High Court considers validity of jurisdiction clause in post-default security letter

The High Court has allowed an application by a foreign borrower and guarantor challenging its jurisdiction over a lender’s claim for sums due under a loan agreement. The lender had served the claim form outside the jurisdiction without the court’s permission, relying on a jurisdiction clause in a security letter signed after the borrower’s default: Denning v Arcem Resources Ltd [2026] EWHC 2426 (Ch).

The decision highlights the risks of relying on English jurisdiction clauses in post-default security arrangements where the requirement of consideration may not have been clearly met. A claimant seeking to rely on such a clause to serve proceedings abroad without permission must establish a good arguable case that the document containing the clause is itself a valid contract. It is not sufficient to rely on the jurisdiction clause separately from the containing contract. Where a claimant seeks to rely on forbearance from suing as consideration, it must provide a plausible evidential basis that the forbearance was undertaken in return for the relevant promise. 

In the present case, the security letter contained an exclusive English jurisdiction clause. The lender relied on this clause to serve out without permission. The court held that the security letter did not provide a valid basis for service without permission because the lender had not established a good arguable case that the security letter was supported by consideration. However, although the borrower and guarantor succeeded in their jurisdiction challenge, the lender ultimately obtained permission to serve out on the basis that the underlying loan agreement (which did not contain a jurisdiction clause) was governed by English law.

For more information see this post on our Banking Litigation blog.