Jurisdictional ‘gateways’

A dispute involving the sale of a luxury Airbus 340 by a Saudi Royal to ex-Libyan dictator Colonel Gaddafi highlights the increasing popularity of the English courts as a hub for international disputes, and the common issues many face trying to get their cases heard here.

Choosing the jurisdiction where a case is heard can affect the cost, conduct and outcome significantly. England and Wales is a favourite for international disputes, but getting proceedings under way is not always straightforward and parties can face difficulties from the start, even in just serving a claim form out of the jurisdiction.

TLT recently acted for the successful claimant in Daad Sharab v Prince Alwaleed Bin Talal [2013] EWHC 2324 (Ch). The English High Court accepted jurisdiction, despite a challenge that went to the Court of Appeal.

Summary

The claimant was a Jordanian businesswoman, Daad Sharab (pictured), who started proceedings for $10m commission on the aircraft sale by the defendant, Prince Alwaleed Bin Talal, to the Libyan state/Colonel Gaddafi.

Sharab claimed that an oral agreement was made with a representative of the prince in London’s Ayoush Restaurant. The agreement was that, in return for arranging the aircraft’s sale to Gaddafi, Sharab would receive $2m commission.

This agreement was subsequently varied during a meeting in Libya between Sharab and the prince. The variation was that should the aircraft be sold to Gaddafi for more than $110m, Sharab would receive the excess in commission. The aircraft was subsequently sold for $120m. In his judgment, Mr Justice Peter Smith awarded Sharab the full $10m, plus $3m interest.

Traversing the jurisdictional gateway

High Court proceedings were issued against the prince in 2007. As the prince’s country of residence is Saudi Arabia, an application notice was also issued seeking permission to serve the prince out of the jurisdiction.

Service of the claim form outside the jurisdiction of England and Wales is now governed by section IV to part 6 of the Civil Procedure Rules. Where the court’s permission is required, the court will only grant permission if:

• The claimant can prove they have a ‘good arguable case’ that one or more of the 20 grounds (often referred to as ‘jurisdictional gateways’) set out in paragraph 3.1 of Practice Direction 6B apply;
• The claimant has a reasonable prospect of success in respect of the intrinsic merits of each cause of action (CPR 6.37 (1)(b)); and
• The court is satisfied that England and Wales is the proper place to bring the claim (CPR 6.37(3)).

The prince opposed Sharab’s call for the claim to be heard in the English courts, arguing instead for the claim to be heard in Libya. Sharab initially focused on four ‘jurisdictional gateways’ so that the claim could be heard here, including: whether the contract was made here; whether the contract was made via an agent trading or residing here; whether the contract was governed by English law; and whether it involved a breach of contract committed here.

Sharab was given leave to serve the prince out of the jurisdiction. The prince’s solicitors accepted service, but without prejudice to the prince’s right to apply for an order that the court (1) had no jurisdiction to hear the claim; or alternatively (2) that the court should decline to exercise any jurisdiction it might have.

The remaining gateways

Following an application from the prince that the court had no jurisdiction, it was concluded that Sharab could only show a ‘good arguable case’ for the contract being made here (contract gateway) and breached here (breach of contract gateway). Further, Sharab could show a reasonable prospect of success as to the intrinsic merits of each cause of action and therefore the ‘proper place’ to hear the case was England and Wales.

Following a further appeal by the prince, he succeeded in challenging the breach of contract gateway. Sharab’s permission to serve her claim outside the jurisdiction was still intact, but now reliant solely on the basis of the contract being made here. While one gateway is enough to obtain permission, this can restrict the claimant’s case going forward.

Quantum meruit

Although not relied on as a ‘jurisdictional gateway’ in her initial application, Sharab argued an alternative claim for quantum meruit. This would allow the court to award Sharab a ‘reasonable sum’ for the work undertaken, even if the court did not find a binding contract had been made. The prince denied the quantum meruit claim and argued that Sharab had not obtained the court’s permission to serve this claim out of the jurisdiction.

In the end, the judgment held that Sharab was entitled to serve her contractual claim out of the jurisdiction. But, this did not extend to a quantum meruit claim of the restitutionary kind. Although it had been pleaded in the alternative to a contractual claim, it did not ‘arise in respect of a contract’, and this was the only jurisdiction gateway Sharab was able to rely upon. It was not deemed permissible to run a claim for quantum meruit under the contractual gateway.

If the court did not find that a contract had been made in England, being restricted to the contractual gateway would mean losing the case. The prince was concerned that entering the jurisdiction to give evidence would allow Sharab to serve a claim for quantum meruit within the jurisdiction. To avoid this, the prince asked to deliver evidence via video link and even move the court to Dubai.

The parties ultimately came to agreement. The prince gave evidence in person, with Sharab undertaking not to serve the prince while in the jurisdiction without the court’s permission.

Jurisdiction is an important factor in determining whether a party will be able to obtain justice or an effective remedy. In the proceedings brought by Sharab against the prince, there were primarily three possible jurisdictions: Saudi Arabia; Libya; and England and Wales. But there was little doubt that succeeding on the claim substantively or at all in Saudi Arabia or Libya was unlikely.

The success of Sharab’s claim hinged on establishing the jurisdiction of the English High Court. This case shows that the gateway(s) through which permission is granted can affect the arguments a claimant relies on. It is important to consider all gateways at the outset. Even when, through procedural manoeuvres, the claims have become limited, Sharab shows success is still possible.  

Richard Waller is a partner and Hannah Harwood a solicitor at TLT