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In Black Diamond v Fomento De Construcciones Y contratas Asplin J upheld an exclusive jurisdiction clause in favour of the English courts despite submissions that an English judgment would then be used for collateral purposes in foreign insolvency proceedings.
In this case there were two sets of proceedings involving the English defendant, those in England and those in Spain. However, the issue of jurisdiction agreements was not relevant as the Spanish proceedings were freestanding proceedings to deal with restructuring of a debt and were not brought under an agreement between the parties which was subject to a jurisdiction clause. There were therefore no competing jurisdiction clauses to consider. The fact that a decision in the English court might be used for collateral purposes within the Spanish proceedings was not a good reason for the court to ignore an exclusive jurisdiction agreement between the parties.
The authorities are very clear that the English common law will enforce an exclusive English jurisdiction clause 'unless there is a strong or compelling reason not to do so and that a case management stay required rare and compelling circumstances'. Issues considered in this case which militated against such a stay were:
FCC, a Spanish company, has two main types of debt:
The claimants consist of Creditors and seven other claimants:
All the claimants were, through the Tranche B debt, senior creditors of FCC under the Syndicated Finance Agreement. They disagreed with the restructuring of the Tranche B debt by FCC which was being pursued through proceedings in the courts in Barcelona known as the Homologation Proceedings. The claimants disagreed with the restructure on the basis it involved a disproportionate sacrifice by Tranche B holders. They were also of the view that the Barcelona proceedings triggered an Event of Default under the Notes so entitling them to accelerate their Notes.
The claimants issued a Part 8 claim in the English courts for declarations that an Event of Default had occurred under the Notes as a result of the Homologation Proceedings. The other seven claimants then filed notices of discontinuance as they were not Note holders. FCC gave notice of its intention to dispute the English courts' jurisdiction under CPR 11. Its position being that there had not been an Event of Default.
Note: Homologation Proceedings are proceedings to obtain a court-sanctioned collective refinancing agreement. For more detailed information, Lexis®PSL subscribers can see question 10 in Getting the Deal Through dealing with insolvency in Spain: Court Homologations. Click here for a free trial.
Asplin J held that the English court had jurisdiction to hear the matter and the rule 11 challenge therefore failed. Asplin J focussed on the intention of the parties to the agreements when considered in light of the transaction as a whole. In this case, the Note contract contained the exclusive English jurisdiction clause and the question of the Event of Default which was the basis of the Part 8 claim fell naturally under the Note contract; rather than the Syndicated Finance Agreement. Further, any consideration as to whether the Notes could be accelerated under the Syndicated Finance Agreement in relation to the Tranche B debt was, on the facts, peripheral.
Asplin J also noted that:
Asplin J held that a stay was not appropriate.
The difficulty in arguing for a stay was the existence of the exclusive jurisdiction clause in favour of the English courts; a very strong reason is therefore required to grant a stay.
The issues taken into account where:
It could be said that FCC in seeking a declaration that the English courts do not have jurisdiction were in fact seeking to subvert the contractual agreement they had entered into in relation to the Notes. Even though the stay sought was temporary rather than permanent it still affected the contractual agreement for English court jurisdiction.
Court: Chancery Division, High Court
Judge: Mrs Justice Asplin
Date of judgment: 9 March 2015
The report as published in LexisPSL provides tables with references to the authorities relied on for the different issues in the case which include synopsis of the salient issues for each authority. Click here for a free trial.
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Janna is a dispute resolution lawyer. She deals primarily with cross border issues and is active in the work being undertaken in relation to the implications of Brexit for Dispute Resolution lawyers. Janna also heads up a LexisNexis costs team bringing together expertise from across the company to deal with the costs issues facing the profession.
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