Contracting with overseas companies, particularly those controlled by foreign states, can create particular legal difficulties, making it all the more important to have a professionally drafted agreement in place. One case that illustrated the point involved a theatre and production company which claimed £500,000 in damages after cancellation of a show in the Middle East.
The company (company A) claimed that it had contracted to stage the show with an entertainment company (company B) that was wholly owned by a Middle Eastern government. A £780,000 price was said to have been agreed – later increased to over £1 million – before the show was cancelled by company B. Company A claimed that, during a telephone conversation with company B’s chief executive, a settlement was agreed whereby it would receive compensation of £500,000.
Company B argued that no binding agreement had been reached and that plans to put on the show had never proceeded beyond preliminary discussions. It also denied that any settlement had been agreed. It submitted that, in any event, the English courts had no jurisdiction to hear the case and that company A had wrongly been granted permission to serve the proceedings abroad.
In rejecting those arguments, and opening the way for the case to proceed to a full trial in London, the High Court found that company A had a strongly arguable case that a legally enforceable settlement had been agreed and that company B had reneged on its obligation to pay the £500,000.
Finding that English law applied to the case, and that England was the natural forum in which the issues should be tried, the Court noted that the crucial telephone call had been made from England and that all relevant documents and correspondence were written in English. Company B had been aware of the proceedings for a considerable time and had been properly served outside the jurisdiction.