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Court Guidance on English Jurisdiction Clauses

Airport 1In an important decision which gives guidance on the scope of English jurisdiction clauses in international trade contracts, the domestic courts have declined to hear a dispute in which an airline claimed that it had suffered huge losses due to the existence of an illegal cartel in the supply of jet fuel at Italian airports.

The case revolved around findings of the Italian Competition Authority that certain oil companies had participated in a cartel which distorted and inflated the price of jet fuel at major Italian airports. Those involved were fined more than 66 million Euros and the airline launched proceedings against one of the cartel’s members on the basis that it had been over-charged by almost 9 million Euros.

Fuel had been supplied by the cartel member to the airline pursuant to a contract which was governed by English law and which contained an English jurisdiction clause. On that basis, the airline argued that the English Commercial Court was the appropriate forum for the case to be heard.

Although the airline’s claims encompassed allegations of both breach of contract and breach of statutory duty, it was submitted that the exclusive jurisdiction clause applied and that a ‘one stop adjudication’ was preferable. Those arguments prevailed before the Commercial Court on the basis that trying the two elements of the claim separately in England and Italy would be a ‘forensic nightmare’.

In allowing the cartel member’s appeal, the Court of Appeal found that, on a true construction of the exclusive jurisdiction clause, England was not the appropriate forum for the dispute to be resolved. The unforeseen situation of a claim being made in respect of a cartel infringement of Article 101 of the Treaty on the Functioning of the European Union (TFEU) simply did not fall within the purview of the clause.

The airline’s claim was, in reality, based primarily upon alleged breaches of statutory duty and there was nothing in the contract to justify a conclusion that the parties had intended that a claim under TFEU in respect of Italian suppliers of fuel at Italian airports should fall within the jurisdiction provisions of an English law contract.