A recent High Court decision has considered the test for deciding whether it would be manifestly unjust for it require the parties to litigate in the courts of the state the parties had chosen in accordance with the Hague Choice of Court Agreements Convention. Gearoid Carey and Gerard Kelly, Partners, look at the implications of this decision.
In applicable cases, the Hague Convention of 30 June 2005 on the Choice of Court Agreements (Hague Convention) provides for the choice of jurisdiction where the courts of a Contracting State have been chosen by the parties to determine their dispute. It also puts in place a framework for the recognition and enforcement of judgments in Contracting States. Although it entered into force in the EU in 2015, it has only been since Brexit and the UK’s accession to it that the Hague Convention has had particular relevance to cases involving the UK. That situation arose because, following Brexit, the UK found itself outside the scope of the Brussels Recast Regulation and was not admitted to the Lugano Convention. However, the types of case where it applies are narrower than those covered by the Brussels Recast Regulation and the Lugano Convention. We consider a recent case[1]
which involves the first substantive consideration of the Hague Convention by an Irish Court and gives guidance on a particular aspect of the jurisdictional rules. The decision is relevant to any party who may seek to litigate in Ireland but whose agreement has an exclusive jurisdiction clause in favour of the English courts.
Background
The case concerned a claim against an Irish incorporated Russian-State controlled company for $20 million under guarantee in favour of a Guinea-based company relating to bauxite, the chief commercial ore of aluminium, to be delivered to Limerick. Following the Ukraine invasion and the application of sanctions, the defendant’s assets were frozen. Although the guarantee contained an exclusive jurisdiction clause in favour of the English Courts, proceedings were issued in Ireland. The plaintiff maintained it did so because it would need:
- An order for payment of the $20 million, and
- A mandatory injunction obliging the defendant to seek an exemption from the Central Bank of Ireland to permit the payment of the relevant sum from the defendant’s frozen assets.
Given the plaintiff was unclear it would obtain such an injunction in the English Courts and be able to enforce it in Ireland, it chose instead to issue its substantive proceedings in Ireland rather than merely bringing enforcement proceedings in Ireland. The defendant sought to hold the plaintiff to the agreement to bring any proceedings in the UK and challenged the entitlement of the Irish Court to hear the case.
Core legal issue
The case turned on Article 6 of the Hague Convention. That provides that, unless one of a number of specified exceptions apply, the court of a Contracting State other than that of the chosen court is obliged to suspend or dismiss proceedings to which an exclusive choice of court agreement applies. The relevant exception here related to whether applying the parties’ choice of court agreement and, therefore dismissing the Irish proceedings, would amount to “manifest injustice” such that jurisdiction clause should not be enforced. Consequently, a detailed examination of the concept of ‘manifest injustice’ had to be undertaken.
‘Manifest Injustice’
Without any case law on the interpretation of ‘manifest injustice’ under Article 6(c), Mr Justice Twomey applied its ‘ordinary and natural meaning’ and concluded it meant “an injustice which was ‘clear or obvious to the eye or mind’ and therefore an injustice which is open to little or no doubt.” This, he said, was a high bar and the onus was on the party asserting manifest injustice to “show that there is little or no doubt that a very obvious injustice will arise, if the exclusive jurisdiction clause is applied.” In considering if that threshold had been met, the Court:
- Rejected the claim that 'manifest injustice' arose from the defendant's failure to include the $20 million claimed in its request for an exemption from the Central Bank to allow it to use its assets for other purposes - the claim was disputed in any event and the failure to seek an exemption until an order was made only led to a delay
- Addressed the claim the plaintiff would be denied an adequate remedy if it were compelled to litigate in England and therefore it would be a ‘manifest injustice’ by holding it was not - there was no evidence before the Court to say an English court would not grant a mandatory injunction requiring the defendant to obtain an exemption or that enforcement of such an order would be unavailable in Ireland and the plaintiff’s legal submissions had stated those consequences were not clear which was contrary to the test that it be ‘manifest’, and
- Rejected the contention that the delay in challenging jurisdiction in Ireland meant there would be ‘manifest injustice’ if the plaintiff were to be compelled at this stage to litigate in England on the basis that any delay, contributed to by the plaintiff, was short and the plaintiff was already aware of the reasons for the delay and the position the defendant would adopt
Although the Court expressed sympathy with the plaintiff and the complications in dealing with a Russian-State owned entity, the complaints of ‘manifest injustice’ amounted only to inconvenience. Mr Justice Twomey commented that “inconvenience is a long way from constituting a manifest injustice” and concluded that “having people honour their contracts is a crucial part of everyday life and commerce and has been something to which the Irish courts have always attached importance…”
Conclusion
The decision represents a detailed consideration of the ‘manifest injustice’ exception to the Article 6 obligation on the court of a Contracting State other than that of the chosen court to suspend or dismiss proceedings to which an exclusive choice of court agreement applies. It not only established that the threshold to be met for a party seeking to satisfy the exception is high and difficult to meet but reiterates that the Irish courts are keen to hold parties to their agreements and will not lightly disregard a jurisdictional choice made in such agreements.
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[1] Compagnie de Bauxite et D’Alumine de Dian-Dian SA v GTLK Europe DAC [2023] IEHC 324
