SAVILLE L.J.:
[1] The appellants are a company incorporated in England. They
specialise in the provision from London of derivative financial product
services worldwide. The respondents are a company incorporated in
France. They are one of the largest construction groups in that country.
[2] On 10 March 1994 the respondents sold to the appellants a Marche a
Terme International de France Bond Put Option (the "Bond Put Option"),
also known as a "knock out/knock in" option. This agreement was made
on the telephone, but in June 1994 the appellants faxed the respondents
a written "revised confirmation" of the deal, which the respondents signed
and faxed back. This confirmation contained many terms which had not
been expressly referred to when the oral deal had been made and it is
common ground between the parties that in the circumstances the Bond
Put Option contract, although it started as an oral agreement, in the event
became one in writing.
[3] The revised confirmation was in the form of a letter from Mr D. on
behalf of the appellants to Mr M. on behalf of the respondents. These are
the individuals who made the oral deal. The letter started by stating that
its purpose was to confirm the terms and conditions of the transaction
entered into between the parties "on the trade date specified below" and
that "this revised telecopy constitutes a confirmation as referred to in the
agreement specified below".
[4] In paragraph 2 of the letter the trade date is specified as 10 March
1994 and in this and the following paragraphs there are set out the
detailed terms of the Bond Put Option. Paragraph 1 was in the following
terms:
1. The definitions and provisions contained in the 1991 ISDA Definitions
(as published by the I. S. and D. A., Inc.) are incorporated into this
Confirmation. In the event of any inconsistency between those definitions
and provisions and this confirmation this confirmation will govern.
References herein to a "transaction" shall be deemed to be references to a
"swap transaction" for the purposes of the 1991 ISDA Definitions.
If you and we are parties to the 1992 ISDA Master Agreement, (the
Agreement), this confirmation supplements, forms a part of, and is
subject to such Agreement. If you and we are not yet parties to the
Agreement, you and we agree to use our best efforts promptly to
negotiate, execute, and deliver the Agreement, including our standard
form of schedule attached thereto and made a part thereof, with such
modifications as you and we shall in good faith agree. Upon execution
and delivery by you and us of the Agreement, this confirmation shall
supplement, form a part of, and be subject to such Agreement. Until you
and we execute and deliver the Agreement, this confirmation (together
with all other confirmations of transactions previously entered into
between us, notwithstanding anything to the contrary therein) shall
supplement, form a part of, and be subject to the 1992 ISDA Master
Agreement, as if, on the trade date of the first such transaction between
us, you and we had executed that agreement (without any Schedule
thereto) and specified that the automatic early termination provisions
contained in section 6(a) of such agreement would apply.
The Agreement and each confirmation thereunder will be governed by and
construed in accordance with English law.
In this confirmation "Party A" means C. S. Financial Products and "Party
B" means S. G. d'E..
[5] Clause 13 of the Master Agreement is entitled "Governing Law and
Jurisdiction". Sub-paragraphs (a) and (b) of this clause provide as follows:
(a) Governing Law. This Agreement will be governed by and construed in
accordance with the law specified in the schedule.
(b) Jurisdiction.With respect to any suit, action or proceedings relating to
this Agreement ("Proceedings"), each party irrevocably:
(i) submits to the jurisdiction of the English courts, if this agreement
is expressed to be governed by English law, or to the non-exclusive
jurisdiction of the courts of the State of New York and the United States
District Court located in the Borough of Manhattan in New York City, if the
Agreement is expressed to be governed by the laws of the State of New
York; and
(ii) waives any objection which it may have at any time to the laying of
venue of any Proceedings brought in any such court, waives any claim
that such Proceedings have been brought in an inconvenient forum and
further waives the right to object, with respect to such Proceedings, that
such court does not have any jurisdiction over such party.
[6] The appellants and the respondents had not entered into the Master
Agreement. However, in view of the second part of paragraph 1 of
the letter, the parties agreed to proceed on the basis that the revised
confirmation would "supplement, form a part of, and be subject to" the
Master Agreement as if such an agreement had been executed (without
the schedule) on the trade date of the first transaction between them. The
transaction of 10 March 1994 was in fact the third relevant transaction
between the parties, the first having been made on 2 November 1993 and
the second on 12 January 1994.
[7] The appellants brought proceedings against the respondents in the
commercial court in London, claiming that 9,776,000 FF is owing to
them under the Bond Put Option. The respondents seek to set aside
the proceedings on the grounds that under the Civil Jurisdiction and
Judgments Act 1982, which incorporated the amended E.C. Judgments
Convention into our law, the court has no jurisdiction. This is disputed by
the appellants who rely upon Article 17 of that Convention, which in the
form in which it now exists provides (in the part material to the present
case) as follows:
If the parties, one or more of whom is domiciled in a Contracting State,
have agreed that a court of 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. Such an agreement conferring
jurisdiction shall be either:
(a) in writing or evidenced in writing, or
(b) in a form which accords with practices which the parties have
established between themselves, or
(c) in international trade or commerce, in a form which accords with a
usage of which the parties are or ought to have been aware and which
in such trade or commerce is widely known to, and regularly observed
by, parties to contracts of the type involved in the particular trade or
commerce concerned.
[8] Both France and this country are Contracting States.
[9] The matter came before H.H. Judge Raymond Jack Q.C., sitting as
a deputy judge of the High Court. As appears from the judgment given
on 21 February this year, the judge considered that since (on his view
of the evidence) Mr M. did not have a copy of the Master Agreement
in his possession and readily available to him, the incorporation of the
Master Agreement containing the jurisdiction clause quoted above was
insufficient to a bring the case within sub-paragraph (a) of Article 17. For
the same reason the judge rejected the argument that the case fell within
sub-paragraphs (b) or (c) of this Article. The judge accordingly set aside
the proceedings, from which ruling the appellants (with the leave of this
Court) now appeal.
[10] It is common ground that Article 17 must be read and applied in
accordance with Community law rather than our own domestic legal
rules. The case on which greatest reliance was placed by both parties and
indeed the judge is Salotti v. RUWA. Although that case was concerned
with the original form of Article 17 it seems to me still to represent the
correct approach to at least the first question at issue in the present case,
namely whether there was an agreement in writing conferring jurisdiction.
I should note that we were referred to other European Court decisions as
well as the opinion of the Advocate General in Salotti and those decisions,
but to my mind those other references provided no assistance in the
circumstances of the present case.
[11] As is clear from the judgment in Salotti, Article 17 is to be treated
as a provision conferring jurisdiction by consent, thereby displacing the
general principle that the courts of the domicile of the defendant have
jurisdiction and the special jurisdiction rules in Articles 5 and 6. Thus
the judgment emphasises the need for what it describes as a clear and
precise demonstration that the clause conferring jurisdiction was in fact
the subject of a consensus between the parties. As the court said "The
purpose of the formal requirements imposed by Article 17 is to ensure
that the consensus between the parties is in fact established".
[12] In Salotti the German party sent a number of written offers to the
Italian party all of which expressly referred to General Conditions of Sale
"overleaf". One of these conditions was a term conferring jurisdiction
on the courts at Cologne. The Italian party then signed a contract on
the German party's form which also had these general conditions on the
back. The contract did not refer to the conditions on the back but did
refer expressly to the earlier offers. The European Court was asked the
following questions:
1. Does a clause conferring jurisdiction, which is included among general
conditions of sale printed on the back of a contract signed by both parties,
fulfil the requirement of a writing under the first paragraph of Article 17 of
the Convention?
2. In particular, is the requirement of a writing under the first paragraph
of Article 17 of the Convention fulfilled if the parties expressly refer in the
contract to a prior offer in writing in which reference was made to general
conditions of sale including a clause conferring jurisdiction and to which
these conditions of sale were annexed?
[13] The court effectively answered the first question in the negative, by
ruling that the requirement of writing in Article 17 is only fulfilled if there
is an express reference in the contract to the terms printed on the back.
As the court said "the mere fact that a clause conferring jurisdiction is
printed among the general conditions of one of the parties on the reverse
of a contract drawn up on the commercial paper of that party does not of
itself satisfy the requirements of Article 17, since no guarantee is thereby
given that the other party has really consented to the clause waiving the
normal rules of jurisdiction".
[14] The court effectively answered the second question in the
affirmative, by ruling that the writing requirement of Article 17 is satisfied
only if the reference is express "and can therefore be checked by a party
exercising reasonable care". Here the court said that the requirement of
a writing under the first paragraph of Article 17 is in principle fulfilled "if
the parties have referred in the text to theircontract to an offer in which
reference was expressly made to general conditions including a clause
conferring jurisdiction". The court also went on to say:
This view of the matter, however, is valid only in the case of an express
reference, which can be checked by a party using reasonable care, and
only if it is established that the general conditions including the clause
conferring jurisdiction have in fact been communicated to the other
contracting party with the offer to which reference is made.
[15] In the present case, of course, there is an express reference in the
written contract itself to the Master Agreement which includes a clause
conferring jurisdiction, rather than a reference in the contact to another
document which in turn refers to conditions which include a clause
conferring jurisdiction. The passage quoted is on the face of it dealing
with the latter case, not the former.
[16] To my mind the question is simply whether the express reference in
the written contract in the present case amounts to a clear and precise
demonstration that the clause conferring jurisdiction was the subject of a
consensus between the parties.
[17] I have no doubt at all that it does. It seems to me that there is
nothing in Salotti which begins to suggest that where in the written
contract itself there is an express incorporation by reference of other
written terms, no consensus is established unless the profferee signing
the contract has been supplied with a copy of those terms, or as the judge
put it, he has "a copy of those conditions in his possession and readily
available to him". It is true that in Salotti the conditions were printed on
the back of the contract, but as the court pointed out, in the absence of
a reference to them in the contract itself, this was not enough to satisfy
Article 17, "since no guarantee is thereby given that the other party has
really consented to the clause waiving the normal rules of jurisdiction".
The court went on to say:
It is otherwise in the case where the text of the contract signed by both
parties itself contains an express reference to general conditions including
a clause conferring jurisdiction.
[18] It seems to me to be clear from the judgment in Salottithat the court
considered that a "guarantee"of real consent does exist where there is an
express reference in the written contract itself by way of incorporation of
other written terms which include a clause conferring jurisdiction. Indeed,
given such an express reference, it seems to me self-evident that the
profferee of the written contract, by signing without reservation, has
agreed in writing the incorporated terms (and thus the clause conferring
jurisdiction) for the simple reason that the very words of the signed
written contract itself are to that effect. To my mind the fact (if such it
be) that Mr Mossler in the present case did not have a copy of the Master
Agreement in his possession and readily available to him, or, as he said in
his affidavit, that he thought the reference to the Master Agreement was
a "standing clause"(whatever that may mean) is neither here nor there;
for in truth Mr Mossler, by signing the confirmation, did agree in writing
that the terms of the Master Agreement formed part of the contract he
was making.
[19] In my view the answer the court in Salotti gave to the second of the
questions posed in that case and the discussion in the judgment on this
second question in no way alters this conclusion. It is from this part of the
decision that the judge in the present case concluded that "Salotti shows
that it must be established that the party whom it is sought to bind by
the jurisdiction clause had at least the means of knowledge of it, and can
therefore be checked by a party exercising reasonable care". The judge
then expressed the view that this requirement would be satisfied if the
individual dealing with the transaction had a copy of the conditions in his
possession and readily available to him.
[20] As I have already observed, the court answered the second question
by ruling that the requirement of a writing under the first paragraph of
Article 17 is satisfied only if the reference is express "and can therefore
be checked by a party exercising reasonable care". Although it is perhaps
not entirely clear, it seems to me that the ruling is referring not to the
reference in the contract to the earlier offers but only to the reference in
the earlier offers to the general conditions. Be that as it may, what seems
to me to be wholly clear is that the court was emphasising, by the use of
the word "therefore", that an express reference is what is required in such
circumstances. Indeed the court said that indirect or implied references
to earlier correspondence would not suffice, "for that would not yield any
certainty that the clause conferring jurisdiction was in fact part of the
subject-matter of the contract properly so-called". In other words, it is
only an express reference that will provide that certainty.
[21] In the present case there is an express and direct reference to
the Master Agreement in the written contract itself. To my mind the
terms of this reference alone make it certain that the clause conferring
jurisdiction was "part of the subject-matter of the contract properly so-
called". Where, as in the case discussed by the court in the context of
the second question, the reference is to earlier correspondence, which in
turn is said to incorporate other terms, I readily accept that, depending
on the circumstances, it may be necessary, in order "clearly and precisely"
to demonstrate that the clause conferring jurisdiction was in fact the
subject of a consensus between the parties, to establish that the terms in
question were supplied to the party concerned. But that is not this case,
and in my view the judge erred in treating it as if it was. To my mind the
consensus is incontrovertibly established by the express reference in the
written contract itself.
[22] In these circumstances I would allow this appeal and it is not
necessary to consider whether the appellants can bring themselves within
sub-paragraphs (b) or (c) of Article 17. The judge considered that they
could not, based on the reasoning which led him to his conclusion on sub-
paragraph (a), but since we did not hear the respondents on this part
of the case, it would be inappropriate to express any view on it, or on
the evidence which the parties adduced in support of their respective
submissions.
[23] In conclusion I should mention that I was a member of the court
that gave leave to appeal from the judgment at first instance. It seemed
to me that this was a case where it was clearly arguable that the judge
had erred in applying the appropriate principle, and thus an example of
the exceptional case where leave to appeal on an interlocutory matter
concerning jurisdiction should be given. Having now heard and considered
the submissions of both parties, I am convinced by the argument that the
judge did err in his understanding of this part of Community law.
ALDOUS L.J.:
[24]
I agree.
SIMON BROWN L.J.:
[25]
I also agree.
Appeal allowed with costs.