Avoidance of Foreign Jurisdiction Clauses in International Contracts

Author(s): Susan M. Knight

Source: The International and Comparative Law Quarterly , Jul., 1977, Vol. 26, No. 3
(Jul., 1977), pp. 664-674
Published by: Cambridge University Press on behalf of the British Institute of
International and Comparative Law

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 SHORTER ARTICLES, COMMENTS AND NOTES

AVOIDANCE OF FOREIGN JURISDICTION CLAUSES IN

INTERNATIONAL CONTRACTS

I. THE USUAL APPROACH: A QUESTION OF DISCRETION

THE parties to an international contract frequently choose to antici-

pate the possibility of disputes arising between them in the course
of their contract. They may decide to provide for this by:
(i) selecting the system of law' by which they wish the contract
to be governed; or
(ii) selecting the forum in which litigation is be pursued.2
If course (ii) (or (i) and (ii)) is chosen and the selected forum is
England then the plaintiff will encounter few problems in invoking
the jurisdiction of the English court, for if the defendant is not
present 3 in England, or has not submitted 4 to the jurisdiction the
plaintiff may apply for leave to serve notice of the writ under R.S.C.
Ord. 11, r. 2 which grants the court the discretion to assume juris-
diction wherever a term in the contract states that England is the
selected forum. In the case of The Chaparral 5 Willmer L.J. sum-
marised the approach of the court to a contract which although it
revealed no connection with England did contain a clause selecting
the "London Court of Justice" as the forum for litigation:
The law on the subject, I think, is not open to doubt, and I do not think
that it is really necessary to cite the authorities to which we have been
referred. It is always open to the parties to stipulate (as they did in this
case) that a particular court shall have jurisdiction over any dispuite arising
out of their contract ... Prima facie it is the policy of the court to hold
parties to the bargain into which they have entered ... I approach the
matter, therefore, in this way, that the court has a discretion which, in the
ordinary way and in the absence of strong reason to the contrary, will be
exercised in favour of holding parties to their bargain.

If, on the other hand, the parties to the contract have selected a
foreign forum the plaintiff may attempt to invoke the jurisdiction
of the English court either by:
(i) actual service on a defendant present within the jurisdiction,
or

1 In English law an express choice of law in a contract is usually construed as a

reference to the domestic law of the country selected: Re United Railways of
Havana, etc. [1960] Ch. 52 at pp. 96-97, 115 (C.A.); cf. Vita Food Products Incor-
porated v. Unus Shipping Co. [1939] A.C. 277 at p. 292 (P.C.).
2 Although as a rule in English law this will be presumed to indicate the selection
of the domestic law of that forum to govern the dispute, especially in the case of
the selection of an English forum, it is still a rebuttable presumption: Re United
Railways of Havana, etc. [1960] Ch. 52, at pp. 93-96 (C.A.); Compagnie d'Armament
Maritime S.A. v. Compagnie Tunisienne de Navigation S.A. [1971] A.C. 572.
3 See Dicey and Morris, The Conflict of Laws (9th ed.), rule 20.
4 Ibid., rule 21.
5 Unterweeser Reederei G.m.b.H. v. Zapata Offshore Co. [1968] Lloyd's Rep. 158
at p. 162 (C.A.).
664

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JULY 1977] Avoidance of Foreign Jurisdiction Clauses 665

(ii) by an application for leave to serve notice out of the jurisdic-

tion under any of the provisions of R.S.C. Ord. 11, r. 1.
In either instance, however, the defendant may contest this proce-
dure by raising the foreign jurisdiction clause in defence of the
application for leave, or as a ground for staying the action if service
has been effected or leave already granted. When the clause is raised
in this way the plaintiff appears to have two courses of action open
to him. If he has effected valid service upon the defendant he may
appeal to the inherent discretion of the court not to grant a stay,"
or if he is applying for leave under Ord. 11, r. 1 he may persuade
the court to see the clause as "non-exclusive" and thereby
influence their discretion in granting leave.8
Very similar factors appear to influence the courts in the exercise
of their discretion in both types of case, and it would not be mislead-
ing to suggest that this statement by Brandon J. in The Eleftheria "
aptly summarises the guiding principles upon which decisions are
based:
The principles established by the authorities can, I think, be summarised
as follows: (1) Where plaintiffs sue in England in breach of an agreement
to refer disputes to a foreign Court, and the defendants apply for a stay,
the English Court, assuming the claim to be otherwise within its jurisdic-
tion, is not bound to grant a stay but has a discretion whether to do so
or not. (2) The discretion should be exercised by granting a stay unless
strong cause for not doing so is shown. (3) The burden of proving such
strong cause is on the plaintiffs. (4) In exercising its discretion the court
should take into account all the circumstances of the particular case.
(5) In particular, but without prejudice to (4), the following matters, where
they arise, may properly be regarded: (a) In what country the evidence on
the issues of fact is situated, or more readily available, and the effect of
that on the relative convenience and expense of trial as between the
English and foreign courts. (b) Whether the law of the foreign court
applies and, if so, whether it differs from English law in any material
respects. (c) With what country either party is connected, and how closely.
(d) Whether the defendants genuinely desire trial in the foreign country,
or are only seeking procedural advantages. (e) Whether the plaintiffs would
be prejudiced by having to sue in the foreign court because they would:
(i) be deprived of security for their claim; (ii) be unable to enforce any
judgment obtained; (iii) be faced with a time-bar not applicable in Eng-
land; or (iv) for political, racial, religious or other reasons be unlikely to
get a fair trial.'o

Not surprisingly, where a plaintiff appears to be able to satisfy

6 Law v. Garrett (1878) 8 Ch.D. 26 (C.A.); Austrian Lloyd S.S. Co. v. Gresham
Life Assurance Society Ltd. [1903] 1 K.B. 249 (C.A.); Blackman and Co. v. Oliver
Davey Glass Co. (1966) V.R. 570; The Fehmarn [1957] 1 W.L.R. 815; The Eleftheria
[1970] P. 94.
7 Evans Marshall v. Bertola S.S. [1973] 1 W.L.R. 349; Y.T.C. Universal Ltd. v.
Trans-Europa S.A. [1973] 1 W.L.R. 480.
8 It has been stated in a number of decisions that where the plaintiff is applying
for leave to serve notice of the writ out of the jurisdiction in the face of a foreign
jurisdiction clause the burden of proving his case is a good one is far heavier than
where he is faced with an application to stay proceedings already commenced by valid
service: The Makefjell [1976] 2 Lloyd's Rep. 29 at p. 32; The Eleftheria [1970] P.
94 at pr. 103-104; Evans Marshall v. Bertola S.A. [1973] 1 W.L.R. 349.
9 [1970] P. 94 at pp. 99-100.
o10 Cf. Evans Marshall v. Bertola S.A., supra, n. 8; The Makeffell, supra, n. 8.

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 666 International and Comparative Law Quarterly [VOL. 26

many of these requirements the defendants have attempted to intro-

duce other barriers to the jurisdiction of the English court. In The
Fehmarn 11 it was suggested that where a foreign forum had been
selected the court was automatically and completely barred from
taking jurisdiction. Such a suggestion was quashed, not unexpec-
tedly.12 Similarly it has sometimes been suggested that where the law
of the foreign forum selected would regard the clause as granting
exclusive jurisdiction to that court and that court alone, the Eng-
lish court should respect that interpretation and refrain from taking
jurisdiction. The decision in Evans Marshall v. Bertola S.A.13 shows
very clearly that an English court, whilst taking notice of the foreign
court's interpretation is not prepared to relinquish its discretion by
virtue of such interpretation alone.
It is interesting to note that these additional arguments were raised
in two of the very few cases where the English court has taken
jurisdiction despite a foreign jurisdiction clause. It is constantly
being stressed that although the court retains what some would call
" excessive jurisdiction " 14 they exercise it very sparingly; and do
indeed appear to be completely committed to the policy of adherence
to bargain.
Just how strong this policy is may be illustrated by two recent
decisions where plaintiffs with rather weak cases by the standards
enunciated in The Eleftheria 15 have attempted to invoke the juris-
diction of the English courts by a different route.

II. A NEW APPROACH: CLASSIFICATION OF THE ACTION

The most novel attempt to avoid a foreign jurisdiction clause with

appeal to the court's discretion appears in the case of The Sindh
The facts, briefly, were that a French vessel, The Sindh, owned
the first defendants, loaded with a mixed cargo of raw materia
became trapped in the Suez Canal on June 6, 1967. On March 19
1970, after considerable dererioration of both vessel and cargo, t
first defendants applied to the French court for the appointment
an administrateur provisoire, who, on August 17, 1970, sold the s
and its cargo for the low figure of ?150,000. The cargo owners w
not informed of the sale until it had been concluded. Dissatisfied
with the distribution of the proceeds of sale, the London insurers
commenced an action on behalf of their cargo owners, four French
and one Italian, claiming that the property in the cargo had not
passed to the buyer because the cargo had been converted at the
time of sale. Valid service was effected upon the defendants. How-
11 [1975] 1 W.L.R. 815.
12 The jurisdictional discretion of that court was held to be based either on s. 1 (i)
(g) of Administration of Justice Act 1956, or by analogy with cases under s. 4,
Arbitration Act 1889, or "under a wider general principle, namely that the court
makes people abide by their contracts, and, therefore, will restrain a plaintiff from
bringing an action which he is doing in breach of his agreement with the
defendants.. "
13 Supra, n. 10.
14 See L. I. De Winter [1958] 17 I.C.L.Q. 706; Nadelmann, "XXth-Centur
parative and Conflicts Law," Legal Essays in Honour of Hessel E. Yntema (1961)
p. 321; von Mehren and Trautman (1966) Harvard Law Review 1121.
15 Supra, n. 9.
16 [1975] 1 Lloyd's Rep. 372.

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JULY 1977] Avoidance of Foreign Jurisdiction Clauses 667

ever, the French shipowners applied to stay the proceedings by virtue

of a foreign jurisdiction clause in the bills of lading, which provided
inter alia that-
All disputes caused by the interpretation or the execution of the present
bill of lading will be submitted . . . before the Tribunal de Commerce
Marseille or the Tribunal de Commerce de la Seine at plaintiffs' choice.

We are told in the judgment of Lord Denning M.R. that counsel

for the cargo owners, in an attempt to escape the clause-
says that the English courts must look at the way the claim is formulat
in the writ. If it were formulated for breach of contract, it would, he
admits, be caught by the exclusive jurisdiction clause. But it is formulated,
he says, as a claim in tort, and that is not caught by the clause."

Reliance had been placed on a domestic case 1s where an action

for fraudulent misrepresentation had been held to be outside the
terms of an arbitration clause contained in a contract, and was
allowed to proceed before the court without first going to arbitration.
Lord Denning did not accept the analogy with the present case, and
without further explicit reference to the argument based on classi-
fication his Lordship proceeded to resolve the case by the following
method:

(a) He stated that the contract containing the clause was a

"French contract to be construed in accordance with French
law ";
(b) according to that law, the claim of the cargo owner would
rest in contract and in contract only;
(c) also according to that law "the exclusive jurisdiction clause
requires this dispute to be determined by the Commercial
Tribunal of Marseille or the Commercial Tribunal of Paris ";
(d) therefore " the plaintiff cannot avoid that clause by bringing
an action in England and framing it in tort."
Unfortunately no authorities were cited in explanation of this
method of resolving the issue, however, it does contain some valuable
comments upon the relationship of questions of classification of
actions and those of interpretation of the contract. Stages (a) and (b)
appear to connect the two issues. At (a) the term "construe" is used,
and this, it is said, is a matter for the law which governs the contract.
We are not told whether this is a French contract by virtue of the
objectively ascertained proper law, or merely by virtue of the selec-
tion of the French forum,'19 but in either event, it is suggested that
it is that law which must be used to interpret the contract. There is
nothing novel in using the proper law to interpret terms of a foreign
contract,20 but here that was not the question posed by the plaintiff's
argument; the question was: by which law is the availability of the

17 Supra, n. 16, at p. 373.

18 Monro v. Bognor U.D.C. [1915] 3 K.B. 167.
19 Although the phrase "exclusive jurisdiction" was used, we are not told that
the defendants pursued their argument on a basis similar to that used in Evans
Marshall v. Bertola S.A. It is doubtful that the plaintiffs used the argument of non-
exclusiveness as their argument on classification was an attempt to show that the
clause, exclusive or otherwise, did not have any effect in a tort action.
20 Cf. Dicey and Morris, op. cit., supra, n. 3, at p. 788.

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668 International and Comparative Law Quarterly [VOL. 26

cause of action determined. At stage (b) Lord Denning is specifically

using the proper law to determine the availability of a cause of
action. Previously he had referred to the French doctrine of non-
cumul which determines that actions brought for the alleged type of
"wrong" are derived from the contractual relationship of the
parties and not from any delictual obligation. In using the proper
law to establish this fact, a departure was made from the commonly
accepted view that classification of an action is usually a matter for
the lex fori.21 However, if authority were sought for this approach,
it could be found in his Lordship's judgment in Sayers v. Inter-
national Drilling Co.22 Although no jurisdictional matters arose in
that case, a superficially similar question was at issue.
In that case a clause in a contract of employment excluded the
application of English law to litigation between employer and
employee, apparently depriving the employee of any action in tort
available by English law. In Lord Denning's view if the clause were
valid by the proper law (Dutch) of the contract then it must preclude
the action in negligence, even though such action would have been
valid by the putative proper law of the tort 23 (English law). In effect
that case determined that a valid contractual "defence" will bar an
action in tort. Unfortunately that case did not turn upon the issue of
classification per se, but nevertheless it may explain the approach
taken in The Sindh, if the defendants there, in requesting a stay of
proceedings, were said to be raising a contractual defence to the
action in tort. The principal objection to adopting Sayer's case in
defence of classifying causes of action by the lex causae lies, how-
ever, in the difference between the cases on the facts. In Sayer's case
the employers had provided a voluntary system of compensation, and
had therefore excluded any right to sue for statutory compensation,
a step they were entitled to take under Dutch law, but prohibited
from taking under English law. The issue, therefore, was quite
different from that in The Sindh. Sayer's case was not concerned
with whether the employee's right of action was derived from the
contract of employment or from delictual obligations, but only with
whether contractual obligations which excluded statutory obligations
were valid or invalid.
Perhaps a more suitable authority would be Matthews v. Bechtel
Corporation.24" That case concerned a contract of service made
between an employer resident abroad and an English employee
expressed to be construed in accordance with English law, and pro-
viding for services to be rendered abroad by the employee. The
employee suffered personal injuries whilst in the course of his em-
ployment abroad and brought an action for damages against his
21 This being a matter of "primary characterisation" to use the term adopted
by Robertson in Characterisation in the Conflict of Laws (1940); Dicey and
Morris, op. cit., supra, n. 3, Chap. 3, contains a survey of the few English examples
of characterisation, cf. George Munro Ltd. v. American Cyanamid and Chemical
Corporation [1944] K.B. 432; Cordova Land Co. v. Black Diamond Steamship
Corporation [1966] 1 W.L.R. 793.
22 [1971] 3 All E.R. 163; cf. Brodin v. AIR Seljan, 1973 S.L.T. 198.
23 That this is the choice of law rule for torts committed abroad is doubtful:
Chaplin v. Boys [19691 2 All E.R. 1085 (H.L.).
24 [1959] 2 All E.R. 345 (C.A.); cf. Armadora Occidental S.A. v. Horace Man
Insurance Co., The Times, Nov. 18, 1976.

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JULY 1977] Avoidance of Foreign Jurisdiction Clauses 669

employer. He alleged a breach of contract by reason of a breach of

implied duty to take care and obtained leave to serve notice of
the writ on the employer outside the jurisdiction under R.S.C. Ord.
11, r. 1 (e).25 The employer applied to have service set aside on the
grounds that his liability arose in tort and not in contract, and as the
tort was committed abroad the employee was unable to satisfy the
provisions of Ord. 11, r. 1 (e). The Court of Appeal took the view
that the provisions of Ord. 11, r. 1 should be read disjunctively,
and that an employee's right of action against his employer lay
either in contract or in tort, and therefore in this case service could
proceed under Ord. 11, r. 1 (e).
The important provision of that contract as compared with The
Sindh, however, was clause 12, which provided that the agreement
"shall be construed and have effect in all respects in accordance
with the law of England." This clause was only mentioned briefly
in the judgment, but nevertheless the decision must be read in the
light that the proper law of the contract was English law and it was
by that law that the availability of actions was determined. Perhaps,
therefore, this latter case might be preferred to Sayer's case as
authority for the proposition that where there is a conflict of classifi-
cation between the lex fori and the proper law of the contract that
of the latter is to be preferred. It is, however, submitted that where
no express choice of law is to be found in the contract and the issue
of classification arises at this primary stage as a jurisdictional issue,
the classification to be applied is not that of the putative proper law,
but that of the forum selected. Such a rule would then preclude any
choice between a "proper law" obtained by the application of Eng-
lish conflict of laws rules, and the law of the forum selected, should
they differ.26
Turning next to stage (c) it was said that-
according to that law, the exclusive jurisdiction clause requires this dispute
to be determined by the Commercial Tribunal of Marseille or the Com-
mercial Tribunal of Paris.

This statement appears to the author to be rather ambiguous. How

ever, it is submitted that his Lordship is not here commenting up
the "exclusiveness " of the clause under French law,27 but is aga
ignoring the distinction between classification of the issue and int
pretation of the clauses. He had stated earlier:
Upon the interpretation of that clause there was considerable evidence
before Mr. Justice Ackner: and much discussion about a doctrine of
French law called the doctrine of non-cumul. It is now accepted that the
doctrine applies to this case. The effect of it is that in this case, if the ship-

25 Which read: "The action is one brought against a defendant not domiciled or
ordinarily resident in Scotland to enforce, rescind, dissolve, annul or otherwise affect
a contract or to recover damages or other relief for or in respect of the breach of a
contract--(i) made within the jurisdiction, or (ii) made by or through an agent trad-
ing or residing within the jurisdiction on behalf of a principal trading or residing out
of the jurisdiction, or (iii) by its terms or by implication to be governed by English
law..." See now R.S.C. Ord. 11, r. 1 (i) (f).
26 See Armadora Occidental S.A. v. Horace Mann Insurance Co., The Times, Nov.
18, 1976.
27 For consideration of such an issue see Y.T.C. Universal Ltd. v. Trans-Europa
S.A., supra, n. 7; Evans Marshall v. Bertola S.A., supra, n. 7.

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670 International and Comparative Law Quarterly [VOL. 26

owners did wrong in selling the cargo, the cargo owners have no cause of
action in tort, but their sole cause of action in a French court is a claim
for damages for breach of contract. If the English courts were to apply
that doctrine, it means that it would be covered by the exclusive jurisdic-
tion clause. The dispute would be caused by "the execution of the bill
of lading "; because the word "execution" in the contract includes not
only misperformance but also non-performance.28

Here, despite the use of the word "interpretation" it is suggested

that what was really meant was that classification must be done by
the proper law of the contract; with the result here in the adoption
of the English conflict of law rules applicable to contract actions.
By those English rules we established that any questions of interpre-
tation of the contract, including the foreign jurisdiction clause, must
be done by the proper law; and that rule requires us to adopt French
rules of interpretation, by which we discover that the issue between
the parties here would be regarded as a dispute arising out of the
execution of the contract, and that, they have agreed, will be litigated
in France.
Before turning to his Lordship's final comment on this case it is
interesting to compare the method of resolution adopted by Lord
Diplock in The Sindh itself and the judgment in the more recent
decision of the Court of Appeal in The Makefjell 29 which concerned
a similar attempt to avoid a foreign jurisdiction clause.
On the argument regarding the formulation of the cause of action
as tortious or contractual Lord Diplock said:
Classification, for the purposes of private international law, is a step to-
wards deciding the choice of law, and if the plaintiffs were allowed to go
on with their action in this country, no doubt it would be relevant to
classify their claim as formulated as in tort or in contract in order to
choose the proper law to be applied appropriate either to the tort, which
was not committed in England or by the contract, if the claim were in
contract. But that is not the question in this appeal.30

In his view the question was simply whether the plaintiffs should be
permitted to go on with their action given the existence of the
jurisdiction clause. If the case before the court were seen in this
light-
The only question of classification that arises, therefore, is whether the
judge was right in holding that the ground for granting a stay arises out
of a contract between the parties. It is conceded that the answer is Yes.31

Having established this fact the next stage was to determine the
proper law of that contract, which he too considered to be French.
Again referring to the evidence of French law he concluded:
It being therefore now undisputed, that the proper law of the contract
which included the exclusive jurisdiction clause, was French; it being
undisputed that, interpreted according to French law, the clause covered
claims of the kind which the plaintiffs are seeking to put forward in the
English action, no question of law, other than the purely elementary one

28 [1975] 1 Lloyd's Rep. 372, 373; italics added.

29 [1976] 2 Lloyd's Rep. 29.
so Supra, n. 28, at p. 374.
s3 Ibid.

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JULY 1977] Avoidance of Foreign Jurisdiction Clauses 671

of private international law to which I have already referred, appears to

me to arise.32

The "elementary" question of private international law appears

to refer to the earlier statement:
The learned Judge held that, interpreting the contract according to French
law, as he was bound to do under English rules of private international
law, the exclusive jurisdiction clause did apply to claims of this kind.33

No authorities were cited in this judgment, which is perhaps unfor-

tunate as it would seem that the ambiguity referred to in Lord
Denning's judgment is resolved here. In Lord Diplock's view the
real issue of the case was one of interpretation, and that must always
be done in accordance with the proper law of the contract. It may
well be that in support of this elementary principle his Lordship had
in mind rule 152 of Dicey and Morris' Conflict of Laws " which
states this to be the case and cites a number of authorities in support
of the rule. It might, however, be noted that many of these cases
turn upon the interpretation of terms such as "to ship " or "pound "
or the effect of a foreign currency clause.35 If these were indeed the
authorities referred to then The Sindh represents a new addition as
requiring the interpretation of the effect of a foreign jurisdiction
clause to be determined by the proper law of the contract. Alterna-
tively it may be that Lord Diplock had in mind decisions such as
that in Sayers v. International Drilling Co.36 which involved the
interaction of contractually based "defences" being used in tort
actions. But, of course, in The Sindh the action was classified as
being contractual and not tortious-in Lord Denning's view by
reference to the foreign law, but in Lord Diplock's view by English
law.37
Now it may well be said, as was stressed by Lord Denning at
stage (d), that whatever the merits or demerits of their Lordships'
different approaches the only principle of real importance was the
preclusion of the attempt to avoid the clause. The case did not turn
on the issue of discretion as so many have done before it: nor did
it turn upon the "exclusiveness" of the clause in a way previously
attempted 8": it turned solely upon questions of classification and
interpretation and the conflict of law rules which should govern
such questions. On the former of those matters The Sindh must
be considered as an important addition to the extremely small
number of English decisions ever to consider openly what this
writer considers to be a sadly neglected area of the conflict of laws
in this country. As to the considerations on the rule of interpreta-
tion to be applied to the foreign jurisdiction clause, however, its
importance might be questioned in the light of the second of the
cases referred to earlier: The Makefjell.9
32 Ibid.
a3 Ibid.
34 Op. cit., supra, n. 3, at p. 788.
35 Ibid., p. 789.
36 Supra, n. 22.
37 [1976] 2 Lloyd's Rep. 29, 373, 374.
38 See cases cited at n. 27, supra.
39 Supra, n. 29.

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672 International and Comparative Law Quarterly [VOL. 26

The plaintiffs in this case were a Canadian company and an Eng-

lish company. The former had contracted to ship a quantity of
frozen bakery goods to the latter on board The Makefjell, owned by
the defendants, two Norwegian companies. The plaintiffs alleged
that, on arrival at Millwall docks, the unloading was carried out in
such a way that much of the cargo was left unrefrigerated overnight,
causing a loss of some ?6,200 to the plaintiffs. Two actions were com-
menced by the plaintiffs, one in rem and one in personam, the in-
dorsements on each writ being a claim for damages for breach of
contract and/or duty and/or negligence. In the first action, in order
to avoid arrest of a sister ship jointly owned by the defendants, their
solicitors accepted service of the writ in England. In the second action
leave was obtained ex parte to serve notice of the writ on the defen-
dants abroad. Both actions were contested by the defendants who
applied to have the first stayed and the second set aside or stayed.
These applications succeeded on the ground that correctly inter-
preted a foreign jurisdiction clause in the bills of lading covered an
action of this type. The clause read:
. . any claim against the carrier shall be decided at the principal place of
business of the carrier and in accordance with the law of that place . .

Apart from this clause (effectively selecting a Norwegian forum) it

was held at first instance, that this was not a proper case for the
exercise of the court's discretion. The plaintiffs appealed against
both aspects of the decision, but here it is the Court of Appeal's
approach to the first aspect of the appeal which will be considered.
The appellants contended primarily that as far as the action in tort
was concerned, the foreign jurisdiction clause had no application;
they also suggested that if this were to be the case then it should not
be applied to the contractual action either. The latter argument was
dispensed wih fairly swiftly, in the word of Cairns L.J.:
... it would, in my opinion, be wrong to stay the claim in contract, because
that would place the plaintiffs in the position of having to elect which cause
of action to pursue--contract in Norway or tort in England (or possibly
pursuing both claims in different jurisdictions). I do not consider that the
plaintiffs should be put in so embarrassing a position.40

This aside, however, his Lordship continued to consider the basis

of the argument against the application of the foreign jurisdiction
clause. This turned on two arguments, both derived from English
domestic rules of construction for contracts. The first suggested that
the contra proferentem rule should apply to give a restrictive mean-
ing to the clause on the grounds that the clause was wholly for the
benefit of the defendants. This was rejected on the grounds that this
clause was not of such a type and that the rule was only applicable
where other approaches to construction left doubt about the mean-
ing. This is not in itself remarkable except that it represents accep-
tance of the view that English domestic law is the one to be used to
determine the meaning of a clause. This is especially surprising
as the contract was distinguishable from that in The Sindh on the
grounds that it also contained a choice of law clause: Norwegian law.

40 [1976] 2 Lloyd's Rep. 29 at p. 32.

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JULY 1977] Avoidance of Foreign Jurisdiction Clauses 673

The appellants' second argument was based on the meaning to be

attributed to the words of the clause: "claims arising under this bill
of lading." They contended that these words should be interpreted
so as to exclude a claim framed in tort for the damage to goods. In
support of this interpretation no argument was made as to either
the "exclusiveness" of the clause, or the interpretation to be given
using this proper law of the contract, or to classification of causes
of action. The cases cited were solely concerned with the interpreta-
tion given to arbitration clauses containing similar wording.'1 It
appeared to be accepted without comment that in all those cases
the words were given a meaning which accorded with English notions
of construction, as summarised by Sir Samuel Evans, President in
The Cap Blanco 42 where he said that "... effect must be given if
the terms of the contract permit it, to the obvious intention and
agreement of the parties."
In the words of Cairns L.J.:
I do not think there can be any doubt that the parties intended that any
claims in respect of damage to the goods carried under the bills of lading
should be decided in Oslo and according to Norwegian law, however they
were framed. To a business man it would be absurd to suppose that if one
cause of action was pleaded it should be triable in Norway according to
Norwegian law, whereas if another cause of action was pleaded it might
be triable anywhere where one of the owners' ships might be arrested and
possibly according to a different system of law; and that if cargo owners
wished to pursue both causes of actions they could pursue them in two
different courts and according to two different legal codes. Giving a com-
mon-sense meaning to the words of the clause I am satisfied that they
apply to the claim in tort as well as the claim in contract.43

On this basis the Court of Appeal agreed that the only remaining
question could be the exercise of their discretion and the remainder
of their judgments considered that aspect of the appeal.

CONCLUSION

If, then, we compare the decision of The Sindh and The Ma

we find apparent agreement as to the real issue before the
Neither court accepted the view that these clauses could be a
solely on the grounds of classification of the action. Both agr
the essence of the issue was the interpretation of the words
clause to discover whether these parties had agreed that their
should be litigated in a foreign forum. The divergence occu
the law which should be used to establish that interpretatio
Denning M.R. and Lord Diplock used the proper law, their L
ships in The Makefjell accepted the lex fori. Which is to
ferred? It would seem that if either by reference to the classific
of the proper law the issue is contractual (Lord Denning's ap
or by the lex fori the matter is contractual (the approach o
court in The Makefjell and of Lord Diplock) then the only c
open is to adopt the English conflict of laws rule for interpretat
contracts: the proper law. Finally it must be recalled that the
41 Supra, n. 40, at pp. 32-33.
42 [19131 P. 131, 136.
43 [1976] 2 Lloyd's Rep. 29 at p. 33.

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674 International and Comparative Law Quarterly [VOL 26

were unusual in that they represent attempts to avoid the clause

without reference to the inherent discretion of the court: a discre-
tion based firmly on the policy of adherence to bargain. Whatever the
discrepancies between the cases this policy runs clearly and con-
sistently throughout them both: implicitly in The Sindh and ex-
plicitly in The Makefjell. Indeed, if it can be seen that a plaintiff is
attempting a subtle method of forum shopping the court will find any
way of curtailing that attempt rather than permit abuse of their
policy. So although it would be pleasing to see the development of
some guiding principles on the English approach to classification it is
very doubtful that they will emerge from any decisions on avoidance
of foreign jurisdiction clauses in the future.
SUSAN M. KNIGHT.

STATE IMMUNITY AND INTERNATIONAL LAW IN

ENGLISH COURTS

IN Trendtex Trading Corporation v. Central Bank of Niger

Court of Appeal has taken the opportunity to review and re
law relating to two areas of international law in relation t
the existing case law was something less than satisfactory.2
area concerns the ascertainment and application by the co
rules of customary international law. The second concerns t
of the doctrine of State immunity." The examination of th
area follows the review by the Privy Council of State immu
actions in rem in the Philippine Admiral 4 and the obiter co
of the Court of Appeal in Thai-Europe Tapioca Service
Government of Pakistan, Ministry of Food and Agricultural
(Imports and Shipping Wing).5
The issue before the Court of Appeal was a preliminary on
permitted the court to consider the governing international
carefully. The facts were as follows. The Ministry of Defe
Nigeria agreed to buy cement for the construction of barr
the army and in pursuance of the contract of sale, the Cent
of Nigeria (" the Central Bank ") was instructed to and did
letter of credit, which was issued through the Midland
London, who acted throughout merely as agent. Following t
commercial practice, the letter of credit constituted a contr
the seller separate from the contract of sale. Trendtex sou
claim payment under the letter of credit for cement supp
for agreed demurrage when shipments were delayed at La
1 [1977] 1 All E.R. 881.
2 See I. Brownlie, Principles of Public International Law (Clarendon P
ed., 1973), at pp. 45-49 and 319-323.
3 The writer prefers the label " State immunity " to the traditional label "
immunity " because it seems to reflect reality more closely than the traditi
The machinery of government is today seldom in the hands of a soverei
dual; it is rather many-tentacled and the bureaucracy of government is far-
This in itself is responsible for many of the difficulties experienced in atte
define the limits of State immunity.
4 [1976] 1 All E.R. 78, noted at (1976) 92 L.Q.R. 166.
5 [1975] 3 All E.R. 961 (cited as " Thai-Europe v. Government of Paki

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