As new rules governing the partnership between the UK and EU come into effect, we look back at a recent case which gives us clarity in relation to the European rules which continue to apply in transition cases, but leaves uncertainty in relation to the rules which can be expected to become increasingly important in future cases. In Etihad Airways PJSC v Flöther [2020] EWCA Civ 1707 the Court of Appeal has confirmed for the first time the effectiveness of asymmetric jurisdiction agreements under the Brussels I Regulation recast (BIR recast). However, the position in the relation to the 2005 Hague Choice of Court Convention was left open.

The administrator of the insolvent airline Air Berlin appealed against the High Court’s refusal to stay proceedings commenced by Etihad in England under a €350 million facility agreement which provided that the English courts had exclusive jurisdiction.  The agreement also permitted Etihad, but not Air Berlin, to take proceedings in any other court which had jurisdiction. The administrator had commenced proceedings in Germany and it was common ground that, in substance, the English proceedings sought negative relief which mirrored the positive relief sought in the German proceedings and that the Berlin court was the court first seised.

The normal lis pendens rule under Article 29 of the BIR recast would require the English court to stay in favour of the first seised German court. However,  under Article 31(2), if the English court was seised under an exclusive jurisdiction agreement within the meaning of Article 25, the normal lis pendens rule would be reversed and the German court would have to stay in favour of the chosen English court.  Thus, the Court of Appeal was required to decided whether an asymmetric jurisdiction clause engaged Article 31(2).

The clause in this case was an “asymmetric” jurisdiction clause  in that it was exclusive as against one of the parties (Air Berlin) but not the other (Etihad). The Court of Appeal noted that asymmetric jurisdiction clauses of this type have been in widespread use for at least twenty five years and that they serve a legitimate commercial purpose. Quoting from Louise Merrett’s 2018 article in the International and Comparative Law Quarterly, the Court of Appeal noted (at [5] per Henderson LJ giving the unanimous judgment of the court) that “such clauses are widely used in international financial markets and that their aim is to ensure that creditors can always litigate in a debtor’s home court, or where its assets are located and they also seek to reassure the creditor that it can only be sued in its preferred jurisdiction”.

The Court of Appeal held that Article 31(2) applied to asymmetric agreements. It followed (at [67]) Louise Merrett’s argument that in an asymmetric cause “each obligation can be considered on its own; the clause includes a promise by the borrower not to sue in any other jurisdiction and that promise is capable of being protected by Article 31(2)” agreeing with the judge below that the essential point was thereby concisely and convincingly expressed.

Jacobs J below had indicated that there were good reasons why the words of definition of exclusive jurisdiction clauses in Article 3(a) of the 2005 Hague Choice of Court Convention should also cover asymmetric agreements (again following Louise Merrett’s article at [85] of the judgment). The Court of Appeal noted, however, that there were strong indications that the framers of the Convention intended to exclude such agreements. Ultimately, the Court of Appeal held that it did not need to decide the issue because whatever the positon in relation to the Hague Convention, that did not affect the conclusion that asymmetric agreements were covered by the BIR recast ([87]). For new cases commenced after the end of the transition period the Hague Convention will replace the BIR recast which means that an answer to this important question concerning the scope of the Convention is likely to be required sooner rather than later.

The judgment can be found here.