Court of Appeal decision shows possibility of parallel proceedings inherent in asymmetric jurisdiction clauses

The Court of Appeal has set aside an order staying certain claims brought in the English court on the basis that an asymmetric English jurisdiction clause did not give the party with the benefit of the clause a right to revoke their submission to the English court's jurisdiction: Hipgnosis SFH 1 Limited v Barry Manilow [2025] EWCA Civ 486.

The clause at issue required one party to litigate all claims in England but gave the counterparty the option of litigating certain pricing claims in the US. When proceedings were brought by the first party in England, including in relation to pricing, the counterparty invoked its option, brought proceedings in the US and disputed the English High Court's jurisdiction to hear the pricing claims. The High Court stayed the pricing claims, construing the jurisdiction clause as creating a type of "floating" jurisdiction which was somehow lost by the English court in respect of those claims when the other party's option to bring proceedings in the US was exercised, at which point jurisdiction crystallised in favour of the US. The Court of Appeal, lifting the stay, firmly rejected the concept that England might have had jurisdiction when proceedings were issued but then lost it because of the exercise of the option.

Asymmetric clauses, also known as "unilateral" or "one-way" clauses, are used frequently in certain types of finance transactions, so the clauses typically used in that context were considered in some detail by way of analogy. These clauses generally require the borrower to litigate in one jurisdiction but give the finance parties the option to litigate in any jurisdiction willing to hear the dispute. They can be useful tools for finance parties as they are flexible and keep the finance parties' options open depending on the location of the obligors' assets and the ease of enforcing a judgment in a given jurisdiction. As a result, they appear in many of the Loan Market Association (LMA) recommended forms of facility agreements

This case acknowledges that the possibility of parallel proceedings is inherent in an asymmetric jurisdiction clause (even where this is not express, as it is in the LMA wording). If the party with the benefit of an asymmetric English jurisdiction clause wants to be able to require any English proceedings issued by a counterparty to be discontinued if it exercises its option to commence proceedings elsewhere, this will need to be clearly stated in the clause.

The court may have a discretion to stay such proceedings, assuming the Hague 2005 Choice of Court Convention does not apply to an asymmetric jurisdiction clause – which is supported by the Court of Appeal's obiter comments in Etihad Airways PJSC v Flöther [2020] EWCA Civ 1707 (considered here), though it remains a point of academic debate, as the Court of Appeal noted in this case. In any event, however, very strong reasons will be needed to persuade an English court to decline jurisdiction where there is an English jurisdiction clause in its favour.

Background

The case concerned a Music Catalogue Agreement (the "agreement") between the appellant, Hipgnosis, and the respondents, including the singer-songwriter Barry Manilow. Pursuant to the agreement, Mr Manilow would pay certain royalties to Hipgnosis in return for payment of an initial purchase price. An additional purchase price was payable in certain circumstances.

The agreement contained a jurisdiction clause that included the following:

• "Each party irrevocably submits for all purposes of this Agreement … to the exclusive jurisdiction of the English courts" (referred to in the judgment as the 'second sentence'); and
• "Notwithstanding the foregoing, any claims made by [Mr Manilow] against Hipgnosis relating to the Purchase Price may be brought by [Mr Manilow] in the courts of Los Angeles, California or New York City, New York and solely in connection with such claims, Hipgnosis hereby agrees to submit to the jurisdiction of [those courts]" (referred to as the 'fourth sentence').

A dispute arose between the parties. Hipgnosis contended that Mr Manilow had failed to pay over receipts due under the agreement. Mr Manilow contended that he was justified in retaining the receipts because the additional purchase price stated in the agreement was due and Hipgnosis had not paid it. Hipgnosis denied that any additional purchase price was payable.  

Hipgnosis issued proceedings in the English court seeking, among other things, declarations (including negative declarations) relating to the receipts and the additional purchase price. Mr Manilow issued proceedings in Los Angeles shortly thereafter, making claims both in respect of the purchase price and for alleged fraudulent or negligent misrepresentation on the part of Hipgnosis. He then applied to the English court for an order that it did not have jurisdiction to hear claims in respect of the purchase price.

The High Court ordered a stay of the purchase price claims. In summary, the judge analysed the position as follows:

• The jurisdiction clause contained in the agreement was asymmetric. So far as claims were brought by Hipgnosis against Mr Manilow, the clause conferred exclusive English jurisdiction. However, as regards purchase price claims only, Mr Manilow had a choice as to whether to litigate in England (pursuant to the second sentence) or in Los Angeles/New York (pursuant to the fourth sentence).
• The question was whether Mr Manilow's choice of where to litigate purchase price claims was eliminated when Hipgnosis commenced proceedings in the English court, ie whether the effect of the clause was to create a first-past-the-post jurisdiction race where the party that commenced proceedings first in time obtained the other party's submission to that jurisdiction.
• The purpose of the words "Notwithstanding the foregoing" in the fourth sentence was to enable purchase price claims to be litigated in one of England or Los Angeles/New York at Mr Manilow's choice, and to retract Mr Manilow's submission to the English court if he chose Los Angeles/New York. This choice was unaffected by Hipgnosis commencing purchase price claims in England.  
• Although the English proceedings had been properly commenced, once Mr Manilow exercised his choice by commencing proceedings in Los Angeles, that crystallised the "floating jurisdiction" between England on the one hand and Los Angeles/New York on the other, in favour of Los Angeles. Consequently, Mr Manilow was entitled to a stay either as of right or as a matter of the court's discretion.

Hipgnosis appealed.

Decision

The Court of Appeal (Sir Julian Flaux giving the main judgment, with which Phillips and Snowden LJJ agreed) allowed Hipgnosis's appeal and lifted the stay.

Jurisdiction of the English court

The English proceedings had been properly commenced. The effect of the second sentence of the jurisdiction clause was that Hipgnosis could not have brought any of its claims, including claims in respect of the purchase price, other than in England. The effect of the fourth sentence was to provide a limited carve-out whereby Mr Manilow (but not Hipgnosis) had the option of pursuing a claim in respect of the purchase price in Los Angeles or New York.

The consequence of Mr Manilow bringing a claim in Los Angeles after the English proceedings were commenced was that there were parallel proceedings underway. This was a possibility inherent in an asymmetric jurisdiction clause and only arose here because Mr Manilow chose to exercise the option and then included additional claims in the US proceedings, which breached the exclusive jurisdiction provision in the second sentence. The High Court's analysis was that, although proceedings had been properly brought in England, the English court's exclusive jurisdiction over purchase price claims was considered to have shifted to Los Angeles when Mr Manilow exercised the option. This was described as a floating jurisdiction which had crystallised in favour of Los Angeles. However, the Court of Appeal rejected this analysis as "heretical and contrary to authority". The Court of Appeal dismissed Mr Manilow's contention that the effect of the words in the fourth sentence "Notwithstanding the foregoing", together with Hipgnosis's submission to the jurisdiction of the court of Los Angeles, was to revoke the English court's jurisdiction. This phrase simply provided a limited qualification to Mr Manilow's otherwise exclusive submission to the English court (ie in respect of purchase price claims). It could not be construed as revoking his submission to the English court or extinguishing the jurisdiction that the English court already had over all of Hipgnosis's claims. Hipgnosis's submission to the courts of Los Angeles was limited to purchase price claims brought by Mr Manilow. Any purchase price claims that Hipgnosis might have could only be brought before the English court.

The suggestion that Hipgnosis could bring a counterclaim in California if, for example, it wanted to bring a claim in restitution for overpayment of the purchase price was also hopeless. Such a claim would breach the exclusive jurisdiction clause in the second sentence, because the carve-out in the fourth sentence was only for Mr Manilow's benefit. Interpreting the "Notwithstanding the foregoing" wording as revoking the English court's jurisdiction over purchase price claims would preclude Hipgnosis from pursuing any claim relating to the purchase price in any jurisdiction. This interpretation was unsupported by the wording of the jurisdiction clause and would be contrary to the interests of justice.

Mr Manilow's reliance on the one-stop presumption derived from Fiona Trust v Privalov [2007] UKHL 40, namely that parties do not generally intend the same dispute to be pursued in parallel proceedings, was misplaced. Whether or not the presumption applied depended on the wording of the jurisdiction clause. In this case, since the clause clearly provided for disputes to be submitted to more than one jurisdiction, the agreement should be given effect even if it resulted in a fragmentation of disputes.

LMA asymmetric jurisdiction clause

In support of its analysis of how the jurisdiction clause in the agreement was intended to work, Hipgnosis referred to the regular use in finance transactions of asymmetric jurisdiction clauses which provide for the exclusive jurisdiction of the English courts but give the lender (or other finance party) the option to sue the borrower in other jurisdictions, citing the LMA's recommended form of asymmetric jurisdiction clause.

It relied on (among other decisions) Lornamead Acquisitions Limited v Kaupthing Bank HF [2011] EWHC 2611 (Comm), in which the Commercial Court rejected an argument that the LMA wording allowed the lender to dispute the English court's jurisdiction over proceedings properly brought by the borrower in accordance with the clause. The clause merely allowed the lender to elect to bring proceedings in another court of competent jurisdiction, in addition to England.

Mr Manilow highlighted various differences between the jurisdiction clause at issue and the LMA wording, which it submitted were individually and cumulatively substantial.

The Court of Appeal accepted that there were differences between the wording of the two clauses but found this did not detract from the correct interpretation of the clause at issue being that it expressly contemplated that there might be parallel proceedings in England and the US.

For example, the fact that the clause included a submission by Hipgnosis to the jurisdiction of the courts of Los Angeles or New York in respect of purchase price claims brought by Mr Manilow did not mean that the US courts would have exclusive jurisdiction over such claims. This wording simply did not address purchase price claims that might be brought by Hipgnosis.

Further, although the court noted that the LMA wording expressly recognised the possibility of concurrent proceedings, thereby rebutting the Fiona Trust one-stop presumption, and the clause at issue did not, the question for the court was whether the clause contemplated parallel or concurrent proceedings in respect of purchase price claims. On its proper construction, it did.   

Risk of parallel proceedings

The court considered that Mr Manilow had exaggerated the "potential disaster" or "procedural nightmare" that concurrent proceedings in respect of the same dispute might entail. The risk of irreconcilable judgments could be avoided by the application of the rules on issue estoppel. In any event, any disaster would be caused not by Hipgnosis properly commencing proceedings in England, but by Mr Manilow choosing to exercise his option to bring proceedings in the US in circumstances when he did not have to do so, given that the English court had jurisdiction over all of the claims.

Discretion to grant a stay

Having established that the English court continued to have jurisdiction over purchase price claims even after the option had been exercised, the question arose as to whether it should exercise its discretion to grant a stay. The court considered that there was no basis on which to do so.

The agreement was governed by English law and contained an exclusive jurisdiction provision covering all claims and providing for a submission to the jurisdiction for all purposes. The English court was the one court in which all issues between the parties could be determined in a single jurisdiction and was the obvious court to determine the dispute. Accordingly Mr Manilow could not rely on any of the common law grounds for granting a stay, such as the existence of another convenient forum where the dispute could be tried.