The Price of Flexibility: Asymmetric Clauses and Parallel Proceedings

In a recent judgment,¹  the English High Court has provided useful guidance on the construction and effect of asymmetric jurisdiction clauses, and the risk of resulting parallel proceedings.  It reinforced the principle that the Court will not intervene lightly where parties have struck a clear contractual bargain (even where common sense would suggest an alternative approach) and will not assist parties to obviate foreseeable risks associated with concurrent parallel proceedings where an asymmetric jurisdiction clause contemplates that very situation.

Asymmetric jurisdiction clauses: an overview

As discussed in a previous OnPoint on this topic, an asymmetric jurisdiction clause provides that party A may sue party B in any competent jurisdiction, whereas party B is limited to suing party A in a specific jurisdiction.

Asymmetric jurisdiction clauses are commonly used and are notably favoured by lenders who wish borrowers only to be permitted to bring proceedings in a specific jurisdiction.  Lenders, however, often want the freedom to commence proceedings wherever they wish, but typically where the borrower’s assets are located against which they could enforce a judgment.

Background

In 2015, The Export-Import Bank of China (the “Lender”) entered into certain ship financing arrangements with various companies.  In 2024, the three Claimants replaced these companies through interlocking agreements, which included a novated, amended and restated secured loan agreement (the “NAR Loan Agreement”) secured by a first preferred mortgage between the Lender and one of the Claimants, Spec 3 Limited (“Spec 3”), in relation to one of Spec 3’s vessels (the “Spec 3 Mortgage”).

The asymmetric jurisdiction clause in the NAR Loan Agreement obliged the Claimants to bring proceedings in England.  The Lender, however, was permitted to commence proceedings in any court of competent jurisdiction and could commence multiple proceedings in one or more jurisdictions (whether concurrently or not).

With issues having arisen under the financing arrangements, the Lender commenced proceedings in Singapore against Spec 3 (the “Original Singapore Proceedings”), alleging default by all the Claimants under the NAR Loan Agreement, with Spec 3 liable under the Spec 3 Mortgage for a principal sum of over US$61m plus interest.  Spec 3 counterclaimed for various remedies based on fraudulent misrepresentation.

The Claimants, unable as a group to bring claims against the Lender in the Original Singapore Proceedings, commenced proceedings in England (the “English Proceedings”), seeking similar relief to that sought by Spec 3 in the Original Singapore Proceedings.  The Lender, unable to add the two other Claimants to the Original Singapore Proceedings, commenced fresh proceedings against them in Singapore for, amongst other things, the US$61m outstanding principal plus interest (the “Further Singapore Proceedings”).  The Lender also applied within the Original Singapore Proceedings for an anti-suit injunction against Spec 3 in relation to the English Proceedings (the “Singapore Application”) (which the Singapore Court dismissed, although the Lender has recently been granted permission to appeal).

The matters before the English Court

Within the English Proceedings, the Court was asked to determine two applications:

1. The Lender’s application for an order declaring that the Court declines jurisdiction in favour of the proceedings in Singapore, and that the English Proceedings be stayed.
2. The Claimants’ application for (a) an anti-suit injunction against the Lender in respect of the Further Singapore Proceedings and (b) an anti-anti-suit injunction to restrain the Lender from bringing an anti-suit injunction in relation to the English Proceedings.

The Court's decision

The Court dismissed both sides’ applications.

As to the Lender’s application, the Court held that:

• The Claimants had no alternative but to bring proceedings in England; to bring proceedings elsewhere would have been a breach of the jurisdiction clause.  The significant (but not complete) overlap between the relief sought in the Original Singapore Proceedings and the English Proceedings did not affect this.
• The Court will not readily stay proceedings where a jurisdiction clause expressly contemplates the possibility of parallel proceedings across jurisdictions.  Strong reasons are needed and the mere existence of parallel proceedings cannot establish vexatious or oppressive litigation tactics: here, the risks of duplicative proceedings and inconsistent decisions were entirely foreseeable and contractually accepted by the parties.
• Further, these risks were manageable given (a) the mutual respect between the English and Singapore Courts and their shared approach to res judicata (the legal doctrine that prevents a matter which has already been finally determined by a competent court from being relitigated between the same parties) and (b) the continuing freedom of the parties to agree a stay or standstill of competing proceedings.

Rejecting the Claimants’ applications, the Court reasoned that:

• An anti-suit injunction, which would constitute a considerable interference with the Singapore judicial system, cannot be granted lightly.  Anti-suit injunctions are most readily available where the foreign proceedings breach an English exclusive jurisdiction clause, which was not the position here: the Lender was contractually entitled to bring the Further Singapore Proceedings.
• As with the Lender’s application, the Claimants could not rely on the mere existence of parallel proceedings to establish vexation or oppression.
• As to the application for an anti-anti-suit injunction, there was no realistic basis for believing that the Lender would apply to the Singapore court for an anti-suit injunction against all of the Claimants: to do so would be a breach of contract (the Claimants having an unqualified contractual right to sue in England).  The Court regarded it as inconceivable that the Singapore Court would grant such relief, which would constitute significant interference with the English judicial process.

Conclusion

The decision serves as a cautionary reminder of the English Court’s attitude toward freely bargained contractual positions, and the importance of understanding the implications of a jurisdiction clause and the effect it might have on future legal proceedings.  The English Court will not interfere with a party’s contractual rights lightly, even where it might be sensible, cost-effective and ultimately quicker to do so: it is for the parties to find a common-sense approach to such issues.

Lenders and other parties who favour the use of asymmetric clauses must be alive to the risk of parallel proceedings materialising in multiple jurisdictions.  Careful drafting of jurisdiction clauses can mitigate this risk, for instance by segregating the issues that can be heard in different courts, or by requiring that counterparties discontinue their proceedings should the lender choose to commence similar proceedings elsewhere.

As noted in the judgment, and despite their commonplace appearance in financing transactions, there are relatively few decided cases involving asymmetric jurisdiction clauses, particularly following the end of the Brexit transition, making this decision all the more valuable.