Two jurisdictions for the price of one? The English Court of Appeal provides guidance on conflicting jurisdiction clauses in related contracts

In Trust Risk Group SpA v AmTrust Europe Limited[1] the Court of Appeal has rowed back from the presumption that parties who have agreed differing jurisdiction arrangements for their disputes intended their disputes to be governed by one regime.

Facts

In July 2010 AmTrust Europe Limited ("AmTrust"), the UK subsidiary of an American underwriting group, entered into a Terms of Business Agreement ("ToBA") with Trust Risk Group SpA ("Trust Risk"), an Italian insurance broker.  The ToBA was a non-exclusive brokering agreement under which AmTrust agreed to pay commission to Trust Risk.  It was governed by English law and any disputes were to be determined in the English courts.

In January 2011 the parties also entered into a framework agreement (the "Framework Agreement") under which the parties agreed to give each other exclusivity in relation to Italian medical malpractice insurance risks.  The terms of the ToBA were appended to the Framework Agreement in a schedule.  The Framework Agreement contained a clause providing for it to be governed by Italian law and for any disputes in relation to it to be determined by arbitrators in Milan.

The parties' relationship deteriorated rapidly from mid to late 2014.  In October 2014 Trust Risk claimed it was entitled to more than €96 million in advance commission from AmTrust and transferred approximately €32 million out of a bank account in part payment for this.  AmTrust issued proceedings in England seeking a mandatory injunction requiring Trust Risk to return the money to the account, which it alleged was a trust account containing premiums received from insured persons to be paid to it.

At first instance, the court held that AmTrust had shown, to the "good arguable case standard" necessary at this stage of the proceedings, that the ToBA continued after the Framework Agreement and that the English courts therefore had jurisdiction. 

Appeal

Trust Risk appealed on the basis that the ToBA was superseded by the Framework Agreement.

According to the Court of Appeal, the underlying question was whether the contractual arrangements consisted of a single composite and overarching agreement or whether the ToBA and the Framework Agreement were two freestanding contracts.

The Court of Appeal considered the so-called "one stop shop" principle established in Fiona Trust & Holding Corp v Privalov [2008] 1 Lloyd's Rep 24.  In Fiona Trust the House of Lords had stated that arbitration clauses should be rebuttably presumed to govern any dispute arising out of the parties' relationship.

However, here, the Court of Appeal found the most useful approach was to consider whether, giving the Framework Agreement and the ToBA a broad and purposive construction, and taking account of the overall scheme, the jurisdiction and choice of law provisions in the Framework Agreement superseded those in the ToBA.

Based on detailed analysis of both the ToBA and the Framework Agreement, the Court of Appeal held that it had not.  In particular, the Court noted that:

• The ToBA provided for the creation of a trust account in favour of AmTrust, which would be recognised under English law, but not Italian law.

• Whilst the Framework Agreement referred to "this Agreement" in various places, it also referred to "all agreements", "this Agreement or any other agreement", "the Agreements, including the [ToBA]" and "the Agreement and/or the ToBA".

• The Framework Agreement's termination clause provided that its termination would only result in a termination of the exclusivity provisions and would require the agreements, including the ToBA, to be modified.  This could only happen if the ToBA had continued to exist whilst the Framework Agreement applied and would continue to exist after its termination.  Furthermore, the Framework Agreement contemplated the termination of the Framework Agreement "and/or the ToBA", which was inconsistent with the contention that the ToBA no longer applied.

• The apparent conflict between a non-exclusivity clause in the ToBA and an exclusivity clause in the Framework Agreement was resolved by analysing the ToBA as an agreement dealing with the basic brokerage position and the Framework Agreement as a later agreement granting exclusivity in the Italian medical malpractice market.  The non-exclusivity provision in the ToBA simply fell away in relation to Italian medical malpractice business as a result of the Framework Agreement.  That did not mean that the jurisdiction clause in the ToBA fell away.

In conclusion, the Court of Appeal held that the agreements dealt with different aspects of the parties' relationship and that AmTrust had "much the better of the argument" (as required by the relevant jurisdictional gateways) that the jurisdiction and choice of law provision in the ToBA applied to the dispute, given the dispute related to the retention by Trust Risk of the premiums received.

Comment

Although this case is specific to the contracts in question, it is a reminder for those drafting agreements of the importance of consistency in related contracts and of the pitfalls that may be hidden in the "boilerplate". 

For litigators, this decision does not render the "one stop shop" principle in Fiona Trust bad law, but makes clear that the principle may not form the starting point where there is more than one contract conferring jurisdiction on more than one forum.  In fact, this is not an entirely new proposition, as it was advocated in the 14th edition of Dicey, Morris and Collins on the Conflict of Laws, a passage from which the court even quoted in its judgment.

However, it does introduce greater uncertainty as to how any given set of conflicting contracts may be construed.  Interestingly, the Court of Appeal noted that it may be easier to conclude that parties chose to have different jurisdictions to deal with different aspects of their relationship where there is a single contract creating a relationship followed by a later contract embodying a subsequent agreement about the relationship (as in this case), rather than where there is a complex series of agreements about a single transaction which are effectively part of one package.

^{[1] [2015] EWCA Civ 437}