1.This appeal concerns the jurisdiction of the Supreme Court of Gibraltar
to hear a case concerning an alleged contract relating to the construction
and operation of a racing yacht. The parties are said to have been a
Gibraltar company, on the one hand, and a Dutch and a Polish company
on the other. The Gibraltar company is Superior Yacht Services Ltd
("SYS") which is the respondent in the appeal. The Dutch company is
Bols Distilleries BV (trading as Bols Royal Distilleries) ("BRD") and the
Polish company is Unicom Bols Group Sp z.o.o ("UBG"). The Dutch and
Polish companies, which their Lordships refer to collectively as "the Bols
companies", are the appellants. SYS claims inter alia a declaration that it
is the owner of the yacht and damages for breach of contract by reason of
wrongful and early termination of the contract.
2.Article 2(1) of Council Regulation (EC) 44/2001 on jurisdiction and the
recognition and enforcement of judgments in civil and commercial matters
provides:
"Subject to this Regulation, persons domiciled in a Member State shall,
whatever their nationality, be sued in the courts of that Member State."
Article 23(1) provides inter alia:
"If the parties, one or more of whom is domiciled in a Member State,
have agreed that a court or the courts of a Member State are to have
jurisdiction to settle any disputes which have arisen or which may arise in
connection with a particular legal relationship, that court or those courts
shall have jurisdiction. Such jurisdiction shall be exclusive unless the
parties have agreed otherwise. Such an agreement conferring jurisdiction
shall be either:
(a) in writing or evidenced in writing...."
3.The Bols companies are domiciled in the Netherlands and Poland
respectively. They assert, accordingly, that by reason of article 2(1),
they are not subject to the jurisdiction of the Gibraltar courts. SYS relies,
however, on clause 15 of the alleged agreement between the parties
which is in these terms: "This Agreement shall be governed by the laws
of Gibraltar and the parties hereby submit to the jurisdiction of the courts
of Gibraltar." On that basis SYS contends that article 23(1) applies and
the Gibraltar courts have jurisdiction. The critical question is whether the
court can be satisfied that there is an agreement, in writing or evidenced
in writing, conferring jurisdiction on the courts of Gibraltar. On the basis of
clause 15, both Schofield CJ, sitting in the Supreme Court, and the Court
of Appeal (Staughton P, Stuart-Smith, and Aldous JJA) held that there is
such an agreement, in writing or evidenced in writing, and that article
23 therefore applies so as to confer jurisdiction on the Supreme Court of
Gibraltar. The Bols companies appeal on the ground that, in reaching their
decision, the Court of Appeal applied the wrong test.
4.Before turning to that issue, their Lordships must explain some of the
background to the dispute. At all material times Bols, the well-known
brand of vodka, was manufactured and distributed by BRD and by UBG
which was the Polish division of BRD. For some years the two companies
promoted their brand by operating ocean-going yachts which took part in
high-profile races and other events. In 1998 UBG employed Gordon James
Wallace Kay, a professional yachtsman, to manage and operate their first
yacht, "Lodka Bols". With the encouragement of the Bols companies,
however, on 5 January 1999 Mr Kay arranged for SYS to be incorporated
in Gibraltar. It was thought to be more expedient for the business of
managing and operating the yacht to be arranged through a company,
rather than for UBG and BRD to employ Mr Kay and his crew directly.
Following incorporation, SYS managed and operated the yacht Lodka Bols.
Under the management of SYS, the yacht was placed first in its class in
the 2001-2002 Sydney-Hobart race. A few months later, in July 2002, that
yacht was sold.
5.Meantime, in 2000 the president of UBG, Stefan Laux, approached SYS
about the future of the companies' advertising campaign. SYS responded
by offering them first refusal of a project which would involve the Bols
brand enjoying what was anticipated to be substantial publicity and
international exposure through a three-year campaign based on a new
state-of-the-art yacht, Lodka II. The design of the new yacht was to be
initiated by SYS. One distinctive feature of the proposal was that, while
UBG and BRD would put up the sponsorship funds, SYS would contract
for the construction of the yacht and would own it once it had been built.
They would operate and race the yacht in accordance with a programme
to be agreed with the sponsors.
6.SYS submitted a formal written proposal to UBG in November 2000.
This included budget projections for the design and construction costs
during the first year and operating costs for the subsequent three years.
While the initial response was positive, consideration of the project had to
be shelved due to the take-over of the Bols Group by Rémy Cointreau.
7.In September 2001, however, BRD asked SYS to re-present the project
to Mr Laux and to Mr Peter O'Connell, a director of BRD who was in
charge of marketing the Bols brand internationally. Further discussions
took place and on 19 September 2001 Mr Kay sent Mr Laux and Mr
O'Connell a provisional contract for the proposed project. The first recital
to the agreement recorded that SYS intended to procure the design and
construction of a high performance 80 foot racing yacht and that they
relied on "the Company" to enter into the agreement for the purpose of
financing the cost of the design and construction of the yacht. At this
stage "the Company" had not been specified. The next recital referred
to the companies which were envisaged as carrying out the design and
building of the yacht. The third recital recorded that, in return for the
Company's financial support, after the vessel had been constructed
SYS would manage it in consultation with, and at the direction of, the
Company. SYS would enter it in various specified yachting events and
regattas with a view to providing a platform for the promotion of the
Company, its logo, brand and certain agreed products. The aim would be
to raise the public profile and awareness of the Company, the brand and
the agreed products. This agreement still had the distinctive effect that,
although the sponsoring company would put up the funds, SYS would
become the owner of the new yacht: in return SYS would have to operate
it for a period of three years in accordance with the provisions of the
agreement. This agreement contained Clause 15 on jurisdiction which
their Lordships have already quoted in para 3 above.
8.Over the following weeks discussions on a variety of points continued
against a background of financial and political pressures on UBG, partly
due to the policy of the Polish government on the advertising of alcohol.
These pressures were felt acutely in relation to the Lodka Bols yacht
that was due to take part in the Sydney to Hobart race in December of
that year. One major decision which was taken on the new yacht was to
change the proposed designers and builders. As these discussions went
on, Mr Kay was becoming increasingly anxious that, if the final decision
to proceed with the project was not taken fairly quickly, the new yacht
would not be finished in time to take part in the Sydney to Hobart race
starting in December 2002. On 29 October 2001 he sent an email to Mr
Laux attaching "a slightly amended copy of the contract". It contained
the same jurisdiction clause but still did not specify which company was
to contract with SYS. It included details of the new designer and builders
and also revamped the schedule of the payments to be made to SYS,
with a view to reducing the payments in the first year. The contract still
envisaged that SYS would own the yacht which the two companies had
paid for.
9.This apparent imbalance in the contract, between financing and
ownership, was causing concern to Mr Laux. On 6 November 2001 he sent
an email to Mr Kay, which ended: "And, my friend, in the end it is a joint
venture with UBG having all the risk and you at worst end up with a nice
boat that can be used utilised or sold!! I know you are after the real glory
and to achieve all the dreamed of results, but ask yourself: You feel this
is balanced?" Mr Kay replied the following day that he fully understood
Mr Laux's point, but asked him for a counter-proposal which they could
discuss at the meeting which they were due to hold in Warsaw.
10.That meeting was eventually held in Warsaw on 19 November and
was attended by Mr O'Connell, Mr Laux and Mr Kay. It appears that the
question of the ownership of the yacht was discussed but not settled.
According to Mr Kay, his position at that time and subsequently was that
the question of ownership was not critical but, if SYS was not to own the
yacht, it would need to be compensated in terms of additional bonuses
under the contract. At the meeting Mr O'Connell indicated to Mr Kay
that they would let SYS have a decision on the project within the next
two weeks, but by 13 December Mr Kay had still not heard and so he
wrote to Mr O'Connell, emphasising the need for an early response. On
15 December, having been unable to contact Mr Kay on his mobile, Mr
O'Connell emailed him to say that "Both Stefan and I have discussed
Lodka II today. Decision is go." He asked for details in terms of cost
"bookings" over the next 24 months. Mr Kay replied that he was looking
forward to working with Mr O'Connell on the project and added: "We still
need to resolve a few issues, such as a contract and the bonus issues we
discussed ref boat ownership etc."
11.On 16 December Mr Kay, who was in Australia, sent an email to Mr
O'Connell, attaching the scanned version of a document on SYS paper
dated 17 December and headed "Invoicing and Contract Information".
Also attached to the email was a scanned updated version of the contract.
The email read:
"Please find attached revised payment schedule as we discussed in
the Warsaw meeting, where this year's costs are reduced as much as
possible.
I will show this to Stefan on his arrival.
We will need to address this contract, bonus arrangements and the
clear understanding as laid out in the contract of what is excluded with
particular reference to graphics and branding."
12.The invoicing information was clearly intended to provide "the details
in terms of cost 'bookings'" which Mr O'Connell had requested two days
before. It gave the details of the SYS bank account and, in turn, asked
for the necessary invoicing details. It then specified the payments and
relevant dates for a period of four years, the total being US$6,100,000.
13.On the next page there was a heading "Additional costs", which
listed certain items which would not be covered by the sponsorship
monies and for which the Company would accordingly have to pay
separately. Under the list of the items whose cost was to be excluded
from the sponsorship monies, the document stated "Full details are in the
contract." And, indeed some details of what was meant by "The cost of
graphics or the placing of sponsor logos or branding on the vessel and its
mainsail and spinnakers" were to be found in item 2 of the Company's
Rights set out in Schedule 2 of the version of the draft agreement which
was attached to the email. Likewise "the cost of crew uniforms and
wet weather gear as selected by the Company to a style and livery as
agreed with SYS together with the branding thereof" seems to refer
to the cost involved in the Company's exercise of its right, in item 4 of
Schedule 2, to "participate in the selection of style and livery of the crew
uniforms and wet weather gear and to place an advertisement bearing
the Company's name and/or logo on the uniforms of the Crew and of the
Team personnel".
14.Then came a heading "Ownership and Registry" followed by this:
"As owners of the vessel you will need to address the issue of port of
registry, the cost of the project is based on the vessel being flagged in a
tax free port. Should you decide to register the boat in a country where
tax is payable you will be responsible for this cost.
The issue of ownership and performance bonus are potentially interlinked
as we discussed, there are several options here which need to be
discussed and resolved, I look forward to your input."
An email dated 17 December from Mr Laux to Mr O'Connell indicates that
they had still not finally decided what to do about the ownership of the
yacht, but that he preferred that ownership should be with UBG or Rémy
Cointreau, or an independent entity.
15.By 3 January 2002, Mr Kay still had not had a reply from Mr O'Connell
to the email he had sent on 16 December. In an email to Mr Laux of that
date, he said inter alia:
"I am however very aware that we are no closer in real terms to closing
this project. I cc'd you my response to POC and I think that no one is
taking this seriously. I do not have invoicing details, a written agreement
etc and unless we have these in place, then we have no project. Surely
it is the basis of any agreement that it is written and agreed??? Or is this
unreasonable. With the constant changes at Bols and movement of the
goal posts even with the current project I am unprepared to commit the
next 3-4 years of life to a period of constant uncertainty.
I am sure you understand and surely you would feel more comfortable
having me under contract......"
16.In fact, news was on its way. On 3 January, Mr O'Connell sent Mr Kay
an email in these terms:
"Please see the attached letter as requested. This is a draft, and I have
also copied Stefan, for any input that he wishes to add.
(See attached file: Gordon Kay.doc)
In terms of the payment transfer timing, I have to speak with Piotr on
Monday to discuss this further, as I have indicated in the letter."
The draft letter attached to the email was from Mr O'Connell to Mr Kay
and was headed "Re: Bols Lodka II". It read:
"As per our telephone conversation of earlier to-day, I wish to confirm the
decision that we have spoken of in relation to the further development of
the 'Bols Lodka II' project.
Thus, by way of this letter, I wish to confirm Bols's commitment to
proceeding with the project, as we discussed in Warsaw, and to the
Project Schedule as forwarded by you on December 17th 2001.
With specific reference to the Project Payment Schedule, I will confirm
the transfer details and timings (in line with your Project Schedule) by
Tuesday of next week (January 8th 2002), following discussions with UBG
Poland.
I wish you the best of success with the Project, and look forward to
continued success in the future."
17.It is common ground that this draft letter was never signed. According
to his witness statement, Mr Kay forwarded a copy of Mr O'Connell's draft
letter to Mr Laux and talked to both men about it on the telephone.
18.On the basis of the draft letter and, presumably, the prior indication
that the "decision is go", Mr Kay then took the step of instructing the
builders, Boatspeed, to start work on Lodka II. He also instructed another
company, Southern Spars, to supply equipment for the construction.
It appears that SYS entered into an agreement for the work with
Boatspeed on 8 January. Two versions of the agreement were produced
in court, neither signed by SYS, one signed by Boatspeed. In one of the
agreements SYS are described as "The Purchasing Agent", in the other as
"The Purchaser".
19.Their Lordships need not follow subsequent events in such detail
since the position of SYS is that the agreement between the parties on
jurisdiction, in writing or evidenced in writing, can be spelled out of the
exchange of emails of 16 December 2001 and 3 January 2002 on the
basis of which SYS proceeded to instruct the construction of the boat.
Some later events should be mentioned, however.
20.Early in 2002, Mr O'Connell, who had played a major role in the
negotiations, left BRD. In February, Mr Stéphane Laugery, the Group Legal
Adviser of Rémy Cointreau, began to take a close interest in the situation.
He invited Mr Kay to a meeting in Paris to discuss the position. At that
meeting on 4 March 2002, according to Mr Kay, he agreed that SYS would
forgo ownership of the yacht, provided certain conditions were met. No
formal agreement between the parties was ever signed.
21. Construction of the yacht was eventually finished in February 2003
and it was launched in March of that year. BRD decided to operate it on
the basis of annual budgets and SYS prepared a programme of events
for the period from March 2003 to March 2004. SYS managed the yacht
during that period. On 17 February 2004, however, BRD gave SYS notice
of the termination of their appointment as from 31 March 2004. The claim
form in the present proceedings was issued two weeks later, on 14 April
2004.
22.With that outline of the factual material, their Lordships must now
examine the relevant law. For present purposes Council Regulation (EC)
44/2001 replaced the Convention of 27 September 1968 on jurisdiction
and the enforcement of Judgments in Civil and Commercial Matters.
Article 2(1) of the Convention was to the same effect as article 2(1) of the
Regulation. Article 17(1) provided:
"If the parties, one or more of whom is domiciled in a Contracting State,
have, by agreement in writing or by an oral agreement confirmed in
writing, agreed that a court or the courts of a Contracting State are to
have jurisdiction to settle any disputes which have arisen or which may
arise in connection with a particular legal relationship, that court or those
courts shall have exclusive jurisdiction."
The wording of article 17(1) of the Convention is not exactly the same as
the wording of article 23(1) of the Regulation, but it was not suggested
that, for present purposes, there was any material difference between
the provisions. Article 17(1) refers specifically to the parties agreeing on
jurisdiction "by agreement in writing or by an oral agreement confirmed
in writing". Article 23(1) simply says that the agreement on jurisdiction
"shall be either … in writing or evidenced in writing...." Unlike article
17(1), the later article does not spell out that the agreement which is
evidenced in writing is an oral agreement. But plainly that is what is
envisaged. Again, neither counsel suggested that the guidance which the
Court of Justice had given on the interpretation of article 17(1) of the
Convention was inapplicable to the interpretation of article 23(1) of the
Regulation.
23.In Estasis Salotti di Colzani Aimo et Gianmario Colzani v RÜWA
Polstereimaschinen GmbH (Case 24/76) [1976] ECR 1831, 1841, para 7,
having pointed out that the effect of conferment of jurisdiction by consent
is to exclude the jurisdiction provided for in article 5 of the Convention,
the Court of Justice continued:
"In view of the consequences that such an option may have on the
position of parties to the action, the requirements set out in article 17
governing the validity of clauses conferring jurisdiction must be strictly
construed.
By making such validity subject to the existence of an 'agreement'
between the parties, article 17 imposes on the court before which the
matter is brought the duty of examining, first, whether the clause
conferring jurisdiction upon it was in fact the subject of a consensus
between the parties, which must be clearly and precisely demonstrated.
The purpose of the formal requirements imposed by article 17 is to ensure
that the consensus between the parties is in fact established."
For the reasons given by the Court, the policy of the legislation requires
that it is "clearly and precisely demonstrated" that the parties actually
agreed to any clause conferring jurisdiction. There is a risk that a
jurisdiction clause in a standard form contract put forward by one party
might be overlooked by the other and the purpose of article 23(1),
as of article 17(1), "is to neutralize the effect of jurisdiction clauses
that might pass unnoticed in contracts": Partenreederei ms Tilly Russ
and Ernest Russ v NV Haven- & Vervoerbedrijf Nova and NV Geominne
Hout (Case 71/83) [1984] ECR 2417, 2435, para 24. As the Court had
indicated earlier in the same judgment, at p 2432, para 16, fulfilling
the requirements of the article will "guarantee that the other party has
actually consented to the clause derogating from the ordinary jurisdiction
rules of the Convention." In Coreck Maritime GmbH v Handelsveem
BV (Case C-387/98) [2000] ECR I-9337, 9371, para 13, the Court
summarised its jurisprudence in this way:
"The Court has held that, by making the validity of a jurisdiction clause
subject to the existence of an 'agreement' between the parties, article
17 of the Convention imposes on the court before which the matter
is brought the duty of examining first whether the clause conferring
jurisdiction upon it was in fact the subject of consensus between the
parties, which must be clearly and precisely demonstrated, and that the
purpose of the requirements as to form imposed by article 17 is to ensure
that consensus between the parties is in fact established…."
24.Before the Board counsel for SYS sought to argue that in the present
case the requirements of article 23(1) were satisfied in one or other of
two ways. First, he argued that on 3 January 2002 Mr O'Connell agreed to
the terms of the sponsorship agreement, including the jurisdiction clause,
which Mr Kay had forwarded to him on 16 December. So there was an
agreement in writing on jurisdiction. Alternatively, during the discussions
between the parties there had been an oral agreement on jurisdiction
which was evidenced in writing in the draft sponsorship agreement
which Mr Kay forwarded to Mr O'Connell on 16 December and to which
Mr O'Connell did not object when he replied on 3 January. Whichever
approach falls to be considered, it is necessary to identify the standard
which is to be applied in deciding whether it is made out on the available
factual material. The main thrust of the submissions on behalf of the
Bols companies was that the courts in Gibraltar had applied the wrong
standard.
25.In Shevill v Presse Alliance SA (Case C-68/93) [1995] ECR I-415,
the Court of Justice had to consider an issue of jurisdiction in relation
to defamation under article 5(3) of the Brussels Convention. The Court
observed, at pages 463-464, paras 37-39:
"37 In the area of non-contractual liability, the context in which the
questions referred have arisen, the sole object of the Convention is to
determine which court or courts have jurisdiction to hear the dispute
by reference to the place or places where an event considered harmful
occurred.
38 It does not, however, specify the circumstances in which the event
giving rise to the harm may be considered to be harmful to the victim, or
the evidence which the plaintiff must adduce before the court seised to
enable it to rule on the merits of the case.
39 Those questions must therefore be settled solely by the national court
seised, applying the substantive law determined by its national conflict
of laws rules, provided that the effectiveness of the Convention is not
thereby impaired."
It follows that, in deciding whether, on the material placed before the
courts of Gibraltar, the plaintiffs have established jurisdiction under the
Regulation, the law to be applied is the law of Gibraltar, provided that the
effectiveness of the Regulation is not thereby impaired.
26.The courts below asked themselves whether the claimants had
established that there is "a good arguable case" that the Gibraltar court
has jurisdiction. In the Court of Appeal Stuart-Smith JA (with whom the
other members of the court agreed) applied that test under reference
to the exhaustive judgment of Waller LJ in Canada Trust v Stolzenberg
(No 2) [1998] 1 WLR 547. In that case the jurisdiction of the High Court
depended on whether one of the defendants had been domiciled in
England, for purposes of the Lugano Convention, at the time when the
writ had been served on certain other defendants. That in turn raised the
question of the standard which the court should apply in determining that
issue. In the course of his analysis Waller LJ explored the development of
the law and examined a line of cases, including the speech of Lord Goff of
Chieveley in Seaconsar Far East Ltd v Bank Markazi Jomhouri Islami Iran
[1994] 1 AC 438. Waller LJ, with whom the other members of the court
agreed, concluded that the plaintiff needed to show that he had a "good
arguable case". He continued, at p 555B-G:
"It is I believe important to recognise, as the language of their
Lordships in Vitkovice Horni a Hutni Tezirstvo v Korner [1951] AC 869
demonstrated, that what the court is endeavouring to do is to find a
concept not capable of very precise definition which reflects that the
plaintiff must properly satisfy the court that it is right for the court to
take jurisdiction. That may involve in some cases considering matters
which go both to jurisdiction and to the very matter to be argued at the
trial, eg the existence of a contract, but in other cases a matter which
goes purely to jurisdiction, eg the domicile of the defendant. The concept
also reflects that the question before the court is one which should be
decided on affidavits from both sides and without full discovery and/
or cross-examination, and in relation to which therefore to apply the
language of the civil burden of proof applicable to issues after full trial
is inapposite. Although there is power under Ord 12, r 8(5) to order a
preliminary issue on jurisdiction, as Staughton LJ pointed out in Attock
Cement Co Ltd v Romanian Bank for Foreign Trade [1989] 1 WLR 1147,
1156D, it is seldom that the power is used because trials on jurisdiction
issues are to be strongly discouraged. It is also important to remember
that the phrase which reflects the concept 'good arguable case' as the
other phrases in Korner's case "a strong argument" and "a case for strong
argument" were originally employed in relation to points which related to
jurisdiction but which might also be argued about at the trial. The court
in such cases must be concerned not even to appear to express some
concluded view as to the merits, eg as to whether the contract existed
or not. It is also right to remember that the 'good arguable case' test,
although obviously applicable to the ex parte stage, becomes of most
significance at the inter partes stage where two arguments are being
weighed in the interlocutory context which, as I have stressed, must not
become a 'trial'. 'Good arguable case' reflects in that context that one side
has a much better argument on the material available. It is the concept
which the phrase reflects on which it is important to concentrate, ie of
the court being satisfied or as satisfied as it can be having regard to the
limitations which an interlocutory process imposes that factors exist which
allow the court to take jurisdiction."
27.The decision of the Court of Appeal in the Canada Trust case was
appealed by the defendants to the House of Lords [2002] 1 AC 1. Counsel
for the defendants dealt with the appropriate standard of proof in their
written case but not in oral argument. So counsel for the plaintiffs was not
called upon to address it. In these circumstances only Lord Steyn referred
to the matter. He gave his view briefly, at p 13:
"In a purely internal English case the test of a good arguable case had
been laid down by the House of Lords as applicable also in respect of
domicile as a ground of jurisdiction: Seaconsar Far East Ltd v Bank
Markazi Jomhouri Islami Iran [1994] 1 AC 438. The question is whether
in the context of article 6 the more stringent test of a balance of
probabilities should apply. The adoption of such a test would sometimes
require the trial of an issue or at least cross-examination of deponents
to affidavits. It would involve great expense and delay. While it is true
that the jurisdictional issues under the Conventions are very important,
they ought generally to be decided with due despatch without hearing oral
evidence. In my view Waller LJ's judgment [1998] 1 WLR 502, 553-559
correctly explained on sound principled and pragmatic grounds why the
defendants' argument is misconceived."
28.Their Lordships would respectfully join Lord Steyn in endorsing the
approach in the judgment of Waller LJ. Despite the submissions of counsel
for the defendants to the contrary, it appears to the Board that, if the
standard of "a good arguable case" is properly understood and applied,
there is no risk that the effectiveness of the Regulation will be impaired.
The rule is that the court must be satisfied, or as satisfied as it can be
having regard to the limitations which an interlocutory process imposes,
that factors exist which allow the court to take jurisdiction. In practice,
what amounts to a "good arguable case" depends on what requires to be
shown in any particular situation in order to establish jurisdiction. In the
present case, as the case law of the Court of Justice emphasises, in order
to establish that the usual rule in article 2(1) is ousted by article 23(1),
the claimants must demonstrate "clearly and precisely" that the clause
conferring jurisdiction on the court was in fact the subject of consensus
between the parties. So, applying the "good arguable case" standard, the
claimants must show that they have a much better argument than the
defendants that, on the material available at present, the requirements
of form in article 23(1) are met and that it can be established, clearly
and precisely, that the clause conferring jurisdiction on the court was the
subject of consensus between the parties.
29.With that approach in mind, their Lordships turn to examine the two
bases upon which SYS claims that the Supreme Court of Gibraltar has
jurisdiction.
30.The first contention for SYS is that clause 17 is simply one clause in
a concluded contract between the parties in terms of the sponsorship
agreement. That contract had been negotiated between the parties
and, though not signed, it became binding, it is said, as a result of the
exchange of emails on 16 December 2001 and 3 January 2002, on the
basis of which SYS proceeded to contract for the yacht to be constructed.
The Bols companies argue, on the other hand, that there never was any
concluded contract between the parties which included the jurisdiction
clause. Their Lordships have concluded that on this matter the contention
of SYS must be rejected.
31.In order to succeed, SYS would have to show that there is a good
arguable case that, by the exchange of emails, the parties concluded
a contract in terms of the draft sponsorship agreement which Mr Kay
forwarded on 17 December. If SYS could show that, then the inclusion
of clause 17, containing detailed provisions on jurisdiction, in a non-
standard contract, would indeed demonstrate "clearly and precisely" that
the parties had agreed on jurisdiction in Gibraltar. The obstacle to that
conclusion is that the available material does not show that the parties
had concluded an agreement for the construction and operation of the
yacht in terms of the sponsorship agreement attached to Mr Kay's email.
32.Their Lordships accept that there is a good arguable case that the
parties concluded an agreement covering some significant matters
relating to the construction of the yacht. For instance, it is clear that
agreement was eventually reached on the schedule of payments -
but only after some further revisions at the beginning of January
2002. Invoices were submitted and paid in terms of that agreement.
Nevertheless, it is equally clear that the sponsorship agreement which Mr
Kay forwarded on 16 December did not set out the terms of any overall
contract to which the parties were committing themselves. Indeed Mr Kay
himself makes that clear in the document attached to his email when he
deals with the ownership and registry of the yacht. Their Lordships have
quoted the relevant passage in para 14 above. It shows that, presumably
in light of what had been discussed at the meeting in Warsaw, Mr Kay
was proceeding on the basis that it was likely that, once built, the yacht
would be owned by Bols rather than SYS and that Bols would, accordingly,
have to decide where it was to be registered. As Mr Laux's email to Mr
O'Connell on 17 December shows, however, the Bols companies had still
not finally decided who should own the yacht. Two significant and related
consequences follow.
33.First, as Mr Kay indicated, the contract which he was forwarding had
been drawn up on the basis that SYS would own the yacht. Even though
there might not be a ready market for such yachts, plainly if someone
else was now going to own the yacht and therefore have the benefit of
any residual value, SYS expected that their performance bonus would
be adjusted to compensate for its loss of the sale value of the yacht.
Mr Kay envisaged that several options would need to be discussed and
resolved and he looked forward to Mr O'Connell's input. This indicates that
the parties had not actually decided on what the financial arrangements
between the parties were going to be if, as seemed likely, someone other
than SYS became the owner of the yacht. So the document which Mr
Kay was forwarding did not contain any agreement of the parties on that
important matter. Equally clearly, the contract could never have been
finalised until the Bols companies had decided who was actually going to
own the yacht.
34.Significantly also, the sponsorship agreement had been drawn up on
the basis that, since SYS was going to own the yacht, the Bols companies
would have only certain specific rights in relation to the yacht. Those
rights were set out in schedule 2. Obviously, if the Bols companies
were now going to own the yacht, they would enjoy all the rights of
owners. The schedule of rights in the sponsorship agreement became
inappropriate. Conversely, the original draft proceeded on the assumption
that SYS would have all the rights of owners: to meet the new situation,
the contract terms would have had to be revised so as to set out the
rights which SYS would have in relation to the yacht.
35.In short, at the time when the exchange of emails took place, many
fundamental matters remained to be resolved. That being so, the draft
which Mr Kay forwarded to Mr O'Connell cannot be regarded as a binding
contract between the parties regulating the position on all the various
aspects of the construction and operation of the yacht. Many of the terms
were likely to be inappropriate, as both sides recognised. It follows that
SYS cannot point to that document as showing that the parties had
reached an agreement on jurisdiction in the terms set out in clause 15.
SYS has therefore not shown that it has a much better argument than
the Bols companies, on the available material, that the Supreme Court
of Gibraltar has jurisdiction on the basis that there was a concluded
agreement between the parties as to the jurisdiction of the Gibraltar
courts.
36.On his alternative approach, counsel for SYS pointed to the long series
of negotiations between the parties on the basis of the draft sponsorship
agreement which Mr Kay had put forward and which always contained
the jurisdiction clause. In his witness statement Mr Laux accepts that
in discussion he was referred to the sponsorship agreement on a
number of occasions. So far as the jurisdiction clause itself is concerned,
he says that, to the best of his knowledge, neither he nor any other
person directly involved with the projects ever objected to the Gibraltar
jurisdiction and he gives various reasons why Gibraltar, a quiet English-
speaking jurisdiction far from Poland, might have been acceptable to
them. It seemed natural, he says, for the aspects of operating an ocean-
going vessel, since Gibraltar certainly had more "practice around" such
projects (ie experience in such projects) than other jurisdictions such as
Poland. So SYS asserts that, in the course of the discussions, the parties
agreed orally that the Gibraltar court should have jurisdiction.
37.Next, SYS says that the parties' oral agreement on jurisdiction was
"evidenced in writing" in the document, dated 17 December 2001 which
Mr Kay emailed to Mr O'Connell. Having been sent that document,
including clause 15, which evidenced the agreement on jurisdiction, Mr
O'Connell did not object to it. On the contrary, the draft letter which
Mr O'Connell emailed to Mr Kay on 3 January indicated that the Bols
companies were committed to proceeding with the project as they had
discussed in Warsaw "and to the Project Schedule" forwarded on 17
December. In these circumstances it would be a breach of good faith
for Bols to contest the application of the parties' oral agreement on
jurisdiction. In this connection Mr Dingemans QC for SYS cited the
decision of the Court of Justice in F Berghoefer GmbH & Co KG v ASA SA
(Case 221/84) [1985] ECR 2699, 2708-2709, paras 14 and 15:
"14 It must be pointed out that … article 17 of the Convention does
not expressly require that the written confirmation of an oral argument
should be given by the party who is to be affected by the agreement.
Moreover, as the various observations submitted to the Court have rightly
emphasized, it is sometimes difficult to determine the party for whose
benefit a jurisdiction agreement has been concluded before proceedings
have actually been instituted.
15. If it is actually established that jurisdiction has been conferred by
express oral agreement and if confirmation of that oral agreement by one
of the parties has been received by the other and the latter has raised
no objection to it within a reasonable time thereafter, the aforesaid literal
interpretation of article 17 will also, as the Court has already decided
in another context …, be in accordance with the purpose of that article,
which is to ensure that the parties have actually consented to the clause.
It would therefore be a breach of good faith for a party who did not
raise any objection subsequently to contest the application of the oral
agreement."
38.Their Lordships are unable to accept this argument. First, while it is
clear that all the various drafts of an agreement discussed by the parties
contained the Gibraltar jurisdiction clause, there is nothing in the material
before the Board to show that the jurisdiction clause itself was actually
ever discussed and agreed in meetings, emails or telephone calls. While
Mr Laux's statement gives good reasons for thinking that a Gibraltar
jurisdiction clause might have been acceptable in any finalised agreement,
it does not suggest that the point was ever actually discussed and agreed.
Rather, he gives the impression that the parties had never got round
to it. This would not be surprising: a jurisdiction clause is unlikely to
have been high up on the list of topics when there were all kinds of more
immediately pressing issues to be settled, such as the ownership of the
yacht and any consequential adjustments to the financial arrangements
and the timing of payments. In that situation, there is nothing to show
clearly and precisely that clause 17 in the sponsorship agreement sent
to Mr O'Connell on 16 December was a written confirmation of a prior
oral agreement on jurisdiction, rather than just a term in a contract to
be agreed. That being so, the fact that Mr O'Connell did not object to
clause 17 when he replied does not bring the case within the ratio of the
judgment of the Court of Justice in the Berghoefer case. In that situation
SYS have not shown that they have a much better argument than the
Bols companies, on the available material, that the court has jurisdiction
on this basis.
39.For these reasons their Lordships will humbly advise Her Majesty that
the appeal should be allowed and that the action should be dismissed.
Parties should make submissions in writing in costs within 14 days.