Mauritius Commercial Bank Ltd v Hestia Holdings Ltd and Another (Defendants/Applicants)
| Jurisdiction | England & Wales |
| Judge | The Hon. Mr Justice Popplewell |
| Judgment Date | 24 May 2013 |
| Neutral Citation | [2013] EWHC 1328 (Comm) |
| Docket Number | Case No: 2013 FOLIO 67 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 24 May 2013 |
[2013] EWHC 1328 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Rolls Building, Fetter Lane
London EC4A 1NL
The Hon. Mr Justice Popplewell
Case No: 2013 FOLIO 67
Emily Wood (instructed by Bird & Bird LLP) for the Claimant/Respondent
Henry Forbes Smith and Sophie Weber (instructed by Reed Smith LLP) for the Defendants/ Applicants
Hearing dates: 17 May 2013
This is an application by the Defendants for an order setting aside the Claim Form and staying all further proceedings on the grounds that the English court does not have jurisdiction to try the claim.
The Claim
The Claimant ("MCB") is a bank registered in Mauritius. The First Defendant ("Hestia") is a Mauritian registered company. The Second Defendant ("Sujana") is Hestia's parent company and registered in India.
MCB, as lender, entered into a facility agreement dated 9 November 2010 with Hestia, as borrower, ("the Original Facility Agreement"), under which MCB established a trade finance banking facility in favour of Hestia up to a limit of US$10 million. On 9 December 2010 Sujana entered into a guarantee of Hestia's obligations under the Original Facility Agreement for up to US$10 million. On 12 July 2011 MCB and Hestia agreed to amend the Original Facility Agreement by increasing the limit of the facility thereunder to US$20 million. Sujana entered into a further guarantee dated 3 August 2011 to cover the additional US$10 million.
Article 9 of the Original Facility Agreement, which was unamended by the 2011 amendment, and paragraph 16 of each of the guarantees given by Sujana, provided that they were governed by the law of Mauritius and that disputes were to be referred to the exclusive jurisdiction of the courts of Mauritius.
By 22 June 2012 Hestia had drawn down almost US$20 million, effectively the full amount of the loan available on the facility. Hestia defaulted on sums which became due and payable in August 2012. On 6 September 2012 the parties agreed by a "Notice of Default and Waiver and Consent" that MCB would waive its rights against Sujana for 7 business days pending the repayment of the facility by Hestia. Hestia failed to repay within the 7 days.
Following further negotiations, on 11 October 2012 MCB, Hestia and Sujana entered into an Amendment and Restatement Agreement ("the ARA") whose terms are at the heart of the dispute on the application before me. Its purpose was a further indulgence granted by MCB to Hestia by providing for a revised repayment schedule and interest amounts.
Recital 5 recorded that MCB, Hestia and Sujana had agreed to terms and conditions for the settlement, rescheduling and restructuring of the defaults by entering into that agreement with an intention "to amend, replace and restate the terms of the Original Facility Agreement."
Clause 2 provided:
"With effect from [11 October 2012] the Original Facility Agreement shall be amended and restated so that it shall be read and construed for all purposes as set out in Schedule 2 (Restated Agreement)"
Clause 3 provided that Sujana undertook to execute fresh guarantees on the terms set out in the Restated Agreement, and was released from its obligations under the previous guarantees on and from the date of the ARA. Sujana did not execute fresh guarantees, but its guarantee obligations were contained in clause 7 of the Restated Facility Agreement scheduled at Schedule 2 ("the RFA"), to which it was party by signing the ARA.
Clauses 18, 23 and 24 were in the following terms:
Clause 18 — Partial invalidity
If, at any time, any provision of this agreement or related documents is or becomes illegal, invalid or unenforceable in any respect under any law of any jurisdiction, neither the legality, validity or enforceability of the remaining provisions nor the legality, validity or enforceability of such provision under the law of any other jurisdiction will in any way be affected or impaired.
Clause 23 — Governing Law
This Agreement and any dispute or claim arising out of, or in connection with, it or its subject matter or formation (including non-contractual disputes or claims) shall be governed by and construed in accordance with English Law.
Clause 24 — Enforcement
24.1 Jurisdiction
(a) The courts of England have exclusive jurisdiction to settle any dispute arising out of or in connection with this Agreement (including a dispute regarding the existence, validity or termination of this Agreement) (a "Dispute").
(b) The Parties agree that the courts of England are the most appropriate and the most convenient courts to settle Disputes and accordingly no Party will agree [sic, obviously a typographical error for argue] to the contrary.
(c) This Clause 24.1 is for the benefit of the Lender only. As a result the Lender shall not be prevented from taking proceedings related to a Dispute in any other courts in any jurisdiction. To the extent allowed by law the Lender may take concurrent proceedings in any number of jurisdictions.
24.2 Service of Process
(a) The Borrower and the Guarantor shall irrevocably appoint 'Progress Corporate Services Private Limited' presently located at 2, Lansdowne Road, Croydon, Surrey, London CR9 2ER.
The Proceedings
Hestia defaulted on the repayment of the loan pursuant to the RFA. MCB brings a claim for the outstanding amounts, some US$15 million plus interest, against Hestia as borrower and Sujana as guarantor. The Claimant issued its Claim Form on 16 January 2013 marked not for service out of the jurisdiction, relying upon clause 24.2 of the RFA, and serving it on Progress Corporate Services Pte Ltd in England pursuant to CPR 6.11(1). By its application notice dated 27 February 2013 the Defendants challenge jurisdiction. The grounds of relief are that clause 24.1 of the RFA is invalid under Mauritian law. It is to be noted that the grounds in the application notice do not challenge the validity of clause 24.2 of the RFA. The Defendants have not identified at this stage any defence to the merits of the claim.
The Defendants' submissions
The Defendants argue that clause 24.1 is invalid under its proper law, whether that of Mauritius or England, and that in the absence of a valid English jurisdiction agreement, the court does not have jurisdiction over Hestia and Sujana. The Defendants' challenge to the validity of clause 24.1 rests on two alternative grounds. They allege that the jurisdiction agreement contained in clause 24.1 of the RFA remained subject to Mauritian law, notwithstanding clause 23; and that under Mauritian law the jurisdiction agreement is ineffective, as a result of the decision of the French Cour de cassation in Banque Privee Edmond de Rothschild Europe v X (26 September 2012), because it is one sided: it allows MCB to sue, or insist on being sued, in any jurisdiction in the world, but binds Hestia and Sujana to litigate in England if MCB so choose. Alternatively, it is submitted that if clause 24.1 is governed by English law, it is too one sided to be compatible with fundamental principles regarding equal access to justice and should not be upheld under English law.
First argument: (a) choice of law
Pursuant to the Contracts (Applicable Law) Act 1990, the RFA is subject to the provisions of Regulation (EC) No 593/2008 of the European Parliament and of the Council dated June 17 2008 ("the Rome 1 Regulation").
Article 3.2 of the Rome 1 Regulation permits the parties to change the governing law of their agreement:
'Article 3.2. The parties may at any time agree to subject the contract to a law other than that which previously governed it, whether as a result of an earlier choice made under this Article or of any other provision of this Regulation. Any change to the law to be applied that is made after the conclusion of the contract shall not prejudice its formal validity under Article 11 or adversely affect the rights of third parties.'
By Article 1(2)(e), however, there are excluded from the scope of the Regulation "agreements on the choice of court".
Accordingly there is no dispute that clause 23 of the RFA is effective to render all of it subject to English law by reason of Article 3.2, apart from the jurisdiction provisions in clause 24.1. Whether parties are permitted to change the governing law of a jurisdiction agreement is governed by English rules of private international law apart from the Rome 1 Regulation.
The Defendants' submission that the validity of clause 24.1 is governed by Mauritian law proceeds in two stages:
(1) Under English rules of private international law parties cannot amend the governing law of their agreement, unlike the position under Article 3.2 of the Rome 1 Regulation. They can change the governing law by discharging the agreement and entering into a new one, but cannot do so by amending an existing agreement. Accordingly it is not possible for parties to amend the law governing their jurisdiction agreement.
(2) Since the parties in this case did not discharge the Facility Agreement and replace it with a new one, but amended and restated it, their jurisdiction agreement (as amended and restated in clause 24.1) remained governed by Mauritian law despite clause 23.
In my judgment the argument breaks down at each stage.
A conclusion that the parties should not be allowed to amend an agreement so as to change the law governing a jurisdiction agreement would be a surprising one. It is common ground that they may change a jurisdiction agreement by amendment. It is common ground that they may change the law governing their substantive rights by amendment. The governing law of a jurisdiction agreement is,...
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