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English Jurisdiction Clauses - Court of Appeal Cracks Down

English law is well-developed, written in the universal business language and the English judicial system has a deserved reputation for fairness.

It is not surprising, therefore, that vast numbers of international contracts incorporate English jurisdiction clauses, and the courts in London are assiduous in enforcing them and minimising the risk of parallel proceedings abroad. In one case in point, the High Court declared that proceedings launched in Italy against a UK bank fell within the scope of such a clause and that the English courts had jurisdiction to determine the dispute.

The case concerned an agreement between the bank and an Italian company that managed funds for the benefit of medical professionals. It stated that the English courts would have jurisdiction to determine any disputes arising. However, the company had, without prior warning, launched proceedings in Milan, claiming that it had suffered substantial loss after being misled by two of the bank's employees into purchasing unsuitable financial products.

In the Italian proceedings, the company claimed, amongst other things, that the English jurisdiction clause was invalid and of no effect. However, a judge in London found that the Italian proceedings fell within the ambit of the English jurisdiction clause and granted the bank a declaration to that effect.

In dismissing the company's challenge to that ruling, the Court of Appeal rejected arguments that the declaration infringed the European Union principle of mutual trust between the courts of member states. The company had no viable defence to the bank's claim for declaratory relief, and summary judgment had rightly been entered on that basis.

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