EUPillar Aquavita International SA, Glendive Enterprises Limited v Ashapura Minecham Limited [2014] EWHC 2806 (Comm)

Summary

The claimants sought about $1 million under a letter of guarantee which guaranteed the performance by Arabian Resources. The first claimant, Aquavita, was a shipping company registered in the Marshall Islands. The second claimant, Glendive, was a Cypriot company. The defendant, Ashapura, was an Indian company. The court had to decide whether there was a good arguable case that the guarantee was governed by English law. On 24th October 2013, a permission for the service of the claim form out of the jurisdiction was granted on the ground that the Guarantee was governed by English law. The defendant made an application to set aside the order on the ground that Guarantee is governed by the Indian law and/or the English court was not an appropriate forum for the resolution of the dispute. The defendant’s application was dismissed by the English High Court. Mr Justice Popplewell held: “22 […] the Court must take care in applying the test in Article 3 to divine a genuine choice of law which is clearly demonstrated by the terms of the contract or the circumstances of the case and not to be tempted to apply common law notions of a test of closest connection. 23 Applying the test to the facts of this case, in my view choice of English law is clearly demonstrated to the necessary interlocutory standard. The starting point, in my view, is that the common law principle, which was applied in the pre- Rome Convention cases and in the Rome Convention cases, is based on the fact that a guarantee is an ancillary contract to the contract which contains the obligations which are being guaranteed. If the rights and obligations under that main contract are governed by a chosen system of law it would be incongruous for the guarantee to be governed by a different system of law. Differences between the two systems of law might potentially result in a mismatch between the obligations of the party to the main contract which are the subject matter of the guarantee, and the obligations of the guarantor to fulfil those obligations. The rationale of the general principle is not merely that the guarantee has a close connection with the contract containing the obligations which are being guaranteed; part of the rationale is that businessmen would not normally choose to have their rights and obligations under the guarantee governed by a different system of law and that there therefore is a presumption, in the absence of countervailing indications, that they have impliedly chosen the same system of law. In Golden Ocean Group Ltd v Salgaocar Mining Industries Pvt Ltd [2011] 1 WLR 2575 Christopher Clarke J, as he then was, refers to this incongruity at paragraph [147] as supporting a conclusion that the choice of the same law was demonstrated with reasonable certainty under Article 3 of the Rome Convention. 24 This aspect of implied choice of law is reflected in an example which is given in the Giuliano-Lagarde Report of circumstances in which a choice of law which is not expressly made may nevertheless be clearly demonstrated so as to fulfil Article 3 . The example given is where an express choice of law is made in related transactions between the same parties.” [22-24] Jurisdiction was exercised under English common law rules.