I right the wrongs: asymmetric jurisdiction clauses

In Hipgnosis SFH 1 Ltd v Manilow & Anor [2025] EWCA Civ 486, the Court of Appeal has unanimously allowed an appeal against a “heretical” High Court decision which posed significant questions as to how asymmetric jurisdiction clauses operate, including in Loan Market Association (LMA) standard facility agreements.

Background

In 2020, music rights investment firm Hipgnosis SFH 1 Limited (the Claimant), and Barry Manilow and his management company, Hastings, Clayton and Tucker Inc (the Defendants) had entered into a Music Catalogue Agreement (the Agreement). Under the Agreement, the Claimant paid an initial purchase price in exchange for the rights to the Defendants’ music catalogue. The Defendants were required to pay royalties to the Claimant, with the possibility of receiving an additional purchase price if certain conditions were met.

A dispute arose when the Claimant contended that the Defendants had failed to pay royalties which were due. The Defendants argued that the royalties had been lawfully retained as the Claimant had failed to pay an additional purchase price owed.

The Agreement contained an asymmetric jurisdiction clause (the Clause). The Clause provided for the exclusive jurisdiction of the English courts, save that “notwithstanding the foregoing” Mr Manilow was entitled to bring any claim relating to the purchase price in the courts in Los Angeles or New York.

The Claimant initially brought proceedings in England, seeking a declaration that no additional purchase price was payable and that royalties were to be paid by the Defendants. Shortly after, the Defendants issued proceedings in Los Angeles, claiming that they were owed the additional purchase price and alleging fraudulent or negligent misrepresentation. The Defendants also applied to the English High Court for a stay of the Claimant’s claim on the basis that the High Court did not have jurisdiction to hear claims in relation to the purchase price.

First instance

The High Court stayed the English proceedings. The first instance judge held that, once the Defendants had exercised their option to litigate in Los Angeles, the English courts’ jurisdiction over the purchase price dispute was effectively lost. The High Court concluded that the result was a “floating jurisdiction” that crystalised and became fixed in favour of Los Angeles after the Defendants chose to bring proceedings there. The Claimant appealed.

Key findings of the Court of Appeal

The Court of Appeal unanimously allowed the Claimant’s appeal and lifted the stay granted by the judge in the High Court.

No concept of a “floating jurisdiction”

The Court of Appeal firmly rejected the notion that the English courts’ jurisdiction could be “floating”, describing the concept as “heretical and contrary to authority”. Sir Julian Flaux C concluded that there was no legal basis for jurisdiction to exist at the time proceedings were issued by the Claimant, only to be retrospectively extinguished because the Defendants later exercised their option to litigate in a different forum.

Proper construction of the jurisdiction clause

The Defendants argued that once they exercised their option to bring a claim in Los Angeles, the English courts lost jurisdiction. The Court of Appeal disagreed, holding that the Clause created a “limited carve-out” to the Defendants’ submission to the English courts. Its only effect was to allow the Defendants to bring proceedings in Los Angeles in respect of the purchase price. While the Defendants had the additional right to litigate certain disputes in Los Angeles or New York, this did not revoke or override the English courts’ jurisdiction over claims properly issued by the Claimant, nor did it retrospectively invalidate those proceedings. Rather, the English courts’ jurisdiction was determined when proceedings were issued by the Claimant in England.

Whilst the Claimant submitted to the Los Angeles courts in respect of the Defendants’ claim, the Court of Appeal found that this only applied to claims brought by the Defendants and did not apply to the claims the Claimant had brought in England which were subject to the exclusive jurisdiction of the English courts.

The prospect of parallel proceedings

The Court of Appeal held there was no good reason to stay the English proceedings, as the Agreement was governed by English law and provided for submission to the English courts. Sir Julian Flaux C acknowledged that the Court of Appeal’s construction of the Clause created the possibility of parallel proceedings but noted that such a possibility is an inherent risk of asymmetric jurisdiction clauses.

Helpfully, the Court of Appeal noted that the ‘one-stop shop’ principle — that commercial parties are presumed to intend that all disputes are be heard in a single forum (Fiona Trust v Privalov [2007] UKHL 40) — does not outweigh the parties’ intentions as conveyed by the actual wording of an asymmetric jurisdiction clause. Rather, where it is clear an asymmetric jurisdiction clause provides for a dispute to be submitted in more than one jurisdiction, that must be given effect to (per Popplewell J as he then was, in Monde Petroleum S.A. v Westernzagros Ltd [2015] 1 Lloyd's Rep 330).

Distinction from LMA wording

An earlier Commercial Court decision, Lornamead Acquisitions Limited v Kaupthing Bank HF [2011] EWHC 2611 (Comm), had addressed an analogous scenario, in which the lender – faced with a claim brought by the borrower in the English courts — had sought to ‘renounce’ the equivalent LMA clause on the basis that it was entitled to do so as the clause was for the lender’s own benefit. A similar argument appears to have been run by the Defendants at first instance, as the Claimant had cited the approach in Lornamead to the judge in the first instance hearing. However, the issue had not been referred to in the High Court judgment. By finding the Defendants were bound by the Clause, the Court of Appeal’s decision helps assuage concerns that the first instance decision has changed the position as stated in Lornamead.

Key takeaways

The Court of Appeal’s examination of the LMA standard asymmetric jurisdiction clause gives helpful insight into the effect of the clause and the role of its constituent parts.

This case also serves as a reminder that if the parties intend for one party’s choice of forum to override or revoke proceedings issued by the other, that intention should be stated expressly. Rather than an asymmetric jurisdiction clause, the Defendants appear to have envisaged a mechanism that provided for the determination of certain issues by certain courts. That was not stated expressly. As Sir Julian Flaux C’s judgment noted, the Clause lacked “any agreement by the appellant that the courts of Los Angeles or New York will have exclusive jurisdiction over such claims and the provision simply does not address at all purchase price claims by the appellant.”

With thanks to Lucy Reynolds for her assistance in preparing this post.