The limits on the remedy of damages for breach of jurisdiction agreements: the law of contract meets private international law.

• Jurisdiction: Australia
• Author: Dinelli, Albert
• Date: 01 April 2015

The availability of damages for breach of jurisdiction agreements raises issues at the intersection of the law of contract and private international law. While the availability of such a remedy is firmly entrenched in England, it has received little attention in Australia. This article suggests that Australian law should embrace such a remedy, and that the real question is what the proper limits of such a remedy should be. Even though a jurisdiction agreement is, like any other contractual term, capable of being breached, careful consideration must be given to the limits on the availability of damages. In particular, an award of damages for breach of a jurisdiction agreement should not be made where to do so would contradict a judgment of a foreign court which is entitled to recognition in Australia.

CONTENTS I Introduction II The Argument from General Principle III Reversing the Effect of a Breach of a Jurisdiction Agreement by the Reme of Damages IV Appropriate Limits on the Right to Damages V Conclusion I INTRODUCTION

In 1964, Professor Zelman Cowen and Dr Derek Mendes Da Costa wrote an article published in the American Journal of Comparative Law entitled 'The Contractual Forum: Situation in England and the British Commonwealth'. (1)

The theme of that article has much current appeal. Therein, the learned authors referred to the judgment of Fullagar J in Compagnie des Messageries Maritimes v Wilson. (2) In that case, his Honour had said:

When parties to a contract say:--'All disputes between us shall be determined by such and such a tribunal', they are saying that, if a dispute arises between them, the claimant will seek a determination of it by the designated tribunal, and that the other party will not object to the jurisdiction of that tribunal. But they are also saying that, as between them, no other tribunal shall have jurisdiction to determine disputes. And what the English courts ... were really saying was that they would recognize such a clause as binding and give effect to it except so far as it purported to oust a jurisdiction which they otherwise possessed. Thus, if one party proceeded before a tribunal other than the designated tribunal, they would entertain an action for damages at the suit of the other party ... (3) Fullagar J's words, written more than 60 years ago, have not spawned cases for damages for breach of jurisdiction agreements in Australia, but the availability of that remedy in England is now firmly established. (4)

Jurisdiction agreements should be invaluable tools for parties who are involved in international trade and commerce. They may enable parties to agree, in advance, to one of the preliminary stages in any litigation; namely, the court in which disputes between the parties will be heard. Their content is familiar to lawyers and to those involved in international commerce. For example, they may say 'The parties agree that any disputes under this contract will be determined by the courts of Victoria', or 'The parties agree to submit themselves to the exclusive jurisdiction of the courts of New South Wales'. As such, their inclusion in international commercial contracts has the potential to bring certainty to the parties' relationship, and save them, as well as the courts, significant time, inconvenience and expense should a dispute arise.

Despite these benefits, without clear and settled mechanisms for their enforcement their effectiveness is significantly decreased. As a result, contracting parties and their legal advisers will also be affected; they will be unable to provide advice on such agreements with any guarantee as to their efficacy. The consequences can be critical--the resolution of the forum for a dispute may often be determinative of the parties' respective prospects of success on the merits.

The Australian courts, which Professor Cowen and his co-author described in their article as those of the 'British Commonwealth', have not yet embraced the remedy of damages for breach of a jurisdiction agreement. (5) But it is likely that little will stand in the way of the common law in Australia being so developed. The real question, and that which is the subject of this article, is what the proper limits of such a remedy should be.

As such, at the heart of this article lies an assessment of the extent to which jurisdiction agreements should be given effect by the courts as exercises in party autonomy. That is, is a jurisdiction agreement a normal contractual term the breach of which sounds in damages? One might start with this very simple proposition: a jurisdiction agreement is a promise by the parties to each other --a mutual promise--that they agree to sue each other, if the need arises, in the chosen court, and no other. (6) The words of Scrutton LJ, on that occasion in the context of an arbitration agreement, are also apposite for jurisdiction agreements, namely that a guiding principle ... and a very natural and proper one, is that parties who have made a contract should keep it'. (7)

No one would be surprised by an assertion that if someone has promised something, he or she should make good on that promise. But private international law must consider interests other than simply those of the contracting parties. The extent to which this 'guiding principle' can inform the law on jurisdiction agreements therefore necessitates consideration of wider issues of public interest.

II THE ARGUMENT FROM GENERAL PRINCIPLE

Courts acknowledge the importance of respecting the contractual autonomy of parties, as expressed in their agreements, particularly jurisdiction agreements. But, as will be explained, the effect that these agreements have on important private international law issues cannot be ignored.

This is a matter that has extensive practical ramifications. If jurisdiction agreements are found to share normal contractual characteristics, certain consequences will flow, particularly when considering the remedies that are available to secure their enforcement. On the other hand, if, upon analysis, it is found that they do not share some, or all, of these contractual characteristics, some other remedies, particularly those commonly found in the corpus of private international law, will shoulder the load of securing their enforcement.

To say that a court has jurisdiction to hear a dispute means that it has the power to hear and decide the proceedings brought before it. It is a precondition to an Australian court adjudicating a dispute that, first, it has personal jurisdiction over the parties to the litigation and that, secondly, it has jurisdiction over the subject matter of the proceedings. If either of these requirements is not established, the Australian court will not be able to hear the matter. Furthermore, at common law, Australian courts also have a discretion to refuse to hear a case if the Australian court is a clearly inappropriate forum. (8) In such cases, the plaintiff is generally left to pursue the desired remedies in the courts of a foreign state.

Australian and English law recognise that parties are generally entitled to choose in advance a court or courts which will have jurisdiction over any disputes arising between them. (9) There are some constraints upon this freedom to choose, notably, for example, that the parties cannot choose an Australian court as the forum to decide a dispute the subject matter of which is real property located outside Australia. (10) Furthermore, some jurisdictions have mandatory rules which prevent the choice of a foreign court to resolve certain disputes. Generally, however, the courts respect the parties' autonomy in relation to choice of jurisdiction.

III REVERSING THE EFFECT OF A BREACH OF A JURISDICTION AGREEMENT BY THE REMEDY OF DAMAGES

Say a person promised to sue another, if the need arose, in a particular court. Rather than institute proceedings in that (chosen) court, the person has sues in another court. He or she has breached that promise. If any loss flows from this breach, the aggrieved party should be compensated. Such an approach merely recites the standard application of contractual principles in response to a breach of contract. A contract lawyer would not be surprised. But these principles are not so easily applied to jurisdiction agreements.

Some commentators have drawn on the dicta in English case law and argued that this remedy, until recently largely unknown and undeveloped in the English common law, should assume more importance in the context of jurisdiction agreements. (11) This discussion, and the embrace of the remedy in English law, (12) comes against the background of legal development in England. Specifically, in Turner v Grovit, (13) the European Court of Justice ruled that an anti-suit injunction is no longer available where the Brussels I Regulation applied because of the concept of mutual trust fundamental to the question of jurisdiction of, and as between, courts in Europe. (14)

As Tham has stated, it is somewhat surprising that no English court had, until 2000, considered a claim for damages for a breach of a jurisdiction clause where, in breach of the agreement to sue in England, a party brought proceedings in a foreign jurisdiction. (15) As already noted, no Australian court has yet substantively grappled with this issue. (16)

The previous obscurity of this remedy was attributable to the view that an anti-suit injunction was the only appropriate remedy, and that damages would be an ineffective, useless remedy. In Continental Bank NA v Aeakos Compania Naviera SA, Steyn LJ (delivering the judgment of the Court of Appeal) said that '[a]n injunction is the only effective remedy for the defendants' breach of contract'. (17) Any award of damages for breach of a jurisdiction agreement has been described as an 'ineffective remedy'. (18)

Union Discount Co Ltd v Zoller ('Union Discount'), (19) decided by the English Court of Appeal in 2001, was, therefore, a trailblazing case. It...