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TCC enforces adjudicator’s decision overruling an exclusive jurisdiction clause in favour of a foreign court

Motacus Constructions Ltd v Paolo Castelli SPA [2021] EWHC 356 (TCC) is the first authoritative decision by an English court on whether, in a construction contract for works in England, the inclusion of an exclusive jurisdiction clause in favour of a foreign court prevents an English court from enforcing the adjudicator’s decision.

Background

Motacus Constructions Ltd (MCL) was employed by Paolo Castelli SPA (PCS) as a sub-contractor to carry out works at a hotel in London. The sub-contract provided that it was to be governed by Italian law but also contained an exclusive jurisdiction clause which was in favour of Parisian courts.

The dispute in question came about from sums due under the sub-contract. MCL referred the matter to adjudication and was awarded £450,000 payment in October 2020. The adjudication was subject to the terms of the Scheme for Construction Contracts (England and Wales) Regulations 1998 as amended. The Scheme and Part II of the Housing Grants, Construction and Regeneration Act 1996 applies to construction contracts regardless of whether or not the law of England and Wales is otherwise the applicable law in relation to the contract

Following paragraph 23 of the Scheme it was an implied term of the sub-contract that the decision made by the adjudicator would be a binding one, until final determination. Ultimately, PCS did not pay the sum awarded by the adjudicator and MCL sought enforcement proceedings in the Technology and Construction Court in the UK (TCC).

The exclusive jurisdiction clause prompted PCS to challenge the choice of the TCC and the court was then required to ascertain whether the inclusion of this exclusive jurisdiction clause, in favour of a foreign court prevented it, as an English court, from presiding over these proceedings.

Exclusive jurisdiction clauses

The court initially spent some time considering the legal framework surrounding these jurisdictional disputes and with the arrival of Brexit and the UK’s departure from the European Union, thus begins a new era of consideration in this area.

The 2005 Hague Convention has now taken precedence at determining which international court has jurisdiction in a given matter, with Article 6(c) and Article 7 of the convention on Choice of Court Agreements in focus with this matter.

  • Article 6(c) of the convention provides that the court of the contracting state, other than that of the chosen court, shall suspend or dismiss any proceedings to which an exclusive choice of court has been recognised save where, inter alia, there would be a ‘manifest injustice’.
  • Article 7 provides that ‘interim measures of protection’ are not governed under the Hague Convention. The convention does not find issue with the grant, refusal or termination of interim protection measures by the court of a contracting state, even with exclusive jurisdiction clauses in question.

The Parties’ positions

MCL presented a number of supporting arguments as to why the TCC should accept jurisdiction and enforce the adjudicator’s decision. MCL primarily relied on Article 6(c) and the distinction that it is simply unjust to refuse enforcement of the adjudicator’s decision. Further to this, MCL relied on Article 7 where the enforcement would only be an interim measure of protection and as a result not governed by the Hague Convention itself. This lies in the nature of enforcement of an adjudicator’s decision not being responsible at determining the underlying dispute in totality, with this still an option open to the parties to follow in Paris. The adjudicator’s decision was only temporarily binding.

PCS relied on the overarching principle of Article 6 and the need to suspend or dismiss proceedings if an exception does not apply. PCS also argued the jurisdiction clause itself was widely drafted. It did not seek to restrict the scope of the disputes to be referred to the courts of Paris, France and nor can it reasonably be interpreted as doing so. Further, the practice of the English courts is to give such clauses, as between the parties to them, "a generous interpretation". As to Article 7, PCS argued that adjudication enforcement was not a measure of interim protection but went further than this, thus calling into question the relevance of Article 7.

Decision

The court awarded summary judgement in favour of MCL, finding merit in MCL’s case on Article 7. The court considered that the concept of an interim protective measure extended to an adjudicator’s decision and as such applying Article 7 meant the enforcement proceedings fell outside the ambit of the convention. While summary judgment is itself a final and conclusive remedy, the remedy granted in enforcement proceedings was and remains interim. The English court’s decision did not decide the underlying dispute between the parties and the avenue to follow and conclude proceedings in Paris, as the exclusive jurisdiction clause seeks, is an avenue open to the parties.

Practical implications

As recognised already, this is the first time an English court has made a decision on this issue in relation to adjudication, and thus the implications are potentially significant. In practice it is likely to be rare that a contract for UK based construction works contains a foreign jurisdiction clause, however this may well change in time post-Brexit and for now, parties have clear guidance on the right to enforce an adjudicator’s decision in a UK court.

For more information on the article above please contact Lianne Edwards and Stephen Homer.

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