The English High Court has granted limited declaratory relief confirming the exclusive jurisdiction of the English courts under the jurisdiction provisions of certain counter-guarantees provided to the claimant Afghan bank by the defendant Indian bank: Afghanistan International Bank v Yes Bank Ltd [2023] EWHC 3294 (Comm).

The decision was made against the backdrop of proceedings initiated by a third party in India, in which the Bombay High Court had granted interim injunctions prohibiting payment under the counter-guarantees (and related agreements). The English court was persuaded that the declaration would have some utility in assisting the Indian court to determine that it did not have jurisdiction over the counter-guarantees, and that granting such a declaration in respect of an English law contract between parties who were before the court would not interfere with the principle of judicial comity.

The more usual route by which the English court will police its own jurisdiction is by issuing an anti-suit injunction against a party that brings or threatens foreign proceedings in breach of an English jurisdiction clause. But there was no question of that here, presumably because the English court had no basis for exercising jurisdiction over the party that brought the Indian proceedings (as it was not party to the counter-guarantees and the underlying contract to which it was party was subject to ICC arbitration).

The present decision illustrates another potential route: the English court may be willing to grant a declaration as to its own jurisdiction over an English law governed contract, where it considers that such a declaration may have some effect on the relevant foreign court and can be granted consistently with the principle of comity.

The decision is also of interest for the court’s view that the plain and ordinary meaning of a clause providing that a contract shall be “subject to” an identified court’s jurisdiction is that such jurisdiction will be exclusive, even where that word is not used. This is consistent with previous decisions which suggest that an English court will likely find that a jurisdiction clause is exclusive unless it is explicitly stated to be non-exclusive, particularly if there is also a choice of English law (see for example AIG Europe SA v John Wood Group Plc [2021] EWHC 2567 (Comm) (considered here)).

Background

An Indian company, KEC International Ltd (KEC), entered into a contract with an Afghan company, Da Afghanistan Breshna Sherikat (DABS), for the installation of power transmission lines in Afghanistan. For the purpose of securing the contract, the claimant (Afghanistan International Bank) issued certain guarantees to DABS which were, in turn, supported by counter-guarantees issued to the claimant by the defendant (Yes Bank).

The counter-guarantees, which were of a combined value of a little over USD 14 million, contained the following clause:

“This counter-guarantee shall be governed by and construed in accordance with the English laws and shall be subject to the jurisdiction of the courts of England.”

As a result of the Taliban taking over the government of Afghanistan in August 2021, both DABS and KEC served force majeure notices under the contract.

In September 2022, KEC brought proceedings against DABS, the claimant and the defendant, amongst others, before the Bombay High Court. It obtained interim injunctions restraining: (i) DABS from making any demand for payment under the guarantees issued by the claimant; (ii) the claimant from making any demand for payment under the guarantees issued by the defendant; and (iii) the defendant from making payment under the counter-guarantees or, if it makes such payment, from exercising any right to be reimbursed by KEC.

In April 2023, the claimant filed the present Part 8 claim before the English High Court for declaratory relief as to the defendant’s liability under the counter-guarantees, as well as a declaration that the English courts have exclusive jurisdiction to determine all questions of fact and law with respect to the counter-guarantees.

Decision

The High Court (Andrew Baker J) granted the declaration sought as to the English court’s jurisdiction but dismissed the claim in respect of the other declarations sought.

The court clarified at the outset that the question of whether the Bombay High Court should (or should not) have granted the interim injunctions referred to above was not a matter for it to consider. The claimant had applied to the Bombay High Court to strike out the claims before it and to vacate the injunctions, including on the ground of lack of jurisdiction.

Insofar as concerns the declaratory reliefs sought by the claimant, the High Court noted that, other than on the question of whether the English courts had exclusive jurisdiction, there was no dispute or live issue between the parties as to the meaning, effect, or potential operation of the counter-guarantees. If the court granted the sorts of declarations proposed by the claimant, they would merely recite matters as to which there was no dispute and as to which no judicial determination was required.

However, the meaning and effect of the jurisdiction provisions in the counter-guarantees was not common ground, and therefore was a matter in dispute, even though the defendant had acknowledged that it could not advance any serious argument against the proposition that the jurisdiction clause was exclusive.  It could therefore properly be the subject matter of an adjudicatory exercise. Moreover, according to the claimant’s Indian law expert evidence, a declaration that the English courts had exclusive jurisdiction would, if granted, have some utility in that it would assist the Indian court in determining whether or not it had jurisdiction over the counter-guarantees. The court was also persuaded that it was not an infringement on the principle of comity between courts for it to grant declaratory relief as to the meaning and effect of provision(s) of a contract which was governed by English law and was between parties before the court.

The court went on to consider the interpretation of the jurisdiction provisions of the counter-guarantees between the parties, which as shown above did not use the term “exclusive”. The court noted that it was not necessary to use the word “exclusive” to qualify the term “jurisdiction” so as to confer exclusive jurisdiction. What mattered was not which word(s) the parties had chosen to use to express the obligation to have disputes determined by a particular court or jurisdiction, but that they had used language that has that effect – as distinct from language that merely provides for the availability but non-exclusivity of a particular jurisdiction.

Relying on the decision of the Court of Appeal in Compania Sud Americana de Vapores SA v Hin-Pro International Logistics Ltd [2015] EWCA Civ 401, which was applied in AIG Europe SA v John Wood Group Plc referred to above, the court was persuaded that the language of the counter-guarantees provided for the English courts to have exclusive jurisdiction to determine all questions of fact or law with respect to the counter-guarantees arising between the defendant and claimant.

Accordingly, the court granted limited declaratory relief to the claimant in relation to the exclusivity of the court’s jurisdiction. In its wider aspects the claim failed and was dismissed.

Ajay Malhotra
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Anuradha Agnihotri
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Tanesha Singh
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