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HOME OR
AWAY
examining the legal
principle of “Forum
Conveniens”
By Dr Alan Ma
Founder & Partner
Maxwell Alves Solicitors
I
n today’s globalised world,
customer demand for higher
quality, more reasonably
priced and local speciality
items has increased the
procurement of materials from
international sources. When
making purchases abroad, buyers
should be aware of several issues
relating to cross-border contracts.
One of the most important of
these is the question of whether
home court or foreign tribunal
should hear the case when things
go wrong. In an ideal world, these
issues would be clearly spelled
out on paper and signed by the
parties (aka a contract). The
English legal principle of “party
autonomy” means that parties are
free to enter into a contract
defining where the dispute is to
be heard and decided. As long as
it is completely clear, the court
will usually follow the terms of the
contract. However, in reality,
contracts are routinely formed via
email, therefore it is not always
clear which documentation
represents the contract or whose
32 | March 2015 | In-procurement
terms govern the deal.
The English court’s approach
has many factors that can benefit
a party during litigation, it is not
surprising that jurisdictional
issues often arise between
parties, even where an
unambiguous provision exists. In
England, rules have been
developed which (a) permit
English courts to exercise
jurisdiction (permit cases to be
heard in England) and (b) permit
English courts to decline
jurisdiction (i.e. to not hear the
case) so that the case is heard in
a foreign court. Jurisdiction of the
English courts is governed by two
broad regimes: (a) Brussels I
Regulations (EU related cases):
(b) all cases which do not fall
within the Brussels I Regulations
– (the rest of the world). Hence
the first question to ask is
whether the dispute falls within
the rules of the Brussels I
Regulation.
In general, the Brussels I
Regulations relate to contracts
with EU connections. For matters
with non-EU connections, the
jurisdictional issue must be
resolved at an early stage of
proceedings, when there has
been no full disclosure of the
evidence and only the statement
of claim is available. To prevent
parties from incurring substantial
litigation costs, the claimant has
only limited evidence to show in
support of the jurisdiction
application.
English courts decide whether
they have jurisdiction to hear the
case using the well-established
principle of Forum Conveniens.
The guiding principle is set out in
the classic case of Spiliada
Maritime Corp v Cansulex Limited
[1987]
“… to identify the forum in which
the case can be suitably tried for
the interests of all parties and for
the ends of justice ….. The
burden of proof rests on the
Claimant to persuade the court
that England is the appropriate
forum for the trial of the action,
but he has to show that this is
clearly so.”
The application of such a
principle is to be illustrated by
reference to a recent case,
Surrey (UK) Limited v
Mazandaran Wood & Paper
Industries [2014] English courts.
@inprocurement
The facts
Contracts were entered into
between the seller and buyer for
the sale and transportation of
wood products from Russia,
China and Chile to the buyer’s
paper mill in Iran. Disputes
between parties erupted, with the
seller claiming:
 non payment of £105,000 for
goods and services provided;
 £880,000 damages due to
repudiatory breaches by the
buyer.
Including costs and interest, the
size of the total claim came to
£3.3m. The buyer rejected the
seller’s allegations, claiming that
(a) the seller was not a party to
any contract and therefore was
not entitled to sue; (b) there were
no sums due or outstanding; (c)
the buyer was entitled to cancel
orders because the material
delivered was not of the agreed
specification. Whether in an
English or Iranian court, the
resolution of such a dispute
requires detailed evidence to be
heard. The UK-based seller
applied to an English Court for a
service of claim form onto the
buyer (in Iran) so that the dispute
would be heard in England.
Firstly, the English court needed
to decide on the appropriate
forum. The seller claimed that it
should be in England on the
grounds that (a) the contract(s)
were made in England, (b) they
were governed by English law.
Firstly, the court had to consider
whether these two “gateways”
were made out. Rather than
courts deciding this by resolving
disputed issues of fact, the
applicant (i.e the seller in this
case) had to show that they had
the “better argument”. If the
gateways could not be made out
by the applicant, the court would
then move on to consider Forum
Conveniens and to decide
whether discretion should be
exercised.
Relying on Forum Conveniens,
the buyer said that the English
court should not exercise any
jurisdiction it may have had
because the seller could not show
@inprocurement
that England was clearly the
appropriate forum. In support of
the seller’s case that England
was the appropriate forum, the
seller submitted the following
points:
 England was the seller’s
domicile;
 England was the place where
the contract was concluded
 All the contractual
documentation as well as
contemporaneous
communications between the
parties were in English.
 All relevant employees of the
buyer spoke and wrote
English.
 If the case was to be trialled in
Iran, all written materials had
to be translated into Farsi.
 It was more costly to initiate
proceedings in Iran, which was
2% of the claimed value. The
buyer could also pursue
personal claims against the
seller in Iran. Hence the buyer
would have had an unfair
judicial advantage.
The documents received in
England did not legally constitute
an acceptance; hence no contract
was concluded there. The judge
considered that no conclusions
could be made as to when and
where contracts were ultimately
made. The court decided that the
contracts were more closely
connected with Iran than England
and therefore were governed by
Iranian law. It could not find any
independent evidence to support
the seller’s allegation that a trial in
Iran would be unfair. All other
points raised by the seller were
rejected by the judge as well.
Concluding remarks
When drafting your contracts, be
sure to insert a clear provision
specifying which court has
exclusive jurisdiction in the event
of a dispute. In the absence of
this, the court will take into
account all of the relevant factors
in deciding which country’s courts
are the most suitable to hear the
case. An understanding of the
court approach as illustrated in
this example will certainly assist
parties to formulate a proper
strategy from the outset.
Dr Alan Ma, Founder & Partner
[email protected]
Maxwell Alves Solicitors, London |
Edinburgh | Hong Kong
www.maxwellalves.com
In-procurement | March 2015 | 33