High Court Clarifies Jurisdiction Clauses, Service Out of Jurisdiction, and Abuse of Process in Echosense Jersey Limited Case

Citation: [2023] EWHC 2700 (Comm)
Judgment on

Introduction

In the recent judgment of Echosense Jersey Limited v Eric Lawrence Schleelein & Ors [2023] EWHC 2700 (Comm), the High Court tackled various legal principles surrounding the scope of jurisdiction clauses, service out of the jurisdiction, the utility of negative declarations, and what constitutes an abuse of process due to the lack of a real and present dispute. The case presents an informative illustration of how English courts interpret contract clauses in light of jurisdictional disputes and the issuance of declaratory judgments.

Key Facts

Echosense Jersey Limited (“Echosense”) sought four declarations concerning investment agreements with several investors (“the Applicants”) who subsequently pursued personal liability claims against certain Echosense representatives in Israeli proceedings. Echosense, a company winding down its activities with minimal assets, was registered in Jersey but invested in medical research and development through an Israeli subsidiary.

The pertinent investment agreements contained English law and jurisdiction clauses. However, disagreements arose over whether certain claims pursued by the Applicants fell within the scope of these clauses. In addition, there was contention over whether Echosense’s request for negative declarations was meaningful or an abuse of process, as the Applicants claimed they had no intention of suing Echosense in England.

The court applied several key legal principles in this case, including:

  • Scope of Jurisdiction Clause: The court adopted a broad, purposive approach, stipulating that jurisdiction clauses should be constructed with the understanding that disputes arising from the relationship (but not the induction of the agreement through tortious acts) are decided by the same tribunal, referencing Fiona Trust v Privalov [2008].

  • Service Out of the Jurisdiction: The court remarked that claims must fall within the scope of jurisdiction clauses for service out to be permissible under CPR Part 6.33(2B)(b). Since the Third Party Claims (allegations of pre-contractual tortious conduct) did not fall within the Jurisdiction Clause, the service was impermissible.

  • Utility of Negative Declarations: Following the principles from Messier-Dowty Ltd v Sabena SA [2000], the court scrutinized the utility of granting negative declarations and emphasized the importance of their practical purpose and the avoidance of hypothetical disputes.

  • Abuse of Process: Assessing whether there was an abuse of process, the court relied on Tinkler v Ferguson [2021], recognizing that re-litigating an issue not previously decided can constitute an abuse if it undermines the integrity of the judicial process. The assertion from Jameel (Yousef) v Dow Jones & Co Inc [2005] that claims should not proceed if they lack substance was also considered.

Outcomes

The court’s ruling produced several outcomes:

  • Third Party Claims Set Aside: Service of the proceedings relating to Third Party Claims was set aside, and those claims were struck out since they fell outside the scope of the Jurisdiction Clause.

  • Echosense Jersey Claims: While the court tentatively considered staying or striking out the claims referred to as the “Echosense Jersey Claims,” which were not genuinely disputed, it sought to explore whether a final resolution could be reached via an amendment to the pleadings or a mutually agreeable order.

  • Undertaking Considered: An amended undertaking offered by the Applicants not to sue Echosense based on the conduct set out in Israeli proceedings was considered as reinforcing the absence of a real and present dispute. The court favored this practical approach over continuing hypothetical proceedings.

Conclusion

The judgment in Echosense Jersey Limited v Eric Lawrence Schleelein & Ors exemplifies the judiciary’s commitment to a principled yet pragmatic approach to contract interpretation and disputes concerning jurisdiction. It underscores the importance of having genuine legal disputes rather than theoretical or hypothetical matters driving litigation. Moreover, the case reinforces the court’s discretion in granting declaratory relief - it must serve a useful practical purpose and not just satisfy a theoretical concern. The decision affirms the court’s role in maintaining the integrity of the litigation process while ensuring that justice is administered effectively and proportionately.