FR Lurssen Werft GmbH & Co KG v Halle

Under Article 3.1 of the Rome Convention, an implied choice of law requires a real choice demonstrated with reasonable certainty and sufficient clarity from the contract terms, the surrounding circumstances, or both. An express English-law clause in related contracts between the same parties may support that inference, especially where the agreements form one series and the later agreement closely depends on the earlier transactions. The court must still consider the later contract and all circumstances. Here, those factors established a clear implied choice of English law for the commission agreement, so the appeal was dismissed.

Lurssen Werft, a German shipbuilder, claimed €3.65 million commission from Halle, a Florida resident, under an agreement concerning the resale of two yachts. The commission agreement contained no governing-law clause, while the related vessel construction contracts contained express English-law clauses.

Blair J had permitted service of the claim form out of the jurisdiction. Simon J refused Halle’s application for a declaration that the court lacked jurisdiction and for an order setting aside that permission. He found that Lurssen Werft had much the better of the argument that the commission agreement was governed by English law, and that England was the forum conveniens. The appeal was confined to whether the commission agreement contained a clear implied choice of English law.

Disposition

Lord Justice Aikens gave the principal judgment. Sir Paul Kennedy and Lord Justice Thorpe agreed. The appeal was dismissed.

1. Applicable test. The parties agreed that the governing law fell to be determined under the Contracts (Applicable Law) Act 1990 and the Rome Convention. Article 3.1 requires a real choice of law, demonstrated with reasonable certainty and sufficient clarity from the contract terms, the surrounding circumstances, or both. Those sources are not mutually exclusive, and the court may examine them together.
2. Related contracts. An express choice of law in related contracts between the same parties is a recognised circumstance capable of demonstrating an implied choice for a contract containing no express clause. The strength of the inference depends on the relationship between the agreements and the absence of circumstances pointing away from it.
3. Application. The commission agreement followed the two shipbuilding contracts and concerned the sale of the vessels constructed under them. It would not have come into existence without those contracts and the vessels. The agreements therefore formed one series and were closely associated. The previous course of dealing and the absence of any contrary term or circumstance established, with reasonable certainty, a clear implied choice of English law.
4. Article 4 and authority. Article 4 would apply only if no choice were established, by reference to the country with which the contract was most closely connected. The court did not need to apply that fallback provision. The Evia Luck [1986] 2 Lloyds Rep 165 was explained as having proceeded on closest connection rather than implied choice, and therefore did not support the Article 3 proposition relied on in Dicey, Morris and Collins. The court found it unnecessary to consider the possible relevance of subsequent conduct.
5. The conclusion that Lurssen Werft had much the better of the argument supported the permission to serve out and the English court’s jurisdiction. The unchallenged findings that there was a serious issue to be tried and that England was the forum conveniens remained in place.

• Court of Appeal (Civil Division): On appeal from Simon J’s order, the court dismissed the appeal and upheld the conclusion that the commission agreement was governed by English law: [2010] EWCA Civ 587.
• Queen’s Bench Division, Commercial Court: Simon J refused Halle’s application for a declaration that the court lacked jurisdiction and to set aside Blair J’s permission to serve the claim form out of the jurisdiction. He also found a serious issue to be tried and that England was the forum conveniens.
• Earlier procedural order: Blair J had granted permission to serve the claim form out of the jurisdiction.