Deutsche Bank AG & Ors v Asia Pacific Broadband Wireless Communications Inc & Anor

An exclusive jurisdiction agreement is separable from the contract containing it. A challenge to the validity or authority of the main contract therefore does not, without a specific challenge to the jurisdiction agreement, prevent the chosen court from determining that challenge and its consequences.

Under Article 23 of the Judgments Regulation 44/2001, the party relying on the clause must demonstrate clearly and precisely that it was the subject of consensus. Where a written agreement containing the clause was executed by the parties, a plausible allegation that an agent lacked authority to conclude the main transaction does not itself defeat consensus. A broadly framed clause may consequently extend to restitutionary and misrepresentation claims pleaded as alternatives if the main contract is found void.

The Finance Parties advanced approximately US$210 million to a Taiwanese telecommunications company under a credit agreement. Its parent guaranteed the loan. The agreement was governed by English law and conferred exclusive jurisdiction on the English courts over any dispute connected with a finance document, expressly including disputes about its existence or validity.

After default, the Finance Parties sued in the Commercial Court. The defendants alleged that the credit agreement was void because members of the controlling family lacked corporate authority and had entered the transaction as part of a fraud on the companies. The claimants sought to add alternative claims in restitution and misrepresentation, arising only if that defence succeeded.

Flaux J refused permission to amend because he considered that the court lacked jurisdiction over those alternative claims: [2008] EWHC 918 Comm; [2008] 2 Lloyds Rep. 177. The issue on appeal was whether Article 23 of the Judgments Regulation 44/2001 permitted the English court to determine claims predicated on the invalidity of the contract containing the jurisdiction clause.

1. Appeal allowed unanimously. The proposed amendments pleading restitution and misrepresentation were permitted. The English court had jurisdiction over those claims under Article 23 of the Judgments Regulation 44/2001, or at least there was a good arguable case that it did.

2. Per Longmore LJ, with whom Keene and Laws LJJ agreed, a claimant relying on Article 23 must demonstrate clearly and precisely that the jurisdiction clause was the subject of consensus. On an interlocutory determination, the claimant must have a much better argument that the prescribed formal requirements were met and that consensus can be established. Here the written agreement, including the clause, had been signed or sealed by all parties. The formal requirements and the requisite consensus were therefore established, subject to the defendants’ challenge to their signatories’ authority.

3. A jurisdiction clause is a separable agreement. A challenge based on mistake, misrepresentation, illegality, lack of capacity or lack of authority affecting the main contract does not itself invalidate the jurisdiction clause. A question about invoking the clause arises where the clause itself is specifically attacked, as by fraud or duress directed at it. A mere allegation that signatures were forged might not, without more, render the clause inapplicable.

4. The separability principle enabled the chosen court both to decide whether the credit agreement was authorised and to determine the consequences if it was not. A court chosen to resolve disputes concerning a contract’s existence or validity must be capable of granting full and effective relief. The broadly worded clause therefore covered alternative restitutionary and misrepresentation claims which arose only if the agreement was void.

5. An allegation that an agent had no authority whatever to make any agreement may attack both the principal agreement and the jurisdiction agreement. An allegation that an agent exceeded an existing authority by agreeing unauthorised terms or acting for improper reasons does not necessarily attack the jurisdiction clause. The defendants’ allegations fell more naturally within the latter category.

6. Article 23 strictly regulates proof that a jurisdiction agreement exists; it does not impose a restrictive construction on the clause’s substantive ambit. Nor does it require separate consensuses for each contractual and alternative claim within a single dispute. Submission to jurisdiction on the primary contractual claim alone, however, did not constitute submission on the alternative claims.

1. Court of Appeal (Civil Division): In [2008] EWCA Civ 1091, the court unanimously allowed the Finance Parties’ appeal and permitted the proposed amendments. It held that the English court had jurisdiction over the alternative claims.

2. High Court, Queen’s Bench Division, Commercial Court: Flaux J refused permission to add the restitutionary and misrepresentation claims because he considered that the court lacked jurisdiction to determine them: [2008] EWHC 918 Comm; [2008] 2 Lloyds Rep. 177. That decision was reversed.