Show some restraint - exclusive jurisdiction clause effective in restraining proceedings outside England

Posted: 11/06/2015

Never underestimate the importance of a well drafted jurisdiction clause. The English court recently upheld the enforceability of an exclusive jurisdiction clause found in warehouse receipts/certificates to restrain court proceedings that had been brought in China.

The dispute involved a warehouse company incorporated in the People’s Republic of China (Impala) and a trading company incorporated in Singapore (Wanxiang) which is part of a Chinese conglomerate.

The underlying dispute concerned a major fraud relating to aluminium ingots held at a bonded warehouse in Qingdao. Wanxiang had begun court proceedings against Impala in the Shanghai courts for recovery of the aluminium or damages.

The warehouse receipts stated that they were subject to Impala’s terms and conditions and referred to Impala’s website where the terms could be viewed. The jurisdiction clause in question was found in Impala’s terms, and provided that all contracts and claims between the parties relating to the goods would be governed by the law of England and disputes dealt with exclusively by the English courts.

Impala, in the light of the jurisdiction clause, sought injunctions from the English court requiring Wanxiang to discontinue the proceedings in Shanghai and to restrain it from commencing a claim anywhere else other than the English courts.

Wanxiang argued that its claim was a non-contractual one which meant that the jurisdiction clause did not apply and the claim could be brought under Chinese law in the Chinese courts. Alternatively, it said that the clause had not been properly incorporated into the warehouse receipts and so was of no effect, or that there were other strong reasons to depart from the clause.

The English court rejected all these arguments and granted Impala a final mandatory injunction requiring Wanxiang to discontinue the proceedings in Shanghai, and a final prohibitory injunction restraining Wanxiang from commencing or continuing proceedings relating to the warehouse receipts anywhere else except the English courts.

This case is a clear reminder of the importance of a well drafted jurisdiction clause. It also emphasises the need to follow the paper and, increasingly importantly, virtual trail to ensure you have read all the salient terms and conditions which may be incorporated into any contract you are signing.

This article was published in The Crucible in June 2015.

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