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England and Wales High Court (Commercial Court) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Commercial Court) Decisions >> Astrazeneca UK Ltd v Albemarle International Corp & Anor  EWHC 1028 (Comm) (12 May 2010)
Cite as:  EWHC 1028 (Comm),  2 Lloyd's Rep 61,  1 CLC 715
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QUEEN'S BENCH DIVISION
Strand, London, WC2A 2LL
B e f o r e :
| ASTRAZENECA UK LIMITED
|- and -
|(1) ALBEMARLE INTERNATIONAL CORPORATION
(2) ALBEMARLE CORPORATION
Mr John Odgers (instructed by Reed Smith LLP) for the Claimant
Mr Andrew Henshaw (instructed by Barlow Lyde & Gilbert LLP) for the Defendant
Hearing dates: 29th & 30th April, 2010
Crown Copyright ©
Mr Justice Hamblen :
(a) Albemarle were to sell to AZ specified amounts of DIP based on forecasts provided by AZ (clause C).
(b) Shipments and invoicing were to be on a "DDU Macclesfield, UK basis" (clause D4).
(c) Delivery was to be "on the date or during the period specified in the purchase order" (clause 2 of the Conditions of Contract).
(d) AZ would give Albemarle at least eight weeks' lead-time to organise shipments in a timely fashion (clause D6).
(e) In the event that AZ reformulated or otherwise changed their Diprivan brand to substitute propofol for DIP, they would so notify Albemarle and give Albemarle the first opportunity and right of first refusal to supply propofol to AZ under mutually acceptable terms and conditions (clause H).
(f) If either party committed a breach of the contract and failed within 30 days of notice by the other party to rectify the breach, the non-breaching party could, without prejudice to any of its other rights, terminate the contract by notice in writing (clause K).
(g) In case either party terminated the agreement "BUYER commits to purchase all remaining PRODUCT that is in stock as described in clause C or F (either at SELLER's Orangeburg plant and/or at BUYER's Macclesfield plant under the consignment program)" (clause D8).
(h) "The contract shall be subject to English Law and the jurisdiction of the English High Court" (clause 14 of the Conditions of Contract).
"Notwithstanding any other provision of this Agreement or term or condition of sale as set forth in Attachment A hereto, Buyer and Seller expressly agree that any and all claims held, alleged, or possessed by Seller (or any subsidiary of Seller) against Buyer shall not be waived or otherwise impacted in any way by the execution of this Agreement. All such claims held, alleged, or possessed by Seller (or any subsidiary of Seller) against Buyer are hereby expressly reserved to Seller (or any subsidiary of seller) without prejudice."
"This Agreement constitutes the entire contract of sale and purchase of the product(s) named herein. All prior agreements between the parties relating to this product, if any are currently in force or effect, shall have no further force or effect, except to the extent relied upon by Seller (or any subsidiary of Seller) as forming the relief sought by Seller (or any subsidiary of Seller) against Buyer in current or future litigation between Buyer and Seller (or any subsidiary of Seller). The terms of this Agreement shall not, in the absence of prior express written consent of the parties, be amended, supplemented or superseded by any terms or provisions of any purchase order, invoice or other document of any kind."
"This Agreement shall be interpreted in accordance with the laws of South Carolina, without giving effect to provisions as to the conflicts of laws. Any disputes relating in any way to this agreement will be resolved in the state or federal court located in (or if none is located in, then the nearest to) Orangeburg, South Carolina, which court will have exclusive jurisdiction and venue over such dispute."
(1) "The 2008 Action", in which Albemarle seek damages and punitive damages against AZ for breach of Clause H of the 2005 Agreement, as described above. Albemarle obtained an anti-suit injunction in these proceedings, which was in force between 31 March and 9 September 2009. However, on the same date that the injunction was discharged, the proceedings were dismissed, for infringement of the English jurisdiction clause in the 2005 Agreement. Albemarle's motion to have that decision reconsidered on the ground that the law and jurisdiction provisions in the 2005 Agreement have been superseded and are ineffective was rejected on 16 December 2009. Albemarle has appealed from that decision to the United States Court of Appeals for the Fourth Circuit.
(2) The present proceedings, which were issued by AZ in March 2009, and in which AZ makes the three claims (breach of the 2005 Agreement, duress and conspiracy) described above. Once the anti-suit injunction had been discharged, AZ obtained an order dated 12 October 2009 to serve these proceedings out of the jurisdiction, and served them on AC and AIC in South Carolina the same day. Albemarle issued their present application on 1 December 2009.
(3) A claim by AC against AZ ("the 2009 Action"), issued in September 2009, for declarations that AC had performed the 2008 Agreement, owe nothing to AZ under or in relation to the 2008 Agreement, and that claims between AC and AZ related to the 2008 Agreement must be brought in South Carolina's state or federal courts. On 22 January 2010 AC amended its complaint to add a claim that AZ had breached the 2008 Agreement by commencing the English proceedings, and another anti-suit injunction. AZ have applied to dismiss the amended complaint, which application is pending.
(1) AZ's claims for economic duress and conspiracy are governed by the law of South Carolina, and are subject to a jurisdiction clause in favour of the courts of that state. Those claims should be litigated in the existing proceedings in South Carolina. Further, AZ have not established jurisdiction even aside from the jurisdiction clause.
(2) The provisions of the 2008 Agreement preclude AZ from suing the Defendants in England in reliance on the jurisdiction clause in the 2005 Agreement.
(3) AZ's claims for breach of the 2005 Agreement were discharged by the terms of the 2008 Agreement.
(4) Issues (2) and (3) depend, in any event, on questions of construction of the 2008 Agreement, which are governed by the law of South Carolina and subject to the exclusive jurisdiction of the courts of South Carolina.
(5) The question of whether the provisions of the 2008 Agreement preclude AZ from suing in England in reliance on the jurisdiction clause in the 2005 Agreement is already in issue in the existing proceedings in South Carolina. The English court ought accordingly to await the outcome of the pending appeal to the US Court of Appeals for the Fourth Circuit which will resolve the point, in practice conclusively.
Service out – the law
"The claimant may serve a claim form out of the jurisdiction with the permission of the court under rule 6.36 where –
Claims in relation to contracts
(6) A claim is made in respect of a contract where the contract –
(c) is governed by English law; or
(d) contains a term to the effect that the court shall have jurisdiction to determine any claim in respect of the contract.
(7) A claim is made in respect of a breach of contract committed within the jurisdiction.
Claims in tort
(9) A claim is made in tort where
(a) damage was sustained within the jurisdiction; or
(b) the damage sustained resulted from an act committed within the jurisdiction.
Claims about trusts etc.
(16) A claim is made for restitution where the defendant's alleged liability arises out of acts committed within the jurisdiction."
"The judge correctly held in paragraph 39 of his judgment that the test is that of a "good arguable case": Seaconsar Far East Ltd v Bank Markazi Jomhouri Islam Iran  1 AC 438 , especially per Lord Goff of Chieveley at 453D-G. As the judge observed, that test is somewhat higher than the test under CPR Part 24, but less stringent than a balance of probabilities: see MRG v Engelhard Metals Japan  1 Lloyd's Rep 731 per Toulson J at 732 paragraph 9. It was thus for Carvill to demonstrate a strong argument which was short of a balance of probabilities.."
"…I have come to the conclusion that…the Court should usually, before giving permission, be satisfied that the claimant's contentions…provide a much better, or at any rate a better, argument in favour of there being the ground for jurisdiction alleged than of there not being one. In granting permission to serve out of the jurisdiction the court is exercising an exorbitant jurisdiction over those who are not within its ordinary reach. In those circumstances the court is, as it seems to me, justified in applying the good arguable test in that manner in order to avoid the risk of compelling individuals or companies to submit to a jurisdiction to which they ought not in truth to be made subject. Further if, as Canada Trust indicates, the concept which the phrase reflects is "of the court being satisfied or as satisfied as it can be having regard to the limitations which an interlocutory process imposes that factors exist which allow the court to take jurisdiction ", it ought ordinarily to require that, when the Court looks at the material, it finds the points in favour of the ground for jurisdiction alleged to be more than just evenly balanced by those which point the other way."
"To my mind, the wording in CPR 6.21(1)(b) [now 6.37(1)(b)] is synonymous with "real prospect of success" — wording to be found in CPR Parts 3 and 24 . "Real" is to be contrasted with fanciful or imaginary. Once this stage is reached, the test is the same or substantially the same as the test in Seaconsar : an issue which is imaginary or fanciful is not a serious issue to be tried. …Any higher test would doom parties in such applications to unwarranted mini trials on the merits."
"The court will not give permission [to serve out] unless satisfied that England and Wales is the proper place in which to bring the claim."
"(i) The burden is upon the claimant to persuade the court that England is clearly the appropriate forum for the trial of the action.
(ii) The appropriate forum is that forum where the case may most suitably be tried for the interests of all the parties and the ends of justice.
(iii) One must consider first what is the "natural forum": namely that with which the action has the most real and substantial connection….
(v) If the court concludes at that stage that there is another forum which is apparently as suitable or more suitable than England, it will normally refuse permission unless there are circumstances by reason of which justice requires that permission should nevertheless be granted…
(vi) Where a party seeks to establish the existence of a matter that will assist him in persuading the court to exercise its discretion in his favour, the evidential burden in respect of that matter will rest upon the party asserting it."
"[ Canada Trust ] does not deal with the burden or standard, when the defendant claims that the English court (which would otherwise have jurisdiction) has no jurisdiction by virtue of a foreign jurisdiction clause. In Knauf U.K. G.m.b.H. v. British Gypsum Ltd.,  1 WLR 907 (CA) Mr Justice David Steel had held that the burden on good arguable case in relation to an alleged German jurisdiction clause lay on the defendants. The Court of Appeal did not find it necessary to decide on the claimants' argument that the good arguable case test was too low a threshold where a litigant sought to use what is now art. 23 to derogate from a jurisdiction otherwise established under the Brussels Convention, but the point was not necessary to decide: see page 925. See also Carnoustie Universal S.A. v. ITWF,  I.L.Pr.82 , at 102. This question was not developed in argument before me, but subsequently I put it to the parties that unless there were a submission to the contrary (which there was not) I would proceed on the basis that the standard is good arguable case in the sense of which side has the better of the argument, and that the burden (on which I consider that Mr. Justice David Steel's approach is right) would only matter if the argument were evenly balanced."
"94 I would seek to sum up these authorities, which are all at first instance, in this way: that where an established Regulation (or Convention) jurisdiction in England is challenged under article 23 (or article 17 ), (1) there are conflicting views as to where the burden of proof lies (there is a decision in Carnoustie that the burden remains on the claimant, a decision in Knauf (at first instance) that it is on the defendant, and a view in Bank of Tokyo-Mitsubishi also to the latter effect); (2) that the standard of proof has not been settled, but that there is a general tendency to apply the good arguable case test in a form which is more or less consistent with the Canada Trust gloss, but that question was expressly reserved in this court in Knauf ; and (3) that no case cited to us has dealt specifically with either aspect of the present case which is of particular interest here, namely (a) a situation where the foreign jurisdiction clause is not within article 23 (17) , and (b) the jurisdiction clause issue goes to the heart of the ultimate merits at trial.
95 As for the difference of opinion at first instance on burden of proof, I would hazard the opinion, without seeking to decide the issue, that the views of David Steel J and Lawrence Collins J are to be preferred. It seems to me to be counter-intuitive to think that, where a statutory jurisdiction has been established but an exceptional jurisdiction elsewhere is put forward based on a contract which must be clearly shown to have the assent of both parties, it remains the burden of the claimant to prove a negative rather than that of the applicant who challenges the established jurisdiction to prove that he is entitled to rely on the clause in question. After all, article 23 comes in a section of the Regulation (section 7) called "Prorogation of Jurisdiction".
"As to the interesting jurisdictional questions considered but not decided by Rix LJ in the latter part of his judgment, his reasoning seems to me to be persuasive but, like him, I would prefer not to reach a final conclusion upon them until they arise for decision."
The breach of contract claim
"This contract shall be subject to English law and the jurisdiction of the English High Court."
"If the parties, one or more of whom is domiciled in a Member State, have agreed that a court or the courts of a Member State are to have jurisdiction to settle any disputes which have arisen or which may arise in connection with a particular legal relationship, that court or those courts shall have jurisdiction. Such jurisdiction shall be exclusive unless the parties have agreed otherwise …" (emphasis added).
(1) the effect of clauses (j) and (k) of the 2008 Agreement is to confer exclusive jurisdiction on the South Carolina courts in respect of any claims brought by AZ in relation to the supply of the DIP, including any claims under the 2005 Agreement; and
(2) the effect of clauses 6 and (j) of the 2008 Agreement is to release AZ's claims under the 2005 Agreement.
"In Yavuz v. 66 MM Ltd., 465 F.3d 418, 430-31 (10th Cir. 2006), the Court of Appeals for the Tenth Circuit explained:
"If the parties to an international contract agree on a forum-selection clause that has a particular meaning under the law of a specific jurisdiction, and the parties agree that the contract is to be interpreted under the law of that jurisdiction, then respect for the parties' autonomy and the demands of predictability in international transactions require courts to give effect to the meaning of the forum-selection clause under the chosen law, at least absent special circumstances…. In other words, just as the Supreme Court has made clear that under federal law the courts should ordinarily honor an international commercial agreement's forum-selection provision, we now hold that under federal law the courts should ordinarily honor an international agreement's forum-selection provision as construed under the law specified in the agreement's choice-of-law provision…."
….The court finds the reasoning of the Second and Tenth Circuits to be persuasive. Therefore, the court will turn to an analysis of the forum selection clause at issue with reference to English law."
"Contrary to the arguments espoused by Plaintiffs, the only reasonable construction of the provisions at issue in the 2008 Sales Agreement was to preserve the allegations of the within complaint that were raised by Plaintiffs with respect to the 2005 Contract. The court discerns no support for Plaintiff's assertion that the 2008 Sales Agreement superseded the 2005 Contract in any respect. The 2005 Contract was for a definitive period of three years and involved the purchase of at least seventy-five percent of forecast requirements…. The 2008 Sales Agreement represented a one-time purchase within a short time frame of a specific amount of DIP…. The 2005 Contract provided for payment for DIP to be made at the close of the month following the month during which the goods were delivered…. The 2008 Sales Agreement provided for a one time payment due upon signing the agreement.
The 2005 Contract was terminated by Plaintiffs. The 2008 Sales Agreement did not resurrect the business relationship between the parties, but provided an opportunity for Defendant to purchase a finite supply of DIP from Albemarle without affecting the rights asserted by Plaintiffs in the within litigation. The court concludes that the 2008 Sales Agreement is unambiguous and capable of only one reasonable interpretation, i.e., that the 2008 Sales Agreement did not supersede or render ineffective the choice of law and forum selection clauses in the 2005 Contract. Plaintiff's assertion is without merit."
(1) The first and third portions of paragraph (j):-
"This Agreement constitutes the entire contract of sale and purchase of the product(s) named herein. ... The terms of this Agreement shall not, in the absence of prior express written consent of the parties, be amended, supplemented or superseded by any terms or provisions of any purchase order, invoice or other document of any kind."
are a standard merger clause, but the remainder:-
"All prior agreements between the parties relating to this product, if any are currently in force or effect, shall have no further force or effect, except to the extent relied upon by Seller (or any subsidiary of Seller) as forming the relief sought by Seller (or any subsidiary of Seller) against Buyer in current or future litigation between Buyer and Seller (or any subsidiary of Seller). "
forms no part of a standard merger clause, and is a "rescission agreement" designed to abrogate pre-existing duties and liabilities except to the extent specified. The only exception specified is claims by Albemarle and therefore AZ is precluded from asserting any claims related to the 2005 Agreement.
(2) The reference to "All prior agreements between the parties relating to this product" is inconsistent with any suggestion that the clause applies only to DIP sold "under" the 2008 Agreement itself. It expressly contemplates the existence of at least one prior agreement, such as the 2005 Agreement, relating to the supply to DIP. There was no other prior agreement between the parties: the 2005 Agreement was the only prior agreement between the parties at the time of the negotiation of the 2008 Agreement.
(3) The provision expressly preserves Albemarle's claims "in current ... litigation" against AstraZeneca, and thus must cover pre-existing claims as well as future claims.
(4) In any event paragraph (j) provides that the terms of the 2005 Agreement are to have no further force and effect. Those terms include the jurisdiction clause and therefore it can no longer be relied upon.
(1) That AIC is, on the language of the 2008 Agreement, intended to enjoy enforceable rights under the agreement and qualifies as a "third party beneficiary";
(2) That AIC "might" be permitted to enforce the 2008 Agreement as a "transaction participant" or under the "closely related test", under which AIC would be bound because it is closely related to AC.
(1) Generally, the doctrine of privity of contract applies; and, in order to confer a right on a third party, the contracting parties must have "intended to create a direct, rather than an incidental or consequential, benefit to such third person". A contract must have clear language showing an intention to benefit a third person to be recognised as a beneficiary under the contract; this fits ill with the fact that AIC receive no performance at all under the 2008 Agreement.
(2) The "transaction participant" doctrine and the "closely related test" doctrine have never been applied in South Carolina and it is uncertain whether South Carolina state law recognises such a right at all.
(1) The "product" referred to in the entire agreement clause is the product which was the subject of the purchase and sale effected by the 2008 Agreement. That is not the contractual product which was the subject matter of the 2005 Agreement. If so, the 2005 Agreement is not a relevant "prior agreement".
(2) Even if the 2005 Agreement is such a "prior agreement", the fact that it is agreed to have no further force and effect has little relevance to an already terminated agreement, still less to accrued claims thereunder.
(3) The clause does not expressly deprive AZ of their already accrued causes of action for damages under the 2005 Agreement, still less does it expressly address or remove their rights to rely on the jurisdiction agreement.
(4) On any view the clause does not clearly deprive AZ of those rights and Professor Crystal's undisputed evidence is that in the event of any ambiguity the clause would be construed against AC, the drafting party.
(2) The claims in relation to duress and conspiracy
"….as long as the defendant has something to do with acts which were committed within the jurisdiction, the requirements of the paragraph should be seen to be satisfied. As to whether an omission to perform an act within the jurisdiction – such as the failure to pay contractual consideration – would suffice to bring the claim within the paragraph, principle suggests that it should, if the act complained of as not done was one which was required to be done within the jurisdiction".
"Albemarle, it is suggested [in Mr Hewetson's witness statement], sought to disrupt AstraZeneca's supply of DIP in an attempt to secure negotiating leverage.
The merits of the parties' respective claims is of course a matter to be resolved at the substantive hearing of those claims, whether that be in South Carolina or England, once the issue of jurisdiction has been determined. Nonetheless, it is important to make clear now that Albemarle takes serious issue with AstraZeneca's characterisation of the factual background."
(1) Significant damage was sustained within this jurisdiction, in two forms as pleaded at paragraph 60 of the Particulars of Claim:
"AZ suffered loss and damage as already set out, namely non-delivery of the outstanding orders and the stockholding of DIP and/or the additional cost of purchasing 9,253 kg of DIP from [AC] at US$1,200 per kg rather than at US$98 per kg."
(2) For the reasons already given, the non-delivery of outstanding DIP was suffered by AZ at Macclesfield. AZ were thereby deprived of a business asset.
(3) As regards the additional cost of purchasing DIP from AC, this is economic damage the substance of which was suffered by AZ in England. The sums were paid from bank accounts in this country and the economic consequences of the additional costs involved were suffered here.
"Because it will rarely if ever be possible to prove an express agreement between the defendants, the extent or scope of their combination will usually be a matter of inference, to be arrived at by a careful and painstaking review of the acts and omission of each of them, considered as a whole."
(1) Breach of contract
Construction of the clause
(1) The clause is very broad: it covers "Any disputes relating in anyway to this agreement …".
(2) An allegation of duress by its very nature relates to the contract sought to be impugned.
(3) South Carolina law, like English law, draws a distinction between widely worded and narrowly worded jurisdiction clauses, and a widely worded clause such as this would be construed broadly and generously.
(1) "Generally, when wrongs arise inducing a party to execute a contract and not directly from the breach of that contract, the remedies and limitations specified by the contract do not apply."
(2) The above proposition is consistent with South Carolina's "general disfavoring of forum selection clauses".
(3) A forum selection clause ought not logically to operate so as to prevent suit in South Carolina based on acts preceding the execution of the agreement.
(4) "… the forum selection clause in the present case is narrowly tailored to encompass all events related to the lease whereas [Forrest v Verizon Communications] involved a clause that related to all claims arising between the parties."
"17. The principle of separability enacted in section 7 [of the Arbitration Act 1996] means that the invalidity or rescission of the main contract does not necessarily entail the invalidity or rescission of the arbitration agreement. The arbitration agreement must be treated as a "distinct agreement" and can be void or voidable only on grounds which relate directly to the arbitration agreement. Of course there may be cases in which the ground upon which the main agreement is invalid is identical with the ground upon which the arbitration agreement is invalid. For example, if the main agreement and the arbitration agreement are contained in the same document and one of the parties claims that he never agreed to anything in the document and that his signature was forged, that will be an attack on the validity of the arbitration agreement. But the ground of attack is not that the main agreement was invalid. It is that the signature to the arbitration agreement, as a "distinct agreement", was forged. Similarly, if a party alleges that someone who purported to sign as agent on his behalf had no authority whatever to conclude any agreement on his behalf, that is an attack on both the main agreement and the arbitration agreement.
18. On the other hand, if (as in this case) the allegation is that the agent exceeded his authority by entering into a main agreement in terms which were not authorized or for improper reasons, that is not necessarily an attack on the arbitration agreement. It would have to be shown that whatever the terms of the main agreement or the reasons for which the agent concluded it, he would have had no authority to enter into an arbitration agreement. Even if the allegation is that there was no concluded agreement (for example, that terms of the main agreement remained to be agreed) that is not necessarily an attack on the arbitration agreement. If the arbitration clause has been agreed, the parties will be presumed to have intended the question of whether there was a concluded main agreement to be decided by arbitration.
19. In the present case, it is alleged that the main agreement was in uncommercial terms which, together with other surrounding circumstances, give rise to the inference that an agent acting for the owners was bribed to consent to it. But that does not show that he was bribed to enter into the arbitration agreement. It would have been remarkable for him to enter into any charter without an arbitration agreement, whatever its other terms had been. Mr Butcher QC, who appeared for the owners, said that but for the bribery, the owners would not have entered into any charter with the charterers and therefore would not have entered into an arbitration agreement. But that is in my opinion exactly the kind of argument which section 7 was intended to prevent. It amounts to saying that because the main agreement and the arbitration agreement were bound up with each other, the invalidity of the main agreement should result in the invalidity of the arbitration agreement. The one should fall with the other because they would never have been separately concluded. But section 7 in my opinion means that they must be treated as having been separately concluded and the arbitration agreement can be invalidated only on a ground which relates to the arbitration agreement and is not merely a consequence of the invalidity of the main agreement."
"25. … as Sir Anthony Clarke MR pointed out at paragraph 52 of the judgment of the Court of Appeal, if there is duress or undue influence or mistake which invalidates the arbitration agreement there will be no waiver of relevant rights under Article 6. The relevant duress must however impeach the validity of the arbitration agreement itself, not just the wider agreement of which it forms part. An attack on the validity of the wider contract may of necessity impeach the arbitration clause too, but it may not, as pointed out by the Court of Appeal in Harbour Assurance Co (UK) Limited v Kansa General International Insurance Co Limited  QB 701.
26. As Longmore LJ pointed out in Fiona Trust at page 697 Steyn J at first instance in the Harbour case  1 Lloyd's Rep 81 at page 91 had already said, in relation to fraud and duress:
"Once it became accepted that the arbitration clause is a separate agreement, ancillary to the contract, the logical impediment to referring an issue of the invalidity of the contract to arbitration disappears. Provided that the arbitration clause itself is not directly impeached (e.g. by a non est factum plea), the arbitration agreement is as a matter of principled legal theory capable of surviving the invalidity of contract."
Fraud is an imprecise term which takes its colour from the context. Duress however in English law leads usually to voidability rather than initial invalidity, and no doubt the same is true of most cases usually characterised as fraud. The significance of what Hoffmann LJ added in the Court of Appeal on appeal from Steyn J in the Harbour case at pages 723/4 of the report lay in his point that even in cases of initial invalidity of the wider agreement it does not follow that the issue which invalidates the main contract invalidates the separate arbitration agreement. The question must always be asked whether the issue extends to the validity of the arbitration agreement itself.
27. Mr Warwick submitted that an allegation that the main agreement was entered into under the influence of duress must necessarily impeach the arbitration agreement because it is an allegation that the Claimant's will was coerced, vitiating his apparent consent to the main agreement and everything in it. The case should he submitted be regarded as analogous to one of mistake or non est factum affecting the main agreement where arguably an arbitration agreement could not be relied upon. … Even if this was wrong, Fiona Trust was he pointed out concerned with bribery, not duress, as to which different considerations apply and in any event, suggested Mr Warwick, the duress in this case plainly affected the arbitration clause. In this regard he relied upon the following passage in the Claimant's second Witness Statement, at paragraph 18:
"I would not have entered into any part of the April 2001 Agreement (and that includes the arbitration clause) had I not been obligated to do so by the duress the subject matter of my claim."
Mr Warwick advanced his thoughtful argument only five days before the House of Lords gave judgment on appeal from the Fiona Trust decision, …. His main argument cannot survive their Lordships' speeches. …Lord Hoffmann said this:
29. Specifically as to the position on this spectrum at which allegations of duress will usually fall, I would draw attention, as did Longmore LJ in the Fiona Trust case at page 699, to what is said by the learned editors of Dicey & Morris, Conflict of Laws, 14th Edition  at paragraph 12-099:
"The Supreme Court of the United States has also held that a challenge to the existence of the jurisdiction agreement based on fraud or duress must be based on facts specific to the clause, and cannot be sustained on the basis of a challenge on like grounds to the validity of the contract containing it. It is submitted that there are excellent reasons of policy to support such an approach, for the parties, when they nominated a court with jurisdiction to settle their disputes, may well have expected this court to have and exercise jurisdiction if the dispute were to concern the very validity of the contract."
The decision of the Supreme Court of the United States to which reference is there made is Scherk v Alberto-Culver Co. 417 U.S. 506 (1974). That was a case where a contract between a German seller and a US buyer for the purchase of various business and associated intellectual property was said to have been induced by fraudulent misrepresentation concerning the trademark rights transferred. The sales contract, which was negotiated in the United States, England and Germany, signed in Austria and closed in Switzerland, contained an ICC arbitration clause providing for arbitration in Paris. At page 519, footnote 14 the majority opinion of the court noted:
"In The Bremen we noted that forum-selection clauses 'should be given full effect' when 'a freely negotiated private international agreement [is] unaffected by fraud…' … This qualification does not mean that any time a dispute arising out of a transaction is based upon an allegation of fraud, as in this case, the clause is unenforceable. Rather, it means that an arbitration or forum-selection clause in a contract is not enforceable if the inclusion of that clause in the contract was the product of fraud or coercion."
30. Accordingly what is needed in the present case if the Claimant is successfully to impugn the enforceability of the arbitration clause is reliance on some facts "specific to the arbitration agreement" – see per Lord Hope. In my judgment the allegations put forward by the Claimant in this case are simply, again in the words of Lord Hope, "parasitical to a challenge to the validity of the main contract" and thus "will not do". Like the argument of Mr Butcher QC in Fiona Trust, Mr Warwick's argument is, in the words of Lord Hoffmann, "exactly the kind of argument which section 7 was intended to prevent".
(1) AZ were entitled to receive the DIP, which they contend they were forced by economic duress to purchase from AC, under an agreement with AIC and AC (the 2005 Agreement) which was subject to English law and jurisdiction.
(2) Those English law and jurisdiction provisions had been both very long-standing (going back before the 2005 Agreement to 1994) and uncontentious.
(3) AC's exploitation of the fact that AIC had illegitimately withheld DIP from AZ included insisting not only on the oppressive commercial terms of the 2008 Agreement but also on the incorporation of their own Terms and Conditions. Thus (adding underlining for emphasis):
(a) On 14 April 2008 Brian Carter of Albemarle provided AZ with their proposed Sales Agreement (including the General Conditions of Sale), warning "Any proposed changes to this agreement may delay shipments".
(b) On 17 April 2008 John Steitz of Albemarle wrote: "As I mentioned last week, it is our desire to Supply DIP. However, it would be based on terms and conditions as prescribed by Brian Carter."
(c) On 18 April 2008 Marc Jones of AZ protested: "AZ cannot sign up to the terms and conditions set out by Brian for DIP supply as they are completely unreasonable and our governance processes will not allow me to do it."
(d) On 21 April 2008, Mr Steitz responded that unless mediation resulted in DIP and Propofol commercial agreements being entered into "any sales of DIP from Albemarle to AZ will be made according to the terms and conditions previously offered. I reiterate please contact Brian Carter as he will be coordinating this for Albemarle. On the subject of governance, I do not believe that I can help provide any solution."
(e) On 16 May 2008, Mr Carter repeated Albemarle's position:
"As Albemarle has advised you several times in the past, we have no desire to disrupt your operations. Moreover, as we have also consistently advised you in the past, we will continue to sell DIP to AstraZeneca at list price, pre-paid with order and subject to our Conditions of Sale."
(f) On 22 May 2008, Mr Jones responded disputing the assertion that Albemarle did not intend to disrupt AZ's operations and stating that "the price offered and the conditions attached to such purchase are deliberately calculated to put us in a position where we cannot accept your offer". He suggested a lower price, payment via an escrow account, and an agreement by AZ not to claim the difference in price.
(g) None of those proposed amendments was accepted by Albemarle.
(4) Thus, relying on AZ's inability to resist, AC drove through not just the commercial bargain but also their own desired ancillary terms, including the law and jurisdiction provisions, which were plainly disadvantageous to AZ, as compared to those which previous applied to the supply of DIP by AIC.
"AstraZeneca contends that its consent to each term of the Second Agreement was procured by economic duress".
"…as a direct consequence of the economic duress placed on the Claimant, it was forced to enter into the Second Agreement…".
"In the circumstances, the exclusive jurisdiction clause was clearly part of the overall deal which was being demanded of the Claimant in return for sale of further DIP."
(1) The evidence is that the jurisdiction clause in the 2008 Agreement is a typical clause which was incorporated by reference into the agreement. This removes the duress objection still further from the jurisdiction clause. AZ have to argue that by duress Albemarle impelled AZ to enter into an agreement, one term of which incorporated by reference terms and conditions, which in turn contained the jurisdiction clause.
(2) AZ did not at any stage object to the jurisdiction clause in the 2008 Agreement, whereas it did object to the price. Thus, AZ's letter of 22 May 2008 proposed various changes to the draft of the 2008 Agreement, including that:-
(a) payment should be made into an escrow account;
(b) the price should be amended to US$250 per kg; and
(c) AZ should be entitled expressly to reserve any claims which it might have against Albemarle, save that it would accept a more limited waiver of its claims for the difference between the 2005 Agreement price and US$250 (a point which AZ ultimately conceded);
but AZ did not seek to change the terms of the governing law and jurisdiction provision in the draft contract.
"..the general rule is clear: where parties have bound themselves by an exclusive jurisdiction clause effect should ordinarily be given to that obligation in the absence of strong reasons for departing from it"
"The authorities show that the English court may well decline to grant an injunction or a stay, as the case may be, where the interests of the parties other than the parties bound by the exclusive jurisdiction clause are involved or grounds of claim not the subject of the clause are part of the relevant dispute so that there is a risk of parallel proceedings and inconsistent decisions."
(1) The question of whether, as AZ contend, AIC breached the 2005 Agreement is a key issue in both those claims: the wrongful deprivation of AZ by AIC of DIP to which they were contractually entitled under the 2005 Agreement constitutes both a central element of the duress exercised against AZ, and of the unlawful means deployed pursuant to the conspiracy.
(2) That question falls for determination under the English jurisdiction clause and arises as part of AZ's claim for damages for breach of the 2005 Agreement. The American courts have expressly declined jurisdiction over that claim and AIC's claims against AZ for damages and punitive damages are under the same agreement. Thus, part (at least) of the issues arising in the duress and conspiracy claims has correctly been assigned to be dealt with here.
(3) The question of what attitude the American Courts will take to the enforcement of South Carolina jurisdiction clause remains unknown. Yet it is now almost two years since Albemarle first applied for an anti-suit injunction (on 16 May 2008). The 2009 Action, in which AC seeks to enforce that clause by obtaining another anti-suit injunction, is subject to an outstanding Motion to Dismiss and, even if it survives that challenge, it will not come on for trial until (at the earliest) December 2010. When and how those proceedings will ultimately be resolved is a matter of conjecture.
(4) As matters stand, therefore, the English courts alone have the opportunity to hear and determine all the related disputes, with the obvious advantages inherent in such a procedure.
(1) The premise of Albemarle's argument is false as the English court's jurisdiction is not dependent on the English court jurisdiction clause. As Albemarle were constrained to accept, the court would in any event have jurisdiction under ground (6)(c) (contract governed by English law) and/or (7) (breach of contract committed within the jurisdiction). Regardless of the outcome of the appeal in South Carolina the English court therefore has jurisdiction.
(2) For reasons already stated, AZ have much the better prospects of success on the appeal.
(3) If the appeal is dismissed then the parties will be in the same position as they are at present, but progress of the claim will have been significantly delayed.
(4) There has already been delay caused to the progress of the English court proceedings by reason of the South Carolina proceedings and the anti-suit injunction granted for a period. The South Carolina proceedings have proceeded slowly and there is every prospect of significant further delay. No decision on Albemarle's appeal is likely much before the end of this year. There is then the possibility of a rehearing en banc, which would cause further delay. There is then the possibility of an application for permission to appeal/appeal to the Supreme Court which would delay matters still further.
(5) If the appeal succeeds on the basis that federal law applies and under federal law the clause is permissive rather than mandatory, then jurisdiction would be being assumed on a basis which English law would not accept, English law being the applicable law as far as the English court is concerned.
(6) If the appeal succeeds on the basis of supersession then that is likely to provide a substantive defence to the contract claim regardless of where the claim proceeds, in which case the forum is unlikely to matter.
(7) There is an injustice in staying AZ's claim so that Albemarle can have recourse to the South Carolina courts when part of its avowed objective is to subject AZ to a punitive damages regime said to be available there, even in circumstances where Albemarle is seeking to advance a claim for breach of a contract, which it agreed with AZ should be subject to English law and exclusive jurisdiction.
(8) As the 2005 Agreement is governed by English law, the South Carolina courts will defer to any decision which may be made by the English court on questions of which party breached the 2005 Agreement and whether the breach was a circumstance giving rise to economic duress and/or arising out of a conspiracy. So, as a matter of sensible case management, it makes positive sense to progress the English claims to a point where it can decide on those questions.