High Court Brings Clarity to Multi-Million-Pound Consultancy Contract

One might expect contracts between sophisticated business entities to be couched in precise and unambiguous terms. That is not always the case, however, and the High Court's intervention was required to bring clarity to a jurisdiction clause in a multi-million-pound consultancy agreement.

A Spanish company had engaged a global advisory and asset management firm to assist in restructuring its finances. The company claimed that the firm had ceased to perform its duties under the agreement and launched proceedings in Spain. The firm, however, argued that those proceedings were a breach of a jurisdiction clause contained within the letter of engagement.

The relevant clause was stated to be for the benefit of the firm and conferred non-exclusive jurisdiction on the English courts to settle any disputes that arose under the agreement. The firm argued that the clause meant that it was entitled to sue in England and elsewhere but that the company could sue only in England. For its part, the company argued that the clause provided no bar to parallel proceedings in Spain.

In upholding the company's arguments, the Court noted the express reference in the clause to non-exclusive jurisdiction. There was no good reason to conclude that the company was prevented from launching proceedings in Spain and its interpretation of the clause accorded with business common sense. Further issues relating to jurisdiction were adjourned for hearing at a later date.

Complex contracts often end in disagreements and clarity of wording is essential. In this instance, a court case has been necessary to work out in what courts the claims can be brought. Only after significant delay and cost can the 'real' arguments begin.