Introduction
The English court's judgment in Pantheon International Advisors Limited v Co-Diagnostics [2023] EWHC 1984 (KB) is the first judgment on the newly introduced gateway in CPR rule 6.33(2B)(b) (the "new gateway").
The new gateway is important, because it allows a claimant to subject a foreign entity to the English court's jurisdiction in circumstances where the contract between them contains a term designating England as the jurisdiction for dispute resolution. Crucially, the claimant can do so without first obtaining the permission of the court (which is otherwise usually required under the CPR).
The decision in Pantheon is significant for those engaged in cross-border business because it demonstrates the strength of an English jurisdiction clause in commercial relationships that go wrong. It also highlights the importance of giving due consideration to the implications of including an English clause in contractual arrangements.
Key Facts
In 2016 Pantheon, the English claimant, had entered into a contract with CDX, the Utah-based defendant, to provide its services to assist CDX with raising capital in the UK markets through a listing on the London Stock Exchange or AIM (the "2016 contract"). From here, the key facts were disputed.
The claimant asserted that services were provided to the defendant but had not been paid for. It also stated that a new contract had been entered into between the parties in 2018 (the "2018 contact") and superseded the 2016 contract. The 2018 contract was signed only by the claimant, who claimed that significant sums were owed under it.
The defendant on the other hand denied that there was a valid contract existing between the parties or that any substantive services were provided to it under the 2016 contract. Instead, the defendant asserted that the contract had lapsed.
Notably, both the 2016 contract and 2018 contract had exclusive jurisdiction clauses in favour of the English courts and English governing law clauses.
The claimant issued two rounds of pre-action correspondence in 2020 and 2021, respectively. Shortly after the second pre-action letter in 2021, the defendant filed a complaint in the State Court of Utah for a declaration that there was no ongoing contractual or business relationship between the parties. Default judgment was entered in these Utah proceedings on the defendant's application, since the claimant did not engage and claimed that service of the proceedings had been ineffective.
The claimant issued its claim in the English High Court for the sums it alleged were due under the 2018 contract. In the alternative, the claimant claimed for quantum meruit (unjust enrichment) in respect of the services that it claimed had been provided to the defendant.
The claimant relied on CPR 6.33(2B)(b) to serve the defendant out of the jurisdiction without the court's permission on the basis that there was a jurisdiction agreement in the 2018 contract.
The defendant filed an application challenging the jurisdiction of the English courts on the basis that the 2018 contract was invalid and, therefore, the jurisdiction clause which Pantheon relied upon was also invalid. The defendant also argued that the unjust enrichment claim fell outside of the scope of the claims which could be served out of the jurisdiction under CPR 6.33(2B)(b). During the course of opening submissions at the application hearing, the claimant conceded its quantum meruit claim.
Issue: Did the English Court have Jurisdiction?
The question before the court was whether the English court had jurisdiction, and whether the claimant had properly served the claim form upon the defendant in the USA by placing reliance on the new gateway.
The 'good arguable case' test
The applicable test to determine this question is the 'good arguable case' test. This required the court to determine whether the claimant had a good arguable case that the claim fell within the new gateway relied upon i.e., whether there was a legally binding contract containing a term that the English court had jurisdiction to determine the claim and that the dispute between the parties fell within the scope of the jurisdiction agreement.
The three limbs of the test
Master Stevens was guided by the three limbs of the test as stated by Lord Sumption in Brownlie [1] and also relied on Lord Justice Green's guidance in Kaefer [2]. The test is as follows:
- The claimant must supply a plausible evidential basis for the application of a relevant jurisdictional gateway;
- If there is an issue of fact about it, or some other reason for doubting whether it applies, the court must take a view on the material available if it can reliably do so; and
- The nature of the issue and the limitations of the material available at the interlocutory stage may be such that no reliable assessment can be made, in which case there is a good arguable case for the application of the gateway if there is a plausible (albeit contested) evidential basis for it.
Decision and Rationale
Master Stevens concluded that the claimant did have a good arguable case that it could serve the defendant through the new gateway. [3] The Claimant had demonstrated, on a plausible evidential basis, that the 2018 agreement (containing the English jurisdiction agreement) was valid, binding and could be legally enforced. Based on the trite principles of contractual formation, the court found that the documents did disclose the parties' intention to be contractually bound.
Ultimately, however, the court stayed the proceedings pursuant to the defendant's alternative claim that the ADR process contemplated by the contract(s) was outstanding and had to be followed. Since the claimant had conceded its quantum meruit (unjust enrichment) claim, the court only made obiter remarks on whether such a claim would have passed through the new gateway. The court said the claimant should not have served that claim without the court's permission.
[4] The unjust enrichment claim was made in the alternative to the contract claim, and therefore the claim would not be covered by the new gateway which is concerned with contracts only. However, this did not undermine or invalidate the service of the accompanying contractual claim.
Comment
Quoting Master Stevens from her judgment, "It is the act of uncontested service which establishes jurisdiction". In light of the new gateway, an English jurisdiction clause gains in significance. It means that a foreign party to such an agreement caught in a dispute will find it considerably harder to escape the jurisdiction of the English courts and succeed in a jurisdiction challenge application. In the present case, despite the institution of prior-in-time proceedings in a foreign court (which would normally be a factor considered by the English court in determining jurisdiction) the English court was willing to find that it had jurisdiction.
The impact of the new gateway is to be welcomed; the English court's practices and approach are aligned to facilitate efficient and effective resolution of commercial disputes. Parties conducting international business frequently designate England as their preferred forum for dispute resolution which is a testament to its reliability.
Further, the introduction of the new gateway is in line with the commercial expectations of parties that agree to English jurisdiction and expect that they would not be faced with proceedings elsewhere. [5] This decision upholds this rationale and makes it more efficient to serve out of the jurisdiction in the circumstances.
This decision, discourages issuing jurisdiction challenges in cases where there is a clear jurisdiction agreement in favour of the courts of England & Wales. This is especially in cases where the challenge is largely fact-based, knowing that English courts have consistently refused to conduct a mini trial at interlocutory stages.
[1] Brownlie v Four Seasons Holdings Inc [2017] UKSC 80
[2] Kaefer Aislamientos v AMS Drilling Mexico [2019] EWCA Civ 10
[3] Paragraph 55.
[4] Paragraph 65.
[5] Master Stevens refers to paragraph 45 of the Civil Procedure Rule Committee's minutes of October 2020 which state that the purpose of introducing the new gateway was "instil confidence in businesses to continue to choose COCAs in favour of the courts of E&W, by eliminating a preliminary step which adds costs and delay".
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