article 17 of schedule 4 should not be interpreted as requiring the Scottish courts to accept jurisdiction in the face of an agreement conferring exclusive jurisdiction on the English courts.
[15]For these reasons, we conclude that the question whether the jurisdiction arising under a jurisdiction agreement is exclusive or non-exclusive depends upon the law governing the agreement (specifically, the law governing the relevant clause), and not upon article 17 of schedule 4.
[16]In the present case, the contract provides that "this Document shall be governed by the laws of England". Given such a provision, Scottish private international law regards English law as the law governing the effect of the jurisdiction condition. The Scottish courts cannot take judicial notice of foreign law; and they cannot therefore apply any foreign system of law (including English law) unless it has been established as a fact. In the absence of any proof of foreign law, the Scottish courts proceed on the basis that foreign law coincides with Scots law. In the present case, there is no suggestion in the pleadings that the relevant English law differs in any way from Scots law, and no attempt has been made before us to establish English law as a fact. In these circumstances, this court can only proceed on the basis that the relevant English law is the same as Scots law.
[17]The Scottish courts are accustomed to have regard to decisions of the English courts for their persuasive value; and reference to a number of English decisions was made during the discussion before us. We were, however, invited by counsel for the pursuer to disregard the English decisions, on the basis that English law in respect of the construction of jurisdiction clauses is different from Scots law. This might be thought to be a paradoxical submission: the court is directed by Scottish private international law to apply English law in construing the contract, but it has to disregard English law if it differs from Scots law. As this point gave rise to some confusion in the discussion before us, we should perhaps make it clear that there is no paradox. This court is not qualified to express any opinion as to English law, for the reasons already explained, unless it has been established by competent means as a fact. The court cannot draw any conclusions, merely from the citation of English authorities in argument, as to what English law may be. To the extent that an English decision appears to proceed upon principles which are not those of Scots law, then that is something to be taken into account in assessing any persuasive authority it might possess in enabling this court to determine the position under Scots law.
[18]Approaching the question of construction of the jurisdiction clause as one of Scots law, counsel made differing submissions as to the relevant principles. Counsel for the defenders submitted that a jurisdiction clause fell to be construed in the same way as any other clause in a contract. Counsel for the pursuer, on the other hand, submitted that there was a special rule in Scots law governing the construction of jurisdiction clauses. According to this rule, there was a presumption in law against the exclusion of the jurisdiction of the Scottish courts, which could be overcome only by an express term or, possibly, by necessary implication. The authority for this special rule was said to be the Opinion of the Second Division, delivered by Lord Justice-Clerk Wheatley, in Scotmotors (Plant Hire) Ltd. v. Dundee Petrosea Ltd., 1980 S.C. 351.
[19]The parties to the Scotmotors case were two Scottish companies, operating from the docks in Dundee. They entered into an agreement, to be performed wholly in Scotland, which essentially concerned the hire of cranes for use by the pursuers in the Dundee docks. The pursuers subsequently brought proceedings against the defenders in Dundee Sheriff Court on the ground that the cranes were defective. The defenders then pled that the Scottish courts had no jurisdiction, on the basis that the contract included a clause in the following terms:
"Proper Law. This agreement shall be governed and construed in accordance with the Laws of England, and the parties hereto submit to the jurisdiction of the English courts."
The sheriff sustained the plea to jurisdiction, but his decision was reversed by the Second Division.
[20]It is not altogether easy to discern the ratio decidendi of the decision of the Inner House; and it is necessary to analyse the Opinion of the Lord Justice-Clerk in some detail. After narrating the background circumstances, the Lord Justice-Clerk continued:
"This point turns on whether the condition headed 'Proper Law' ousts the jurisdiction of the Scottish Courts. It has been stated, albeit in relation to arbitration cases, that the jurisdiction of the Courts cannot be ousted unless the provision therefor has been 'expressly specified' or 'distinctly expressed' cf. Lord Justice-Clerk Inglis in Calder v. Mackay 22 D. 741 at p. 744 and Lord Dundas in McConnell & Reid v. Smith 1911 S.C. 635 at p. 638. We see no reason for a different standard being applied to the agreement here."
[21]A number of observations can be made about this paragraph. First, in our opinion it is not accurate to say that an exclusive jurisdiction clause "ousts" the jurisdiction of the courts. Courts possess jurisdiction by the operation of law. One of the powers which jurisdiction confers is the power to decide whether or not to exercise that jurisdiction in the sense of allowing a case to proceed. That power is recognised, for example, by section 49 of the 1982 Act. A jurisdiction clause is relevant to the exercise of that power (and may, in circumstances governed by article 17 of the 1968 Convention, be decisive), but it cannot and does not oust the jurisdiction from which that power is derived. In Elderslie Steamship Co. Ltd. v. Burrell & Son (1895) 22 R 389, for example, the court declined to exercise jurisdiction in circumstances where one party to a contract had exercised an option to decide that proceedings must be brought in England, but the court regarded itself as continuing to possess jurisdiction (see e.g. per Lord Young at p. 391 and per Lord Rutherfurd Clark at p. 394). As Burger C.J. observed, delivering the opinion of the majority of the United States Supreme Court in The Bremen v. Zapata Off-shore Co. (1972) 407 U.S. 1 at p. 12:
"The argument that such clauses are improper because they tend to 'oust' a court of jurisdiction is hardly more than a vestigial legal fiction. It appears to rest at core on historical judicial resistance to any attempt to reduce the power and business of a particular court and has little place in an era when all courts are overloaded and when businesses once essentially local now operate in world markets. It reflects something of a provincial attitude regarding the fairness of other tribunals. No one seriously contends in this case that the forum-selection clause 'ousted' the District Court of jurisdiction over Zapata's action. The threshold question is whether that court should have exercised its jurisdiction to do more than give effect to the legitimate expectations of the parties, manifested in their freely negotiated agreement, by specifically enforcing the forum clause."
[22]Secondly, the analogy drawn by the Lord Justice-Clerk between an agreement on jurisdiction and an arbitration clause appears to us to be untenable, at least at the present day. The analogy may have been derived from the English authorities which were cited to the court, and in particular the case of Austrian Lloyd Steamship Company v. Gresham Life Assurance Society Ltd. [1903] 1 K.B. 249. At the time of that decision (as is evident from the report), the power of the English courts to stay proceedings which were in breach of a foreign jurisdiction agreement was thought to be derived from the discretion conferred on them by arbitration legislation. In other words, the English courts at that time treated agreements on jurisdiction as analogous to arbitration clauses so as to be able to give effect to them. Later English decisions, which were not cited to the court in Scotmotors, departed from that approach. In Racecourse Betting Control Board v. Secretary for Air [1944] Ch. 114, for example, MacKinnon L.J. said (at p. 126):
"It is, I think, rather unfortunate that the power and duty of the court to stay the action was said to be under s. 4 of the Arbitration Act 1889. In truth, that power and duty arose under a wider general principle, namely, that the court makes people abide by their contracts, and, therefore, will restrain the plaintiff from bringing an action which he is doing in breach of his agreement with the defendant that any dispute between them shall be otherwise determined ... it would have been, I think, more logical to say, not that the plaintiff could be restrained under s. 4 of the Act, but that he could be restrained under the principle of which that section is a particular example."
It appears now to be settled that the English courts' jurisdiction to grant a stay is inherent; and a submission to a foreign court is no longer treated as equivalent to a submission to arbitration (see e.g. Evans Marshall & Co. Ltd. v. Bertola S.A. [1973] 1 W.L.R. 349 at p. 360 per Kerr J., as he then was). Any support formerly derived from English law for the proposition that an agreement on jurisdiction and an arbitration clause fell to be treated similarly thus no longer exists. On analysis, there are, of course, significant differences. In particular, under the latter, the parties waive their right to have their rights and obligations determined by a court. Under the former, they merely agree to restrict that right to a particular court. That is a difference which, albeit thought unimportant in 1980, can no longer be brushed aside. We say that because the treatment of foreign courts as equivalent to arbitrations, rather than as equivalent to Scottish courts, is difficult to reconcile with the ratification and implementation of international conventions on jurisdiction and the mutual recognition of judgments. Indeed, now that the 1968 Convention has been implemented by the 1982 Act, it seems to us that that approach can simply no longer be treated as a principle of Scottish private international law.
[23]For the foregoing reasons it is, we think, arguable that the decision in Scotmotors need no longer be regarded as authoritative or binding on this court. However, it is unnecessary to go that length because on close analysis we do not consider that, read overall, the Lord Justice-Clerk's Opinion involves the application of any distinct principle or rule of law to the construction of clauses such as that with which we are here concerned. Before embarking on that analysis, it is, however, perhaps worth noting that even the cases concerning arbitration clauses to which the Lord Justice-Clerk referred are far from conclusive.
[24]Calder v. Mackay was an application to the supervisory jurisdiction of the court, for judicial review (as it would now be called) of a decree-arbitral which was said to be ultra vires in so far as it not only valued work carried out under a building contract but in addition ordered the employer to pay the sum at which the work was valued. The issue before the court in that case was whether or not the vires of the decision-maker extended to making an order for payment. The passage in the Opinion of Lord Justice-Clerk Inglis, to which Lord Justice-Clerk Wheatley referred, is in the following terms:
"Now, one ground on which I hold this decree bad in law is, that it is ultra fines compromissi - that is to say, that it is an unlawful attempt to extend the subject-matter of the submission. That subject-matter, according to my view, is a valuation of work, and nothing else; and whenever the arbiters went beyond that, they assumed an office not conferred on them. I should have thought this clear in principle, but we have lately had abundant opportunities of seeing practical illustrations of this principle, as in the case of Blaikie v. Aberdeen Railway Company, in which there were as general words of reference as were ever put in a submission. That case was appealed, and the judgment was sustained in so far as it held that the construction of the contract was within the power of the arbiters. But the House of Lords were of opinion that the award of the arbiter was bad, in so far as it assessed damages, and for this reason, because an arbiter cannot be allowed to oust the jurisdiction of the courts of law, nor can parties be considered as intending to do so, except to the extent which they have expressly specified."
[25]The phrase "expressly specified" thus comes from Lord Justice-Clerk Inglis's gloss on the decision of the House of Lords in Blaikie v. Aberdeen Railway Company. When one reads the speeches of their Lordships in the latter case, however, it seems clear that only ordinary principles of construction were employed. Lord St. Leonards L.C. said this (at p. 121):
"Now, my Lords, that [viz. the construction of the arbiter's powers] is a mere question of construction, and not depending upon any rule of law...My noble and learned friend and myself have both agreed that the arbiter has exceeded his power as regards the assessing of the damages, and therefore that part of the interlocutor which affirms his proceeding in that respect, will be reversed..."
The other speech was delivered by Lord Brougham, who said (at pp. 121-122):
"My Lords, on the other point, namely , with respect to the assessment of damages, we are entirely agreed...I entirely agree with my noble and learned friend, that our course here would not be difficult if it was a mere question of law; but we consider this to be a question on the construction of an instrument, which is to a certain extent a question of law, in as much as these questions are for the court, not for the jury; nevertheless, it is in the nature of a question of fact so far, that it is for the purpose of discovering what the intentions of the parties are, that you undertake the examination of that instrument; and, therefore, on that ground it is that we have come to this opinion."
In so far as it goes, therefore, the decision of the House of Lords seems to give little, if any, support to the view that an arbitration clause should be construed according to a different principle from any other contractual provision.
[26]The other authority cited by Lord Justice-Clerk Wheatley, McConnell & Reid v. Smith, was a "ticket" case in the same line of authority as the better known case of McCutcheon v. David McBrayne Ltd. 1964 S.C. (H.L.) 28. It was concerned with the question whether an arbitration clause included in certain standard conditions, to which a general reference was made in sale notes, had been sufficiently brought to the notice of the purchaser so as to be incorporated into the contract. It was in that rather special context that Lord Dundas observed
"It is an important matter, and one that must be distinctly expressed, that a man should abandon his normal remedies at law."
The other members of the court, Lord Justice-Clerk MacDonald and Lord Ardwall, found it unnecessary to employ similar language, and it is by no means clear that even Lord Dundas intended his remarks to be applicable generally.
[27]The authorities cited by Lord Justice-Clerk Wheatley thus provide, in our opinion, a less than firm foundation for the proposition that special rules of construction apply even to arbitration clauses. That of course would not matter if the ratio of Scotmotors was otherwise clear that such rules should be applied to jurisdiction clauses. But, as stated above, we do not believe that to be the case.
[28]Read in isolation, the paragraph from Scotmotors which we have quoted might be interpreted as setting up a rule of law that a jurisdiction clause will not exclude the jurisdiction of the Scottish courts unless such an exclusion has been "expressly specified" or "distinctly expressed". The remainder of the Opinion, however, does not support that interpretation. After the paragraph already quoted, Lord Justice-Clerk Wheatley continued:
"In construing the meaning and effect of the condition, we start by noting that both parties are companies with their registered office in Scotland and the contracts had to be carried out in Scotland. In that situation the normal forum for an action for breach of contract would be a Scottish Court. The condition, however, provided that the agreement would be governed and construed in accordance with the laws of England. That in itself provides no obstacle to a Scottish Court entertaining such an action, since our procedure provides for English law being proved as a matter of fact in Scottish Courts. The condition, however, goes on to provide that "the parties hereto submit to the jurisdiction of the English Courts." The respondents argued that this, read in conjunction with the earlier part of the condition, clearly indicated that the parties were agreeing that all disputes arising out of the contracts would come within the exclusive jurisdiction of the English Courts. Reliance was placed on the case of Austrian Lloyd Steamship Company v. Gresham Life Assurance Society [1903] 1 K.B. 249 in support of this argument. In that case the condition was in these terms: 'For all disputes which may arise out of the contract of insurance, all the parties interested expressly agree to submit to the jurisdiction of the Courts of Budapest having jurisdiction in such matters.' The facts were that a life assurance policy was effected by a foreigner with an English insurance company which had an office in Budapest. The policy was in French language and provided that the premiums and insurance money should be payable at Budapest. The Court of Appeal, overturning the decision of a single judge, ordered a stay of proceedings, on the basis that the condition attached to the contract of insurance, properly construed, meant that the parties had agreed that all disputes arising under the contract should be determined by the Court in Budapest. Romer L.J. took the view that this is what the condition provided for, and rejected the contention that it simply meant that the parties would not take any objection to the jurisdiction of the Budapest Court. Matthew L.J. said that the condition meant that both parties were bound to refer such a dispute to that Court. We note that there were features in that case which distinguish it from the instant case. The person effecting the policy was a foreigner, the insurance company, although an English one, had an office in Budapest, and the premiums and insurance money were to be paid in Budapest, whereas in this case the parties were both companies incorporated and operating in Scotland, the contracts were to be carried out in Scotland, and no reference was made to disputes in the condition. The respondents maintained, however, that this last point had no significance since a proper reading of the condition necessarily implied that it related to all disputes arising out of the contract."
[29]The first point we note about this paragraph is that it is inconsistent with the view that the court had, in the preceding paragraph, laid down a rule of law that an exclusive jurisdiction could only be conferred "expressly". The condition with which the court was concerned and which has been quoted above did not, in terms, confer exclusive jurisdiction. Nonetheless, the court embarked upon the task of "construing the meaning and effect of the condition"; and they began that task by examining the circumstances surrounding the contract - what Lord Wilberforce described in other cases as the "matrix of fact".
[30]The second point to note is the emphasis laid by the court upon the fact that the "normal forum" was the Scottish courts. In this connection, it is again important to bear in mind that this case pre-dated the 1982 Act. At that time jurisdiction, under Scots law, was governed by the common law. In an ordinary action in personam, such as an action of damages for breach of contract, the court's jurisdiction generally depended on the defender's being present or resident in Scotland, or (in the case of a company) registered in Scotland. On the facts of Scotmotors, all these grounds of jurisdiction pointed to Scotland: the facts of the case had no connection whatsoever with England, apart from the reference to England in the jurisdiction condition.
[31]The third point we note is that the court distinguished the decision of the Court of Appeal in the Austrian Lloyd case on its facts. The Austrian Lloyd case is discussed below, but it is sufficient at this point to note that the Court of Appeal did not apply any special rule of construction to the jurisdiction condition with which it was concerned.
[32]Returning to Scotmotors, the final relevant paragraph of the Lord Justice-Clerk's Opinion is in the following terms:
"As we have already noted, the normal forum for an action arising out of these contracts was the Scottish Courts which could deal with the law agreed to in the condition. In considering whether that jurisdiction has been ousted on the ground that the condition meant that the parties had agreed that all disputes arising out of the contract had not only to be governed and construed by English law but that the English Courts would have exclusive jurisdiction to entertain such disputes, we have to determine whether the wording of the condition was so expressly specified or distinctly expressed as to produce that effect. On the face of it, the wording does not do so. In our view the proper meaning and effect of the second part of the condition is that the parties agree to submit to the jurisdiction of the English Courts if an action is raised there. It does not provide that the parties agree that all disputes must be submitted to the jurisdiction of the English Courts. Nor does it mean that the parties agree to abandon their right to resort to the otherwise obvious jurisdiction of Scottish Courts. Had it been intended to give exclusive jurisdiction to the English Courts, that could easily have been clearly specified. We are not dissuaded from that view by the opinions expressed by the Judges in Austrian Lloyd Steamship Company, supra because the circumstances there were clearly different, and these different circumstances seem to have weighed with the Judges in reaching their decision. The view which we have taken accords with the view expressed by Baron Pollock in Hoerter (1893) 10 T.L.R. 22 at p. 23."
[33]In this paragraph the Lord Justice-Clerk again emphasised the status of the Scottish courts as the "normal forum" or "obvious jurisdiction" to which all the facts of the case pointed. The decision in Austrian Lloyd was again distinguished on its facts rather than because of any divergence in principle; and support was found in the earlier English decision in the Hoerter case.
[34]In our opinion, the Scotmotors decision does not vouch the proposition that a clause conferring an exclusive jurisdiction must do so in express terms. Nor does it support an approach which confines the construction of a jurisdiction clause to the precise words used: otherwise, the court need not have examined the surrounding circumstances. Moreover, the references to the earlier English cases, and the distinguishing of Austrian Lloyd on its facts, are inimical to the suggestion that there was a special rule of construction in Scots law which applied generally to jurisdiction clauses. Instead the emphasis placed by the court upon the factors connecting the case to Scotland as the "normal forum" suggests to us that all the court was really doing was to emphasise that, where Scotland was the "normal forum", its jurisdiction would not be held to be excluded unless that was the clear meaning of the words used. If that is indeed the ratio of the case, however, then it need not be regarded as laying down any special rule of law for the construction of jurisdiction agreements, but should be understood simply as a decision on the facts of the case as to how the meaning of the contract fell properly to be ascertained.
[35]In support of his submission as to the rule of law supposedly laid down in Scotmotors, counsel for the pursuer also referred to the decision of the Extra Division in Morrison v. Panic Link Ltd., 1993 S.C. 631. This case concerned a franchise agreement relating to courier services, entered into between the franchiser, an English company operating from Leicestershire, and the franchisee, an individual living in Aberdeen. The franchisee began proceedings in the Court of Session, seeking damages for breach of contract. The action was brought after the 1982 Act had come into force, although no reference was made to this by the Lord Ordinary or by the Extra Division. It is apparent from the Session Papers that jurisdiction was based on article 5 of schedule 4, i.e. it was contended that Scotland was the place of performance of the obligation in question. The franchiser pled that the court had no jurisdiction, on the basis of a clause in the franchise agreement which provided:
"9.25Proper law and jurisdiction
9.25.1This agreement shall be governed by English law in every particular
including formation and interpretation and shall be decreed to have been made in England.
9.25.2Any proceedings arising out of or in connection with this agreement
may be brought in any court of competent jurisdiction in England.
9.25.3The submission by the parties to such jurisdiction shall not limit the
right of the franchiser to commence any proceedings arising out of this agreement in any other jurisdiction it may consider appropriate."
That plea was repelled by the Lord Ordinary, and a reclaiming motion against that interlocutor was refused.
[36]Lord Murray's Opinion, in giving the reasoning of the court, made no reference to any authority but focused on the terms of clause 9.25.2, and in particular the use of the word "may":
"As counsel himself recognised, the use of the word 'may' in cl. 2 of sec. 9.25 of the contract, though not fatal to his argument, does mean that the context in which it is used must indicate clearly and unambiguously that it is intended to convey an exclusive obligation. While we accept that there is a necessary interrelationship between cll. 2 and 3, we are not persuaded that cl. 3 is necessary in order to interpret the terms of cl. 2 even although cl. 2 is necessary for the interpretation of cl. 3."
It appears from that passage that counsel made a concession (not otherwise recorded in the Opinion), which may explain the absence of any reference to authority. In any event, in so far as the decision proceeded on a concession, its significance, if any, is greatly reduced.
[37]The only other Scottish case to which we were referred in this context was Compagnie Commercial Andre S.A. v. Artibell Shipping Co. Ltd. 1999 S.L.T. 1051, in which the Lord Ordinary referred (at p. 1063) to
"the need for clarity and distinct expression if jurisdiction which the Scottish courts would otherwise have is to be excluded by an agreement to prorogate the jurisdiction of a foreign court (Morrison v. Panic Link Ltd. at 1994 S.L.T., p. 234J-L; Scotmotors at 1980 S.C., p. 354)".
The citation from Morrison in fact refers to counsel's argument, but in any event we do not regard this decision as innovating in any way upon Scotmotors.
[38]We were also referred to a number of English decisions concerned with the construction of jurisdiction clauses, some of which have already been mentioned. Before embarking upon a discussion of these cases, it is relevant to note that the English cases have considered the effect of jurisdiction clauses in a number of different contexts. First, the issue has come before the English courts in the context of applications for leave to serve defendants out of the jurisdiction. That is a procedure under which the English courts exercise a more extensive jurisdiction than Scottish courts have traditionally claimed, exercising jurisdiction over defendants who are neither present nor ordinarily resident in England. Hoerter, for example, was a case of that kind; and its facts were far removed from those in which, to use Lord Wheatley's expression, England might be regarded from a Scottish perspective as the "normal forum". That context had no Scottish equivalent prior to the 1982 Act. Secondly, the issue has arisen in the context of applications for staying actions brought in England against defendants served there. Thirdly, the issue has arisen in the context of applications for injunctions to prevent proceedings from being taken in other jurisdictions.
[39]We begin by considering the Hoerter case. The first point we note is that the Lord Justice-Clerk referred to the decision of the Divisional Court, reported at (1893) 10 T.L.R. 22. That decision was however appealed to the Court of Appeal, whose decision is reported at p. 103 of the same volume. The case concerned a claim by an English company for commission on sales, principally in England, of the goods of a German company which had no place of business in England. The question was whether the plaintiffs should be allowed leave to serve their writ out of the jurisdiction. Under English law (unlike Scots common law), such service was normally permitted where the claim arose out of a contract which was due to be performed in England. In opposing leave, the defendants relied on a clause in these terms:
"In case of disputes, the firm of Mumm [the plaintiffs] submit to the laws in force in Hanover, and jurisdiction."
In the Divisional Court, the latter part of that clause was interpreted as meaning that the parties would not object to the jurisdiction of Hanover, rather than as conferring an exclusive jurisdiction on Hanover. Pollock B. observed that if it had been intended to give the court in Hanover exclusive jurisdiction, it might have been so provided in express terms. That observation appears to have attracted the court's attention in Scotmotors. The decision was affirmed by the Court of Appeal, but on different grounds, and without any view being expressed as to the construction of the clause. Lord Esher M.R. is reported as saying (at p. 104):
"The clause was in a German contract, and it must be construed according to German law. Was the Judge at that stage of the proceedings to try the question whether that was its effect? Was he to examine the German law and hear evidence on the point? That was not the time to discuss the contract...It was impossible to say that the clause was clear, because two judges in the Divisional Court differed from [the judge in chambers]. That being so, the right course was to allow the service of the notice of the writ to stand, and to leave the question to be argued upon a subsequent application of the defendants, or to be disposed of at the trial."
In the circumstances, we do not consider that any assistance can be derived from the decision of the Divisional Court in that case.
[40]We next consider the Austrian Lloyd case. This case concerned a life assurance policy taken out by a native of Trieste with an English insurance company which had a branch in Budapest. The premiums and insurance money were payable in Budapest. The policy (which was in French) contained a clause in these terms (as translated):
"For all disputes which may arise out of the contract of insurance, all the parties interested expressly agree to submit to the jurisdiction of the Courts of Budapest having jurisdiction in such matters."
Romer L.J. posed the question for determination in this form (at pp. 251-252):
"Does the condition merely mean that, if one of the parties to the contract is sued by the other in the Court of Budapest, he will not take any objection to its jurisdiction; or, does it mean that the parties mutually agree that, if any dispute arises under the contract, it shall be determined by the Court in Budapest? Having regard to the nature of the contract and its language, I am of opinion that the latter construction is the correct one. It is not as if the insurance company only had agreed that they would submit to the jurisdiction of the Court at Budapest: both parties mutually agree to submit to that jurisdiction in respect of any dispute which may arise under the contract. If there had been an agreement by the parties in similar terms to submit to the decision of a particular individual, I think there could have been no doubt that it would have amounted to an agreement to submit any dispute under the contract to the arbitration of that person. In this case, instead of nominating a particular individual as arbitrator, the parties agree to submit any dispute arising under the contract to the Courts at Budapest."
Matthew L.J. delivered a concurring judgment, in the course of which he said (at p. 252):
"It seems to me that the plain meaning of the language of the condition is, not merely that, in the event of a dispute arising under the contract, either party shall have an option of suing in the Court at Budapest having jurisdiction in such matters, but that both parties shall be bound to refer such a dispute to that Court."
The clause did not include the word "exclusive". The meaning attributed to the clause was not one which, in our opinion, could readily be described as "expressly specified" or "distinctly expressed", and there is no trace of such a test in the court's reasoning. The court appears to have approached the question in the ordinary way, as one of construction of language in the context of the surrounding circumstances. The question was whether, properly construed, the clause obliged the parties to resort to the specified jurisdiction.
[41]The remaining English cases which were cited to us are more recent. The first case which appears to us to be of assistance is Sohio Supply Co. v. Gatoil (U.S.A.) Inc. [1989] 1 Lloyd's Rep. 588. That case concerned a contract for the sale of crude oil, entered into between two companies neither of which was English. The parties negotiated various amendments to the form on which they contracted. The outcome was that it included the words:
"Governing law: This agreement shall be governed by the laws of England under the jurisdiction of the English Court without recourse to arbitration."
In the Court of Appeal, Staughton L.J., with whom Buckley L.J. agreed, said this about the clause (at pp. 591-592):
"In Dicey and Morris on Conflict of Laws, p. 404, there is this footnote 93:
'Some authorities suggest that the clause must provide in terms that the jurisdiction of the chosen court be exclusive...'
and then there is a reference to Hoerter v. Hanover (1893) 10 T.L.R. 103, to two Canadian cases and to certain other authorities, and the footnote continues:
'...but it is submitted that the question is whether on its true construction the clause obliges the parties to resort to the relevant jurisdiction, irrespective of whether the word "exclusive" is used.'
...
The question is one of the construction of this contract and nothing more. It is, I think, part of the matrix background, or surrounding circumstances, whichever term one chooses to use, that this was a contract made between sophisticated businessmen who specifically chose their words as to English jurisdiction for the purpose of this contract. It is not a consumer contract on a printed form, or anything like that. To my mind, it is manifest that these businessmen intended that clause to apply to all disputes that should arise between them. I can think of no reason at all why they should go to the trouble of saying that the English courts should have non-exclusive jurisdiction. I can think of every reason why they should choose that some court, in this case the English court, should have exclusive jurisdiction. Then, both sides would know where all cases were to be tried. It may be that in some other types of case, such as a policy of insurance, there is a reason for providing for non-exclusive jurisdiction. I can see none here. I am not sure that I can detect what precisely the reason was for choosing England. The parties had chosen English law; it may be that they thought that the best place for English law to be applied was an English Court; it may be that they even thought that English Courts were a good thing in their own right - I do not know. It may be that they wanted to join the 28 per cent of cases in the Commercial Court where both sides came from overseas; or it may be that they just wanted to choose a neutral forum."
In this passage, the court rejected any general proposition that the choice of an exclusive jurisdiction must be expressly specified, regarding the matter simply as one of construction of the contract unencumbered by special rules of construction. In construing the contract in question, the court had regard to its commercial context; to the fact that the jurisdiction clause had been specifically agreed; to the fact that English jurisdiction had been chosen although neither party had any relevant connection to England; to the existence of several reasons why an exclusive English jurisdiction might have been selected (including, in the context of international trade, the desirability of a neutral forum); and to the absence of any rationale for selecting a non-exclusive English jurisdiction. The passage implies that a consumer contract on a printed form might fall to be treated differently; and the court observed that, in the context of an insurance policy, there might be a reason for providing for non-exclusive jurisdiction.
[42]The next case we wish to consider, and the one which we have found of greatest assistance, is S & W Berisford plc v. New Hampshire Insurance Co. [1990] 2 Q.B. 631. This case concerned two insurance policies taken out by a British company with the London office of an American insurance company. The British company took out the policies not only on their own behalf but also on behalf of and for the benefit of their subsidiaries, which included a company incorporated in New York. The policies were governed by English law. One of the policies was a cargo contract and was on a form used by the Institute of London Underwriters. It included the clause:
"This insurance is subject to English jurisdiction."
In considering that clause, Hobhouse J. (as he then was) said this (at pp. 636-637):
"These words have to be construed as part of a contract made in England and governed by English law. Further, they appear on a printed document, on the same page as the signature and stamp which binds the defendants, which is headed 'The Institute of London Underwriters companies marine policy.' The contract is a policy of insurance of which the primary function is to state the rights of the assured against the underwriters and the obligations of the underwriters. The contemplation of the form must be a contract made in London, almost certainly by an insurance company with a place of business in London. The defendants were such a company and they had an Institute of London Underwriters reference number. To construe the relevant words as being intended to permit English jurisdiction would appear implausible, although such a construction would become more plausible if one were to consider that the parties had in mind article 17 of the Convention of 1968 to which I will refer later. But taking the contract at its face value, there is no need for the parties to provide that English jurisdiction be permitted; such jurisdiction already exists. The alternative constructions are either that, on the one hand, it is simply a declaratory provision and, on the other hand, it is a provision for exclusive jurisdiction.
An exclusive jurisdiction clause is one which imposes a contractual obligation on one or more parties to litigate in the stated jurisdiction. The present clause if creating an obligation would create a mutual obligation. (It is of course possible for such clauses to impose such an obligation on only one of the contracting parties.)".
After referring to the judgment of Staughton L.J. in Sohio, Hobhouse J. continued (at pp. 637-638):
"It is to be noted that Staughton L.J. was inclined to put insurance contracts into a different category where a permissive clause could make commercial sense. However, the same canons of constructions are to be applied in relation to this type of clause as any other mutual contractual provision. It is a matter of construing the words used in accordance with their natural meaning and in the light of the surrounding circumstances in which the contract was made: see, for example, Cannon Screen Entertainment Ltd. v. Handmade Films (Distributors) Ltd. (unreported), 11 July 1989.
In the present case, in my judgment, the words used are inapt to create any obligation. If an obligation was intended it could easily have been so stated in clear words. The provision appears in the underwriter's printed form of policy which is issued to the assured. The mutuality of the clause must in practice be very limited. Under English law where a contract has been placed through brokers it will be very rare indeed that an underwriter will ever have to start an action against an assured. The primary relevance of the clause must be to actions to be brought by the assured against the underwriter. To construe this wording as requiring the assured to sue only in England is to go beyond the natural meaning of the words actually used. Further, to construe the words as declaratory is not to deprive them of significance. It is a statement to the assured, who may be foreign, that the rights that he has under the policy are capable of enforcement in the English courts. Such is an apt interpretation having regard to the legal and commercial relationships created by the document and having regard to the words actually used. Such a clause, even though creating no obligation to sue only in England is a contractual acknowledgement of the jurisdiction of the English courts and a contractual agreement to the invocation of that jurisdiction.
Therefore I conclude that this clause is not an exclusive jurisdiction clause. As I pointed out in Cannon Screen Entertainment Ltd. v. Handmade Films (Distributors) Ltd. such a conclusion does not mean that the clause ceases to be relevant in relation to an application such as that which is being made by the defendants on this summons. If the contract says that the assured is entitled to sue the underwriter in the English courts, then it requires a strong case for the courts of this country to say that that right shall not be recognised and that he must sue elsewhere. Further, it will be necessary to revert to the significance of this clause in relation to article 17 of the Convention."
[43]A number of points can be taken from the passages which we have quoted. First, the court proceeded, as in Sohio, on the basis that a jurisdiction clause is to be construed in the same way as any other mutual contractual provision: the words used are to be construed in accordance with their natural meaning and in the light of the surrounding circumstances in which the contract was made. Secondly, the court had regard to a number of factors in considering the alternative constructions. The factors which pointed away from construing the clause as a provision for exclusive jurisdiction were (i) that such a provision would, in the context of the insurance policy in question, impose an obligation which would in practice be likely to fall only on the insured; (ii) that the putative obligation was not clearly stated; (iii) that the contract was on a printed form issued by the insurer to the insured; and (iv) that the alternative construction, even in a situation in which the English courts had jurisdiction in any event (the underwriters being English and the contract being governed by English law), had legal and commercial significance. In relation to the last factor, the court had in mind (a) the general legal and commercial significance of an acknowledgement issued to the insured (who might be foreign) that the contract was enforceable in the English courts, and (b) the more particular significance of such an acknowledgement in private international law, notably (1) in the context of an application for a stay of proceedings (or, in Scotland, sisting or dismissal) under section 49 of the 1982 Act, for example on the ground of forum non conveniens, and (2) in relation to article 17 of the 1968 Convention (which Hobhouse J. considered to be applicable to non-exclusive jurisdiction clauses: p. 642).
[44]The Cannon Screen case, to which reference was made in Berisford, was a slightly earlier decision of Hobhouse J. It too is of assistance in identifying how clauses of the present kind ought to be interpreted. Although it is unreported, the central passages of the judgment are quoted in British Aerospace plc v. Dee Howard Co. [1993] 1 Lloyd's Rep. 368 at p. 374. In Cannon Screen, the court had to consider two clauses in similar terms. One was as follows:
"This agreement shall be construed and interpreted pursuant to laws of England and the parties hereby consent and submit to the jurisdiction of the Courts of England in connection with any dispute arising hereunder."
We note that that clause is in similar terms to the one considered in Scotmotors (the words "in connection with any dispute arising hereunder" do not appear in the Scotmotors clause, but are implicit). Hobhouse J. decided that the clauses were not exclusive, and distinguished the Austrian Lloyd case ("for all disputes...the parties interested expressly agree to submit to the jurisdiction of the Courts of Budapest"). He stated his reasons as follows:
"In my judgment the wording of these clauses is clear. The clause in the model and conforming agreements starts by specifically referring to the fact that the agreement shall be binding upon and inure to the benefit of the parties and their respective successors and permitted assigns. It therefore expressly contemplates the relevance of other entities than those actually named in the agreement. It then uses words which are words of submission not reference: 'The parties hereby submit to the jurisdiction'. In the output agreement the equivalent phrase is 'the parties hereby consent and submit to the jurisdiction'. The addition of the word 'consent' reinforces the same conclusion. The phrase in the Austrian Lloyd case was 'agree to submit' but in that case it was construed in a transitive sense as an agreement to submit disputes to a particular court in the same way as one can agree to submit disputes to the decision of an arbitrator. The clauses which I have to construe do not lend themselves to a transitive construction; the sense is that the parties submit themselves to the jurisdiction of the court not that the parties submit disputes. In the Austrian Lloyd case it was open to the court to construe the words as if they read 'agree to submit all such disputes'. I do not consider that it would be appropriate to make such an inferential insertion in these clauses. Words are an accurate tool and relatively small differences in wording will produce different contractual effects. In these clauses the parties have used neither the word exclusive nor a sentence construction which is transitive. They have used words which are apt to demonstrate an intention to agree to submit to the jurisdiction of the English Courts and not there should be a contractual obligation not to have any recourse to any other court. This is the natural meaning of the words used. It is consistent with the surrounding circumstances and the general matrix of the contracts and in accord with the general context in which these clauses appear in the contracts."
This passage is helpful, in our opinion, in emphasising the importance of paying close attention to the words actually used. The conclusion reached did not depend on any artificial presumption or rule of construction, but upon a careful examination of the clause within its factual matrix. In particular, so far as the language is concerned, Hobhouse J. identified the issue as being whether the sense of the clause was that the parties agreed to submit their disputes to the chosen jurisdiction, or that they agreed to submit to that jurisdiction if it were to be invoked in connection with any dispute: in other words, whether "submit" was being used in a transitive or intransitive sense.
[45]Although Hobhouse J. decided that the clause was non-exclusive, he granted an injunction in that case to restrain Californian proceedings; and one of the important considerations he had in mind, in doing so, was the jurisdiction clause:
"There is on any view an agreement between Cannon UK and the Defendants to submit to the jurisdiction of the English courts. Therefore it cannot be said that as regards the matters to which that clause relates it is an arrogation of jurisdiction by the English courts to decide where those matters should be tried. Those parties have agreed to submit to English jurisdiction; they cannot object to its accepting that jurisdiction."
This illustrates the point made by Hobhouse J. in Berisford: even a clause which is merely declaratory of a jurisdiction which already exists can nonetheless be of legal significance.
[46]We were next referred to the British Aerospace case itself. The clause in that case provided:
"This agreement shall be governed by and be construed and take effect according to English law and the parties hereto agree that the courts of law in England shall have jurisdiction to entertain any action in respect hereof and that in the event of such proceedings being commenced each party shall forthwith notify to the other an address in England for the service of documents."
The clause appeared in a contract between an English company and an American company and had been specifically agreed. Waller J. (as he then was) considered the factual matrix to be similar to that in Sohio, i.e. a deliberate choice of English jurisdiction in a sophisticated commercial transaction, which the parties had freely negotiated, expressed in a situation in which the English courts would have jurisdiction in any event (by virtue of the contract being governed by English law), and in circumstances where either party might wish to sue the other. In these circumstances, and bearing in mind also the provision for an English address for service, Waller J. distinguished Cannon Screen and Berisford, and construed the clause as intended to confer an exclusive jurisdiction, rather than as being merely declaratory.
[47]Counsel also cited to us the decision of the Court of Appeal in Continental Bank N.A. v. Aeakos Compania Navilera S.A. [1994] 1 W.L.R. 588. That case concerned a loan agreement between an American bank and Greek shipping companies which contained the following clause:
"21.01This agreement shall be governed by and construed in accordance with English law.
21.02Each of the borrowers...hereby irrevocably submits to the jurisdiction of the English courts and hereby irrevocably nominates Messrs. Aegis (London) Ltd., of 197, Knightsbridge, London, S.W.7, England, to receive service of proceedings in such courts on its behalf but the bank reserves the right to proceed under this agreement in the courts of any other country claiming or having jurisdiction in respect thereof."
In construing the clause, Steyn L.J. (as he then was), delivering the judgment of the court, said (at p. 592):
"In our judgment the clause should be read in a transitive sense: see Austrian Lloyd Steamship Co. v. Gresham Life Assurance Society Ltd. [1903] 1 K.B. 249. It contemplates the submission of disputes to the English courts. The correctness of this construction is reinforced by the fact that the clause contemplates service of proceedings."
Steyn L.J. added (at p. 594) that the fact that the clause was construed in a transitive sense did not necessarily mean that it was an exclusive jurisdiction clause. The juxtaposition of a submission to the jurisdiction of the English courts and the option reserved in favour of the bank to sue elsewhere however brought into play the expressio unius exclusio alterius canon of construction. In holding that this clause conferred an exclusive jurisdiction on the English courts, Steyn L.J. observed (at p. 594):
"In our judgment it would be a surrender to formalism to require a jurisdiction clause to provide in express terms that the chosen court is to be the exclusive forum."
We respectfully agree with that observation.
[48]The most recent case cited to us was Sinochem International Oil (London) Co. Ltd. v. Mobil Sales and Supply Corporation [2000] 1 Lloyd's Rep. 670. So far as relevant to the issue with which we are concerned, this case concerned a contract for the sale of oil made between the Hong Kong subsidiary of a U.S. oil company and a state trading company of the People's Republic of China. The contract contained the following clause:
"This contract shall be governed by and construed in accordance with the laws of Hong Kong. The parties hereto irrevocably agree that the courts of Hong Kong are to have jurisdiction to settle any disputes which may arise out of or in connection with this contract and submit to the jurisdiction of those courts."
In construing the clause, Rix J. (as he then was) said this (at p. 676):
"32.The test which has been developed for distinguishing an exclusive from a non-exclusive jurisdiction clause is whether on its proper construction the clause obliges the parties to resort to the relevant jurisdiction, irrespective of whether the word 'exclusive' is used: Dicey and Morris, 13th ed. 2000 at par. 12-078. Or to put the issue in another way: is the obligation contained in the clause the intransitive one to submit to a jurisdiction if it is chosen by the other contracting party, or is it the transitive one to submit all disputes to the chosen jurisdiction? See Austrian Lloyd Steamship Co. v. Gresham Life Assurance Society Ltd., [1903] 1 K.B. 249, Sohio Supply Co. v. Gatoil (U.S.A.) Inc., [1989] 1 Lloyd's Rep. 589, British Aerospace plc v. Dee Howard Co., [1993] 1 Lloyd's Rep. 369, cf. Cannon Screen Entertainment Ltd. v. Handmade Films (Distributors) Ltd. (July 11, 1989, Mr. Justice Hobhouse, unreported) and S & W Berisford Plc v. New Hampshire Insurance Co., [1990] 1 Lloyd's Rep. 454.
33.In the present case the clause in the Hong Kong contract not only provides for Hong Kong law, but states that the Hong Kong Courts 'are to have jurisdiction to settle any disputes' between the parties and that the parties 'submit to the jurisdiction of those courts'. In my judgment, this is a clause which contains a transitive obligation to submit disputes to the Courts of Hong Kong. It has all the indicia of such a clause. It is mutual, it refers to 'any disputes' i.e. all disputes, and the language 'are to have jurisdiction', pace Mr. Hollander who contrasts the word 'shall' in the opening line of the clause, is the language of obligation and not option. Moreover, although a choice of law clause may well exist without any jurisdiction clause to accompany it, nevertheless, as Mr. Justice Waller remarked in British Aerospace v. Dee Howard at p. 375, there is not much point in choosing a specific law to accompany a jurisdiction clause unless the intention is to make the Courts where such law operates exclusive. Mr. Berry did not stress the unusual presence of the word 'irrevocably', and so I do not do so either, but it strikes me that if anything this word underlines the transitive commitment."
[49]This passage was strongly founded upon by counsel, and we should make some observations about it. The statement that "there is not much point in choosing a specific law to accompany a jurisdiction clause unless the intention is to make the courts where such law operates exclusive" appears to us to go somewhat further than the earlier authorities. The judgments of Hobhouse J. in Cannon Screen and Berisford, for example, made it clear that there can, in certain circumstances, be a rational purpose in providing expressly for the non-exclusive jurisdiction of the courts whose law governs the contract. We also observe that although, as a matter of common sense, there might be thought to be something to be said for the view that a choice of law is in itself a strong pointer towards the construction of a jurisdiction clause as conferring exclusive jurisdiction (where the jurisdiction is one which applies the chosen system of law), that is not the approach which has been followed in either the Scottish or the English cases which were cited to us.
[50]In the light of this discussion of the relevant authorities, both in Scotland and in England, it appears to us that the following conclusions can be reached. First, as to the interpretation of the Scottish authorities, we are satisfied that Scotmotors, even if still to be regarded as authoritative, did not lay down any general rule of law that a contractual clause will only be construed as conferring an exclusive jurisdiction on a foreign court if it does so expressly. The court appears to have considered that, where the circumstances of the case disclosed no connection to any jurisdiction apart from Scotland, the parties' contract would not be construed as excluding the jurisdiction of the Scottish courts unless that was its clear meaning. That proposition is not however a rule of law, properly speaking, but rather a description of factual circumstances which would lead the court to construe the contract in a particular manner.
[51]The only general principle of interpretation to be extracted from the authorities, in our view, is that which was stated by Hobhouse J. in Berisford (at p. 637):
"[T]he same canons of construction are to be applied in relation to this type of clause as any other mutual contractual provision. It is a matter of construing the words used in accordance with their natural meaning and in the light of the surrounding circumstances in which the contract was made."
There is however nothing new about that principle in Scots law.
[52]All the cases cited are, we think, simply illustrations of an application of that principle, albeit a comparison between them demonstrates the obvious importance of the actual words used. As Hobhouse J. observed in Cannon Screen:
"Words are an accurate tool and relatively small differences in wording will produce different contractual effects."
Such a comparison also demonstrates the importance of reading the contract as a whole: for example, a provision for an address for service only within the chosen jurisdiction, or the conferring of an option on only one party to bring proceedings elsewhere, may be important. The surrounding circumstances may also colour the interpretation to be placed upon the words used; and it is possible to identify, in the cases which we have cited, particular circumstances which have been regarded as tending to point towards, or away from, the conferring of an exclusive jurisdiction. For example, the fact that a clause selecting a jurisdiction has been specifically agreed, and that the clause is apt to be invoked by either party to the contract, are factors which, ceteris paribus, may tend to point towards agreement on an exclusive jurisdiction. On the other hand, the fact that the clause appears in a printed form issued by one party to the other, and the considerations that exclusivity will in practice impose an obligation falling substantially on the party to whom such a form has been issued, and that the clause has (or could have, to other persons to whom such a form might be issued) a commercial or legal significance even if construed as only declaratory, are factors which ceteris paribus may tend to point away from agreement on an exclusive jurisdiction. This of course is not intended as an exhaustive list, nor does it purport to lay down any rule of law.
[53]We can turn now to the construction of the particular clause with which this case is concerned. It is in the following terms:
"JURISDICTION CLAUSE
This Document shall be governed by the Laws of England whose Courts shall have jurisdiction in any dispute arising hereunder."
Considering in the first place the ordinary meaning of the words used, the clause plainly means that the English courts are to have jurisdiction; but it does not appear to us to carry any implication, on its face, that that jurisdiction is to be exclusive. We note that similar words were construed in the opposite sense in British Aerospace ("the courts of law in England shall have jurisdiction to entertain any action..."), but that construction was influenced by a provision concerning addresses for service and also by the surrounding circumstances. Again, in Sinochem similar words ("the courts of Hong Kong are to have jurisdiction to settle any disputes") were construed as conferring an exclusive jurisdiction, but in that case the clause separately provided for the parties to submit to the jurisdiction of the Hong Kong courts, and in addition the surrounding circumstances resembled those in Sohio and British Aerospace.
[54]Considering next the context in which the clause appears, the contract is a printed booklet bearing on its cover the words "Motor Fleet Insurance Policy". It is headed:
"SUMMIT MOTOR FLEET DOCUMENT
(Subscribed by Lloyd's Underwriters Only)"
The opening paragraphs of the document state inter alia that "the Underwriters will indemnify the Insured", and that "Summit Motor Services Limited is empowered to sign this Document on behalf of the Underwriters". The document applies in respect of vehicles registered in the United Kingdom, but covers accidents occurring abroad as well as within the United Kingdom. The insurance covers awards made by foreign courts, subject to certain conditions. There is an arbitration clause in the following terms:
"If any difference shall arise as to the amount to be paid under this Document (liability being otherwise admitted) such difference shall be referred to an arbitrator to be appointed by the parties in accordance with the statutory provisions in force at the time. Where any difference is by this condition to be referred to arbitration the making of an award shall be a condition precedent to any right of action against the Underwriters."
The contract bears to have been signed at Summit House, Waterloo Lane, Chelmsford, Essex, by a director of Summit Motor Services Limited (the defenders in the present action) under the authority of the underwriters.
[55]The observations made by Hobhouse J. in Berisford appear to us to be applicable to this contract. The jurisdiction clause cannot plausibly be construed as being intended to permit English jurisdiction, since such jurisdiction plainly exists already. It must therefore be either a declaratory provision or a provision for exclusive jurisdiction. The latter construction goes beyond the natural meaning of the words used (and does not sit easily with the arbitration clause, although the implications of the latter were not discussed before us). The clause appears in a printed form of policy which is issued to the insured. The primary relevance of the clause must be to actions to be brought by the insured against the underwriters or the defenders. In that situation, the words used are not apt to impose an obligation on the insured to bring proceedings only in the English courts. The alternative construction does not deprive the words used of significance, for the reasons which Hobhouse J. explained in Berisford at pp. 637-638. In particular, a declaratory provision could be relevant where article 17 of the 1968 Convention applied.
[56]For all the above reasons, we reject the submission that only the English courts have jurisdiction to deal with the subject-matter of the present action, and we therefore refuse the appeal.
[57]Finally, in the light of the submissions in this case (and other cases), it is appropriate that we should add some observations about the citation of judgments to the court. Where a case has been reported in Session Cases it should be cited from that source. Similarly, where an English case has been reported in the Law Reports published by the Incorporated Council of Law Reporting for England and Wales it should be cited from that source. The publishers of other series of reports perform a valuable service by reporting a wider range of cases, and often doing so more quickly. Where, however, a case has been reported in Session Cases or in the Law Reports, it is that report which is most authoritative and, in general, most useful to the court. The report is authoritative, because the text will have been revised by the court. The textual differences can be of importance (see e.g. Duke of Buccleuch v. Inland Revenue Commissioners [1967] A.C. 506 per Lord Reid at p. 526; Lamb v. Lord Advocate, 1976 S.C. 110 at p. 113). Even minor differences may not be altogether without significance. In the present case, for example, Berisford was cited to us as reported in Lloyd's Law Reports. In that version of the text, Hobhouse J. referred to Pathe Screen Entertainment v. Handmade Films. It was not immediately apparent that that was a reference to the decision cited and quoted in British Aerospace under the name of Cannon Screen. In the version of the Berisford judgment reported in the Law Reports, on the other hand, Hobhouse J. referred to Cannon Screen.
[58]There are occasions on which reports in other series are appropriately cited. For example, the House of Lords decisions in Scottish appeals were not reported in Session Cases until 1850, and even thereafter they continued for some time to be reported more fully in private reports. Thus the report of Blaikie v. Aberdeen Railway Company at (1852) 15 D. 20, to which the reader of Calder v. Mackay is directed, does not contain the speeches, but merely summarises the conclusions reached. The speeches which we have cited are however reported by Paterson, whose report (a revised version of the report in the Scottish Jurist) is cited as (1852) 1 Paters. 119.
[59]A second reason for citing Session Cases or the Law Reports in preference to other series of reports is that the former may include a summary of the argument presented to the court. Sadly, the practice of reporting the argument appears to have died out in Session Cases, but it continues in the Law Reports. Where it is available, such a summary can be of great assistance to the court in putting the earlier decision in context and in assessing the weight to be attached to it.
[60]A third reason for citing Session Cases is that such a citation enables the court to consult the Session Papers relevant to the case in question. The Session Papers are a valuable resource, but in order to consult them the court has to know that the case in question was reported in Session Cases, and the number of the case in that year's reports.