Can foreign litigants be bound by English jurisdiction clauses contained in contracts to which they are not a party?

By Sophie Eyre, Jacob Webster

06-2019

Competing jurisdiction clauses and the question of whether foreign litigants can be bound by English jurisdiction clauses contained in contracts to which they are not a party are considered in the recent Court of Appeal decision of Airbus SAS v (1) Generali Italia Spa & others [2019] EWCA Civ 805

This appeal is important for 2 main reasons:

1. It gives guidance as to the approach taken where there are several different contracts between the parties each with their own dispute resolution clause.  Although the Court will look at the parties' intentions even if they are to give priority to one jurisdiction clause in one contract in the face of another, the Court will only do so if the intentions are clear.

2. It shows the extent to which a party's entitlement to dispute resolution in England will be protected and if a third party seeks entitlement to any benefit under a contract it has to accept the burden of its jurisdiction provisions.

The facts

"Air One", an Italian company, entered into an agreement with Airbus to purchase aircraft pursuant to a Purchase Agreement.  This Agreement contained a dispute resolution clause stating English law and ICC arbitration with a seat in Geneva.

The aircraft was operated by Alitalia as sub-lessee and an Airtime Warranties Agreement ("AWA") was executed  with Alitalia, Airbus together with other parties.   The AWA contained an English governing law clause and for the English courts to have exclusive jurisdiction to settle any disputes arising out of or in connection with the AWA and any non- contractual obligations connected with it. 

In 2013, the aircraft had to make an emergency landing in Rome and suffered significant damage. Alitalia's insurers indemnified Alitalia for the damage (c$11m) for the damage.  In 2017, the Insurer commenced proceedings against Airbus in Italy to recover the amount they had paid to Alitalia under the insurance policy.  Airbus commenced proceedings in England seeking declarations that the action fell within the scope of the AWA  exclusive jurisdiction clause and that the Italian proceedings were in breach of that clause.

The matter came before the Court of Appeal and the issues to be considered were: (i) Whether  the jurisdiction clause  in the AWA, on its true construction extended to a substantive claim under the warranties; (ii) Were the Italian proceedings commenced contrary to that clause; and (iii), could the English Court make a declaration to that effect where the Insurer was not a party to the AWA or the Purchase Agreement and their claims were not founded on those Agreements.

The Court of Appeal decision

The Court considered the contractual background in deciding the jurisdiction for the claim but said  it shed little light on the parties' intentions. Although the parties had entered into a number of agreements with different dispute resolution clauses, consideration of the contextual background was only one part of the broad and purposive approach to be taken.

Instead, the Court held that:

(i)  The scope of the AWA jurisdiction clause was exceptionally wide extending wider than the terms of the AWA and included therefore not only all disputes arising out of or in connection with the WA itself, but any non-contractual obligations connected with it. Its natural meaning was therefore to be comprehensive.

(ii) The AWA itself was the only contract to which all those who were or may be interested in the warranties were parties. There was a good arguable case that the insurance claim, although not made under the AWA, was sufficiently closely connected with the warranties to fall within the scope of the jurisdiction clause and that Insurers exercising rights of subrogation are bound by arbitration or jurisdiction clauses as their insured would have been.

(iii) If the parties intended for resolution be arbitration they would have made that clear and there is no authority to suggest that it is permissible to incorporate an arbitration clause from one contract to another contract which already contains a dispute resolution clause.

 

 

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