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UK: Competing exclusive jurisdiction and arbitration clauses: the Fiona Trust "one-stop" presumption displaced
The defendant Italian broker, Trust Risk Group SpA ("TRG"), placed medical malpractice insurance business with the claimant UK insurer, AmTrust Europe Ltd ("ATEL").
The parties' relationship was governed by a series of agreements, chief among them being the 2010 Terms of Business Agreement ("TOBA"), and the 2011 Framework Agreement ("FA").
ATEL argued that the TOBA and FA dealt with different aspects of the parties' relationship: the payment of premiums and the parties' exclusive placing arrangement, respectively. The importance of this point lay in the fact that, while there was a clause in the TOBA providing for the exclusive jurisdiction of the English courts, the FA required disputes between the parties to be submitted to Italian arbitration.
The main point of dispute between the parties lay over TRG's alleged misappropriation of funds from an account created pursuant with the terms of the TOBA. ATEL sought an injunction requiring TRG to (re-)pay some €32m into this account (the funds of which TRG was to hold – under the terms of the TOBA, ATEL argued - on trust for ATEL). TRG contested the injunction on 4 main grounds:
- The English court lacked jurisdiction: TRG argued that the FA's Italian arbitration clause governed;
- The account was not held on trust: ATEL had no relevant proprietary claim;
- Damages were an adequate remedy: granting an injunction would be inappropriate; and
- The balance of convenience was against granting an injunction.
There was common ground as to the principles governing the granting of injunctive relief in these circumstances:
- To succeed, ATEL needed to show that it had a good arguable case that the Court had jurisdiction;
- "Good arguable case" was a lesser hurdle than proof on the balance of probabilities, but a more stringent test than "whether there is a serious issue to be tried";
- The construction of an arbitration clause should start from the (rebuttable) presumption that the parties, as rational business people, are likely to have intended any and all disputes arising to be decided by the same tribunal ("Fiona Trust Presumption");
- That presumption can be displaced, for instance, where different agreements deal with distinct aspects of the parties' relationships; and
- In the context of competing clauses, the allocation of jurisdiction is fundamentally a question of construction.
ATEL argued that the "one-stop" Fiona Trust Presumption was displaced by the fact – as touched upon above – that while the TOBA dealt with premium payments, the FA concerned only issues of exclusivity. Also relevant was the fact that the TOBA and FA had been entered into at different times.
TRG countered that, as soon as the parties had entered into the FA, the TOBA was superseded and ceased to be a free standing agreement; any differences in subject matter were irrelevant: as of the date of the FA, the agreements had been merged.
The parties' submissions mainly focused on the wording of the FA's termination and entire agreement clauses, and the significance of the fact that the TOBA had been scheduled to the FA as an "integral part" of the FA. Furthermore, certain clauses referred to "This agreement, including its Schedule…" whereas others – such as, conspicuously, the arbitration clause itself – referenced only "This Agreement". Much of the judgment involved discussion of whether the phrase "This Agreement" covered only the FA itself, or was wide enough to include the (scheduled) TOBA as well.
The judge (Blair J) outlined a number of reasons why the claimant's case offered the better construction:
- That the TOBA was scheduled to the FA was "consistent with it continuing as a separate agreement";
- Also consistent with this "separate agreement" construction was the fact that one of the FA's clauses required the parties to modify the TOBA "to the extent necessary to reflect the terms" of the FA;
- That the termination clause envisaged, post-termination of the FA, the TOBA continuing to exist (albeit in a modified form) was inconsistent with TRG's case that the two agreements had completely merged;
- Blair J accepted that the claimant had a good arguable case of rebutting the Fiona Trust Presumption since the TOBA and FA dealt with different subject matters; and
- The necessity of subjecting these different topics to different bodies of law was illustrated by the fact that the TOBA governed the creation and operation of a trust account, whereas the concept of a trust is (largely) unknown to Italian law.
While he accepted that certain provisions of the FA led to the argument going "both ways" (the entire agreement clause, for instance, was widely drafted to include the scheduled TOBA), on balance Blair J held that ATEL could in fact show a good arguable case: the court had jurisdiction to grant the mandatory injunction.
From the outset, the judge considered that – of the four main issues – the jurisdiction question was "the most significant". Perhaps as a result, Blair J spent little time on indicating that he was not persuaded by the defendant's other arguments: that the account was not a trust account, that damages would be an adequate remedy for ATEL, and that the balance of convenience was in TRG's favour.
The injunction was granted: TRG were ordered to (re-)pay €32m into the trust account.
This case goes to show that, while the Fiona Trust Presumption is a strong one, it is far from conclusive and is readily rebuttable where the circumstances allow. Competing jurisdiction clauses will each be given effect (rather than being construed to mean the same thing) where there are certain factors – such as the separate agreements dealing with different issues and being entered into at different times – that lead the court to conclude that rational business people really did intend the clauses to bestow jurisdiction upon separate tribunals.
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