Does a foreign jurisdiction clause prevent an English court enforcing an adjudicator's award?

7 minute read
31 March 2021

You might have assumed that if both parties have agreed that their construction contract will be subject to (say) Italian law, and agreed an exclusive jurisdiction clause in favour of the French courts, you have side-tracked any disputes away from the courts of Great Britain. The recent case of Motacus Constructions Ltd v Paolo Castelli SpA [2021] has confirmed that this is not necessarily the case in relation to construction projects that fall within the ambit of the Housing Grants, Construction and Regeneration Act 1996, as amended (the Construction Act).



Background

  • In May 2019, Paolo Castelli appointed Motacus to supply and install certain walls, plasterboards, partitions, ceilings, back boxes, flooring and painting in relation to fitting out works to a hotel in London (the Contract).
  • In the Contract, the parties agreed that the governing law of the Contract would be Italian law, and that disputes would be subject to the exclusive jurisdiction of the courts of Paris, France.
  • The Contract did not comply with s108 of the Construction Act providing for adjudication and so, the adjudication provisions of the Scheme for Construction Contracts 1996 as amended (the Scheme) were implied into the Contract. One of the provisions of the Scheme is that that the decision of an adjudicator binds the parties until the final determination of the dispute.
  • A dispute arose relating to sums due under the Contract and an adjudication followed, with a decision in December 2020 that Paolo Castelli should make a payment to Motacus of around £454,700 plus VAT and interest. That payment was not made and Motacus commenced these proceedings to enforce the adjudicator's decision.

The jurisdiction issue

Paolo Castelli's only defence to these enforcement proceedings was that the (English) Court had no jurisdiction to determine this application for summary judgment as the application was in breach of the Contract, which conferred exclusive jurisdiction on the courts of Paris.

The question therefore to be decided by the Technology and Construction Court (TCC) was whether the inclusion of an exclusive jurisdiction clause in favour of a foreign court precludes the English court from hearing proceedings for breach of the term that the decision of an adjudicator binds the parties until the final determination of the dispute.

TCC decision

Following Brexit, such jurisdictional issues are determined by the Convention on Choice of Court Agreements concluded on 30 June 2005 at the Hague (the 2005 Hague Convention). The issues centred on Articles 6(c) and 7 of the 2005 Hague Convention.

Article 6(c) of the 2005 Hague Convention

  • Motacus relied on Article 6(c) of the 2005 Hague Convention which provides that a court of a contracting state (in this case the UK) other than that of the chosen court (in this case Paris, France) "… shall suspend or dismiss proceedings to which an exclusive choice of court agreement applies unless …(c) giving effect to the agreement would lead to a manifest injustice or would be manifestly contrary to the public policy of the State of the court seised…" [emphasis added]. Motacus contended that refusing to enforce an adjudicator's award would result in a manifest injustice and/or was contrary to public policy.
  • In defence, Paolo Castelli argued that "manifestly contrary to… public policy" in Article 6(c) is a high threshold to meet - the policy of enforcing adjudicator's awards on an interim basis to ease cash flow did not meet this threshold. The parties should be held to their bargain which included the exclusive jurisdiction clause.

On the issue of Article 6(c), His Honour Judge Hodge QC sitting as a Judge of the High Court, preferred the submissions on behalf of Paolo Castelli - Motacus had not met this high threshold.

He stated " [t]here is no good reason why the parties should not be held to the bargain that they freely made when they incorporated clause 19 [the exclusive jurisdiction clause] into their construction contract". There was no evidence that the adjudicator's decision could not be enforced in a timely and effective manner in the courts of Paris.

Article 7 of the 2005 Hague Convention

  • Motacus also relied on Article 7 of the 2005 Hague Convention which states (in summary) that it does not govern "interim measures of protection" - Motacus argued that the enforcement of an adjudicator's decision was the enforcement of an interim measure of protection meaning it fell outside of the Convention.
  • Paolo Castelli argued that this type of application (for summary judgment to enforce an adjudicator's decision) was not an "interim measure of protection" within Article 7 as it "was not a measure intended to preserve the status quo" e.g. a freezing injunction. Here (it was argued) Motacus was acting in direct breach of the exclusive jurisdiction clause in the Contract.

The TCC preferred Motacus' submissions on this point - Article 7 was not restricted to measures intended merely to preserve the position of the parties pending final judgment. Under the Construction Act and the Scheme, the adjudicator's decisions protect the successful party on an interim basis, pending the final resolution through the courts or arbitration - this was within the ambit of Article 7. What was before the TCC on this application was not the underlying dispute.

His Honour Judge Hodge QC sitting as a Judge of the High Court held that "an application for summary judgment to enforce an adjudicator's decision is an interim measure of protection within art. 7 of the 2005 Hague Convention".

Commentary

The adjudicator's decision was therefore enforced by the TCC on the basis that the exception in Article 7 (but not Article 6(c)) of the 2005 Hague Convention applies.

In terms of which projects may be affected by this decision, the key is ascertaining whether a contract relates "to the carrying out of construction operations in England, Wales or Scotland". Therefore, a project may be covered if the works take place in England, Scotland or Wales, even if the law and jurisdiction of the contract have been agreed to be governed by other countries, such as Italy and France in the Motacus case.

If you have any queries relating to any construction issue, contact Ashley Pigott.


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