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Danish jurisdiction in dispute between Danish and foreign naval architects

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Legal news
calendar 12 December 2021
globus Denmark

In a case concerning a claim for payment for ship design and royalties, the Maritime and Commercial High Court had to decide whether the case could be heard in Denmark, or whether the parties had agreed English jurisdiction. Due to ambiguity of the content of the agreements, the court found that English jurisdiction had not been agreed.

The parties were both naval architects and had an agreement on cooperation on ship design. It was part of the parties' cooperation agreement that disputes relating to the contract should be settled by English law before the English courts. However, the parties also agreed a subcontractor contract in connection with the first agreement. This agreement referred to the standard conditions of the Danish principal, referring to Danish law and jurisdiction. The dispute arose from the subcontractor contract, and the parties disagreed where the case should be settled.

Naval architect A referred to their standard conditions, which contained the Danish jurisdiction clause. The terms were incorporated in A's original offer for the subcontractor work, which had been negotiated further in an email correspondence between the parties. It was also argued that even if the court found that the standard conditions had not been adopted, the Danish courts were competent under the Brussels Regulation. This was because naval architect B had to perform their obligation to pay for the services giving rise to the claim in Denmark.

B argued that the subcontractor contract was part of the general cooperation agreement and that the dispute then should be settled in England. They argued that A's standard conditions had not been adopted between the parties because of the subsequent negotiations. In these later negotiations, the standard conditions were not explicitly agreed between the parties. Therefore, the Danish jurisdiction clause in the standard conditions could not apply to the dispute either.

Danish venue – as nothing had been agreed between the parties

The court agreed that a Danish jurisdiction clause was found in A's standard conditions. However, these conditions were not referred to in the parties' negotiations after the initial offer for the subcontracting agreement had been made. The court therefore considered that the jurisdiction clause in the terms had not been adopted between the parties.

Nor could the court rule whether the English jurisdiction agreement was valid based on EU legal principles between Denmark and the UK because the case was brought after 1 January 2021, i.e., after Brexit. The question then had to be decided under Danish law.

Even though the agreement on English jurisdiction was adopted in the general cooperation agreement, the court found that it did not apply to the subcontractor contract. The court found that it was not clear from the wording of the cooperation agreement that the subcontractor contract was also to be subject to the cooperation agreement.

As both parties were residents in the EU, Denmark and Cyprus, respectively, the court eventually settled the issue under Article 7 of the Brussels Regulation. According to this, a case will have jurisdiction where the agreement must be performed. As delivery under the subcontractor contract took place in Denmark, the court found that it was competent.

IUNO's opinion

The case is an example of much ado about nothing. The parties had made considerable efforts to adopt a jurisdiction clause, which failed concerning the specific dispute. The case shows that the courts may be reluctant to recognize that jurisdiction has been agreed when – as in the subcontractor contract –there is no clear agreement to that effect, and the contract containing a jurisdiction clause is interpreted narrowly so that it does not apply to the specific dispute.

The dispute ended up in Denmark , which would have the case even if nothing had been agreed.

The case is also one of the first examples of Brexit's practical significance in deciding jurisdictional issues.

It is unfortunate to spend time and money on disagreeing where to decide disagreements. IUNO recommends entering agreements on jurisdiction with the utmost care. Among other things, it should be avoided that there are multiple possible jurisdiction agreements, and in all circumstances, it should be decided which agreement is effective.

[The Maritime and Commercial High Court's ruling in case BS-18206/2021-SHR of 9 November 2021]

The parties were both naval architects and had an agreement on cooperation on ship design. It was part of the parties' cooperation agreement that disputes relating to the contract should be settled by English law before the English courts. However, the parties also agreed a subcontractor contract in connection with the first agreement. This agreement referred to the standard conditions of the Danish principal, referring to Danish law and jurisdiction. The dispute arose from the subcontractor contract, and the parties disagreed where the case should be settled.

Naval architect A referred to their standard conditions, which contained the Danish jurisdiction clause. The terms were incorporated in A's original offer for the subcontractor work, which had been negotiated further in an email correspondence between the parties. It was also argued that even if the court found that the standard conditions had not been adopted, the Danish courts were competent under the Brussels Regulation. This was because naval architect B had to perform their obligation to pay for the services giving rise to the claim in Denmark.

B argued that the subcontractor contract was part of the general cooperation agreement and that the dispute then should be settled in England. They argued that A's standard conditions had not been adopted between the parties because of the subsequent negotiations. In these later negotiations, the standard conditions were not explicitly agreed between the parties. Therefore, the Danish jurisdiction clause in the standard conditions could not apply to the dispute either.

Danish venue – as nothing had been agreed between the parties

The court agreed that a Danish jurisdiction clause was found in A's standard conditions. However, these conditions were not referred to in the parties' negotiations after the initial offer for the subcontracting agreement had been made. The court therefore considered that the jurisdiction clause in the terms had not been adopted between the parties.

Nor could the court rule whether the English jurisdiction agreement was valid based on EU legal principles between Denmark and the UK because the case was brought after 1 January 2021, i.e., after Brexit. The question then had to be decided under Danish law.

Even though the agreement on English jurisdiction was adopted in the general cooperation agreement, the court found that it did not apply to the subcontractor contract. The court found that it was not clear from the wording of the cooperation agreement that the subcontractor contract was also to be subject to the cooperation agreement.

As both parties were residents in the EU, Denmark and Cyprus, respectively, the court eventually settled the issue under Article 7 of the Brussels Regulation. According to this, a case will have jurisdiction where the agreement must be performed. As delivery under the subcontractor contract took place in Denmark, the court found that it was competent.

IUNO's opinion

The case is an example of much ado about nothing. The parties had made considerable efforts to adopt a jurisdiction clause, which failed concerning the specific dispute. The case shows that the courts may be reluctant to recognize that jurisdiction has been agreed when – as in the subcontractor contract –there is no clear agreement to that effect, and the contract containing a jurisdiction clause is interpreted narrowly so that it does not apply to the specific dispute.

The dispute ended up in Denmark , which would have the case even if nothing had been agreed.

The case is also one of the first examples of Brexit's practical significance in deciding jurisdictional issues.

It is unfortunate to spend time and money on disagreeing where to decide disagreements. IUNO recommends entering agreements on jurisdiction with the utmost care. Among other things, it should be avoided that there are multiple possible jurisdiction agreements, and in all circumstances, it should be decided which agreement is effective.

[The Maritime and Commercial High Court's ruling in case BS-18206/2021-SHR of 9 November 2021]

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