There is a gale force wind out there and the girls and I are housebound: so I thought I’ld clear the blog queue a bit. It is generally not good practice to post poorly drafted choice of court provisions yet once in a while it helps illustrate what I often say in class: that even in sophisticated contracts, choice of court and -law provisions can be drafted extremely sloppily.
Tradin Organic Agriculture BV v Gold Grain [2024] EWHC 1562 (KB) is such an example. It is an application for set-aside of a default judgment (I will not focus here on the issue of jumbled papers in the service of the claim form).
On 31 October 2019 Tradin and Gold Grain entered into a five-year exclusive supplier agreement (“ESA”). Tradin made Gold Grain their exclusive supplier of certain products from certain areas. Tradin then entered into a series of loan agreements with Gold Grain, the first to finance the purchase of a processing facility (the Mersin facility) and then five pre-finance loan agreements (“the loan agreements”). The repayments for the loan agreements were made by way of the goods supplied with a backstop that all the sums would be payable within 12 months of the date of the agreement. The goods were supplied under a series of purchase agreements.
The ESA was governed by English law. There is no jurisdiction clause. The Mersin agreement was governed by Swiss law and was subject to an arbitration agreement. The purchase agreements contained a Dutch choice of law clause.
The loan agreements contained the following clauses:
“Governing law: Submission to Jurisdiction
(a) This loan agreement and the obligations of the Borrower [Gold Grain] shall be governed by and construed in accordance with the governing jurisdiction of law in English law with the exclusion of the Vienna Sales Convention…
(b) The Borrower also agrees not to bring any action or other proceeding with respect to this loan agreement or with respect to any of its obligations in any other court unless such courts determine that they do not have jurisdiction in the matter”
(Note the exclusion of the CISG just to be sure: English law does not include it anyways).
Application to set aside judgment in default is brought on three grounds: (i) service was defective because the particulars of claim were not verified by a statement of truth, (ii) Gold Grain has a real prospect of success in challenging the jurisdiction of the English court or alternatively, without prejudice to the jurisdictional challenge, that there is a real prospect of success in defending the quantum of the claim, and (iii) Tradin failed to satisfy the duty of full and frank disclosure in their application for default judgment.
Prima facie, first note the poor title of the clause. There is an amazing amount of contracts with ‘choice of court’ articles which merely contain choice of law, and vice versa, thereby giving the judge a window to hold on express, if implicit, choice of court or law. The second part is simply puzzling: Borrower may only bring claims to a court where such claim will be ineffective due to lack of jurisdiction?
Gold Grain’s position is primarily that they have a real prospect of arguing that the claim should be stayed either on forum non conveniens grounds or through case management powers due to the parallel proceedings in the Netherlands. [20]
In respect of the forum grounds, the argument is that the choice of law clause is choice of governing law not a choice of jurisdiction clause. Clause (b), set out at paragraph 8 above, is confusing and contains a double negative such that it is not possible to understand what the parties intended from the paragraph alone. Even if it does connote forum, it is not an exclusive clause. If it is not an exclusive jurisdiction clause, it is governed by common law. Whilst the English courts will give effect to an agreement to submit to their jurisdiction, the court has a discretion. It is submitted that in this case, the claim proceeding in the Netherlands is inextricably linked to these proceedings which, it is said, gives rise to risks of inconsistent judgments and England is not the proper forum as none of the parties have any connection to England. These arguments mean a forum non conveniens challenge has a real prosect of success or alternatively that the court should grant a stay under its case management powers.
[26] Master Sullivan holds
On the substantive jurisdiction issues, there is no real prospect of success, the title before the relevant clauses in the loan agreements in issue is “Governing law: Submission to Jurisdiction”. It is clear this is a jurisdiction as well as a governing law clause. The drafting is infelicitous but the meaning is clear. It is an asymmetric exclusive jurisdiction clause in favour of English courts.
That in my view is not at all convincing, Reminder, the clause reads
“Governing law: Submission to Jurisdiction
(a) This loan agreement and the obligations of the Borrower [Gold Grain] shall be governed by and construed in accordance with the governing jurisdiction of law in English law with the exclusion of the Vienna Sales Convention…
(b) The Borrower also agrees not to bring any action or other proceeding with respect to this loan agreement or with respect to any of its obligations in any other court unless such courts determine that they do not have jurisdiction in the matter”
The title of the clause is not that relevant and judges must look beyond it. Yet a) surely can only be read as choice of law in favour of English law; and for b) to be read as asymmetric choice of court, it would have to indicate which choice of court the lender is bound to; and it is difficult to overlook the incomprehensible double negative.
All in all this is one of these cases where parties’ fumbling in drafting cannot be rescued by a judge reconstructing what they might have meant. Despite the Etihad v Flóhter instruction that he approach to be adopted to construction is a “broad, purposive and commercially minded approach”, this clause in my view simply cannot be rescued.
Geert.
https://x.com/GAVClaw/status/1806216674548588748
