By the International Transport, Trade & Energy Team

Southern African companies will often find themselves faced with a request or insistence that a contract they wish to conclude be subject to English law and the jurisdiction of the English courts, ICC arbitration or similar.  Deciding what jurisdiction will govern contracts can have far-reaching consequences in terms legal costs and the conduct of any potential disputes that may arise.

Two recent English Court decisions show willingness by the English Courts to entertain matters which they might not have heard in the past.  Important issues relating to jurisdiction were raised in Re Pan Ocean Co. Ltd, subnom Seawolf Tankers Inc and Another v Pan Ocean Co Ltd and Another, 2015 (“Pan Ocean case”) and  Standard Chartered Bank (Hong Kong) Ltd and Another v Independent Power Tanzania Ltd and Others, 2015 (“SCB case”).

In the Pan Ocean case, the Claimant companies entered into a pool agreement and time charterparty with a Korean ship operator and time charterer, Pan Ocean.  Both agreements were governed by English law and contained clauses referring disputes to London arbitration.  In 2013, Pan Ocean entered into Korean rehabilitation proceedings as a result of the global financial crisis.  The claimants sought damages from Pan Ocean resulting from numerous breaches relating to the time charterparty and pool agreements.

The Court held that the Claimants could bring their claims against the Korean company in London arbitration with reference to the English law and arbitration clauses which were contained in the contracts.  The Court decided that the recognition order that recognised the Korean rehabilitation proceedings should be modified to lift the stay which prevented the Claimants from pursuing their claims in London arbitration.  As a matter of practicality, it was held that London arbitration was the most appropriate forum.  Due to the fact that Pan Ocean's claims needed to be arbitrated, it was held that it would be quicker and more practical to have all the disputes heard in the arbitration.

This SCB case related to the recovery of sums due under facility agreements. The facility agreements contained non-exclusive English jurisdiction clauses with forum non conveniens waivers.  The forum non conveniens waiver means that parties agree not to assert that to be sued in the non-exclusive jurisdiction would be inconvenient, oppressive or expensive.  It is a breach of contract for a party to assert forum non conveniens in relation to the chosen non-exclusive jurisdiction. 

One of the applications before the Court in the SCB case related to a stay of the English proceedings on the ground that Tanzania, and not England, was clearly the most appropriate forum.  It was held that even where there was a forum non conveniens waiver with a non-exclusive jurisdiction clause, the Court might, in appropriate circumstances, grant a stay, provided that the grounds in question could properly be described as unforeseen and unforeseeable at the time the agreement was made.

Despite the existence of the overwhelming grounds, the stay was not granted.  The grounds for a stay were:

• The defendants were all located in Tanzania;
• Most of the witnesses were in Tanzania;
• The secured property was in Tanzania;
• The issues of liability and quantum would require investigations in Tanzania;
• A wealth of jurisprudence had been accumulated by the Tanzanian legal fraternity on these issues;
• The mortgage and change of shares were governed by Tanzanian law; and there were two sets of parallel proceedings in Tanzania which raised the same core issues as in the English proceedings.

It was held that with the possible exception of the expertise of the Tanzanian lawyers, all of these points were foreseeable at the time the contracts were entered into.

These two decisions indicate that English Courts will adjudicate on matters, even when there are compelling factors which may favour a matter being heard in another forum.  This is clear from the Standard Chartered Bank decision.  Companies need to be aware that unless they reserve the right to jurisdiction, a plea of forum non conveniens will not be successful.  The costs of litigating abroad (more so when one converts the Rand to GBP, Euros or US Dollars), the difficulty in trying to litigate in a foreign forum, the convenience of consulting with advisors and the travelling of witnesses should always be considered when concluding a contract.