Australia: What is the Effect of a Foreign Jurisdiction Clause in Commercial Disputes?

Last Updated: 16 September 2010
Article by Selva Veeriah

Global Partners Fund Limited v Babcock & Brown Limited (in liq.) & Ors [2010] NSWCA 196


The New South Wales Court of Appeal considered the effect of a foreign jurisdiction clause on a commercial claim issued in the Supreme Court.

The plaintiff sought to justify the proceeding on the basis that the alleged breaches of tortious, fiduciary, or contractual obligations concerning a partnership agreement had occurred within this jurisdiction. There was a clause in the agreement giving exclusive jurisdiction to a foreign court to determine all disputes arising from the agreement. The respondents applied to stay the proceeding on that basis.

The Court of Appeal granted the stay. It ruled that, in the absence of strong reasons to the contrary, a foreign jurisdiction clause would be enforced. It was not appropriate for claims to be determined by courts other than that to which the parties have agreed to submit their disputes.


The plaintiff was an investor. It sued Babcock & Brown Limited (in liquidation) ('Babcock & Brown') and its subsidiaries to recoup losses suffered from a failed investment. It was alleged that their Sydney office had ultimate control over certain key decisions about the investment.

The plaintiff had entered into a partnership agreement with Babcock & Brown for the purposes of making investment on a global basis. There was a clause giving exclusive jurisdiction to the English courts to determine any dispute arising out of or in connection with the agreement. The subsidiaries were expressly given a right to rely on the clause although they were nonparties to the agreement.

At the time of commencement, there were proceedings on foot in the English courts that included some aspects of the conduct complained of in this proceeding. There was a risk of multiplicity of proceedings.

Babcock & Brown and its subsidiaries applied to stay the proceeding on the basis that the dispute should be brought before the English courts. They also argued whether the court was an inappropriate forum ("forum non-conveniens").

The following questions fell to be determined: (a) whether considerations that applied to forum non-conveniens also applied to an exclusive jurisdiction clause; (b) whether a stay should be granted to enforce the clause regardless of any connection of the dispute with the present jurisdiction; and (c) if yes to (b), whether non parties to the agreement are entitled to take the benefit of the clause.


Babcock & Brown contended that the exclusive jurisdiction clause should prevail. The subsidiaries argued that they too had a right to rely on the clause to stay the claims made against them.

The plaintiff contended otherwise. It was argued that the dispute was properly before the court considering the circumstances of the claim. It said there was no evidence to show that the court was forum nonconveniens. Further, the subsidiaries were not parties to the agreement and therefore could not rely on the exclusive jurisdiction clause.

Primary Judge's decision

The primary judge dismissed the proceeding. The judge justified his conclusion on various independent bases, including the grant of stay to enforce the exclusive jurisdiction clause.

An additional issue arose in this dispute. The plaintiff required the leave of the court to proceed against Babcock & Brown since it was in liquidation. Leave was refused because there was clear evidence that Babcock & Brown was not in a financial position to finance litigation.

Decision of the Court of Appeal

The Court of Appeal resolved the appeal unanimously on the basis of the exclusive jurisdiction clause.

The Court found it was not appropriate for disputes that arise from a contractual relationship to be determined by courts other than that to which the parties have agreed to submit their disputes.

Where an agreement confers rights on identified non-parties, the exclusive jurisdiction clause should be construed as binding the parties with respect to the proceeding in which those rights might arise.

The subsidiaries, though not parties to the partnership agreement, were entitled in their own right to rely on the clause and request for a stay with respect to the claims against them.

The Court also said that the considerations applicable to staying proceedings based on forum non-conveniens were not applicable to applications based on an exclusive jurisdiction clause. A court will give primacy to the foreign jurisdiction clause and enforce it by granting a stay unless there are strong grounds (such as bias or countervailing circumstances) to justify refusal. In this instance, there was found to be none.

The Court also said that the trial judge was correct to take into account Babcock & Brown's inability to finance litigation as a relevant consideration in refusing leave to proceed against it.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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