Corporate & Commercial March 2009 Is Non-Exclusive Jurisdiction Clause Really Non-Exclusive in Nature? The Hong Kong Court of Appeal decided in Noble Power Investments Ltd & Anor v. Nissei Stomach Tokyo Co Ltd (CACV No. 398 of 2007) that with proceedings instituted in the forum named in a non-exclusive jurisdiction clause, the Courts will hold parties to their contractual bargain be bound as a matter of contract save and except in exceptional circumstances. Non-exclusive jurisdiction clauses are common provision in commercial contracts. Typically, they provide for the parties’ agreement to submit any dispute arising from the contract to the courts of a particular jurisdiction while leaving the parties free to commence legal proceedings in the courts of any other jurisdiction. By contrast, exclusive jurisdiction clauses are more restrictive in a sense that any dispute can only be submitted to the jurisdiction specified in the clause. Noble Power Investments Ltd & Anor v. Nissei Stomach Tokyo Co Ltd In Noble Power Investments Ltd & Anor v. Nissei Stomach Tokyo Co Ltd [2008] HKCU 1009 (CACV 398/2007, 24th April 2008), the Court of Appeal considered the proper approach of the courts to contractual non-exclusive clauses within the context of challenges to the jurisdiction The Plaintiffs are companies registered, respectively, in the British Virgin Islands and Japan. The Defendant is a Japanese company. None of the parties carries on business in Hong Kong nor is any of them registered under the laws of Hong Kong. The Plaintiffs’ case is that in June 2006 the parties made a written agreement headed Co-Operation Agreement (“the Agreement”) where all negotiations leading up to it were conducted by persons who were based in Hong Kong and the Agreement was also signed here even though none of the parties were based in Hong Kong and all the principal obligations under the Agreement were to take place in Japan. The Agreement contained a non-exclusive jurisdiction clause: P. 1 “27.1 This Agreement shall be construed and governed in accordance with the laws of Hong Kong and the parties hereto submit to the exclusive jurisdiction of the courts of Hong Kong. 27.4 Nothing contained in this Clause shall limit the rights of any party to take any suit, action or proceedings arising under this Agreement against the other parties in any other court of competent jurisdiction...” In July 2006, the Defendant sent a letter to the 2nd Plaintiff stating effectively that it was not going to perform its obligations under the Agreement. The Plaintiffs institute proceedings here and obtained leave from a High Court Master to serve the Writ out of jurisdiction since the Defendant is a Japanese company. Having been served with the Writ, the Defendant issued a summons to apply for the setting aside of the order giving leave to serve the Writ out of jurisdiction and dismissal of the action. The application was made on the basis that the Tokyo District Court in Japan was a more appropriate forum than Hong Kong to litigate the dispute, that is, it relied on the principle of forum non conveniens. The Defendant succeeded with its application to set aside the Order giving leave to serve out of jurisdiction in the High Court and it is the Plaintiffs’ appeal against that decision that the matter came before the Court of Appeal. The Court of Appeal allowed the Plaintiffs’ appeal. The Court of Appeal held that the court below erred in approaching the case on the basis of forum non conveniens and viewed the non-exclusive jurisdiction clause merely as one of the factors to be considered in evaluating whether there exist another available forum which is clearly or distinctly more appropriate than the forum in which the proceedings are instituted and which the case may be tried more suitably for the interests of all the parties and for the ends of justice. However, this is not the correct approach when there is a non-exclusive jurisdiction clause and proceedings were instituted in the very forum to which the parties had agreed to submit. In such a situation, strong or overwhelming reasons or exceptional circumstances have to be shown (such as existence of factors P. 2 not contemplated by the parties at the time the agreement was made) as to why that agreement should not be enforced since the contesting party is in effect seeking to avoid a forum which he has by contract, agreed to submit. In this sense, the effect of a non-exclusive For enquiries: Please contact members of our Corporate & Commercial Practice Group jurisdiction clause in terms of a challenge to the appropriateness of a forum, is in practice the same as in an exclusive jurisdiction clause and to the extent that in both situations, the parties have agreed, if they institute proceedings in the forum identified in the agreement, Raymond Cheung Partner, Head of Corporate & Commercial Practice Group +(852) 2107 0347 to submit to it. [email protected] Where proceedings are instituted in a forum other than the identified Salina Luk Partner +(852) 2107 0362 one, an altogether different approach may be required and much [email protected] depends on the precise wording of the clause in question. If the other forum is one which the parties also agreed to submit in the event of their being sued, may be there is little difference between the two situations. Where, however (as is common) the other forum is merely one in which proceedings can be instituted without any obligation on the party sued actually to submit to that forum, the approach is different and the party which seeks to contest jurisdiction or appropriateness of that forum is in a better position to do so simply because he would not be seeking to avoid a forum to which he has contractually agreed to submit. In conclusion, it can be seen from this judgment by the Court of Appeal that a non-exclusive jurisdiction clause in name would only be non-exclusive in law as long as proceedings are not instituted in the forum or jurisdiction identified in the non-exclusion clause. Contacts: http://www.onc.hk [email protected] Tel : 2810 1212 Fax : 2804 6311 15/F, The Bank of East Asia Building, 10 Des Voeux Road Central, Hong Kong Branch Office: Unit 1510, No. 9 Queen’s Road Central, Hong Kong IMPORTANT: The law and procedure on this subject are very specialized and complicated. This article is just a very general outline for reference and cannot be relied upon as legal advice in any individual case. If any advice or assistance is needed, please contact our solicitors. Published by ONC Lawyers © 2009 P. 3