Operational Company Disputes Do Not Trigger Exclusive Seat-Based Jurisdiction Within the UK

1. Introduction

This decision concerns the boundary between disputes about a company’s constitutional validity and disputes about compliance with contractual arrangements governing its operations. That distinction determined whether proceedings concerning an English-registered windfarm development company could continue in Scotland.

Christopher Moran Energy Limited sought interdict and interim interdict against Galileo Empower Limited (“GEL”), a director of GEL, and a director of their joint venture company, Dorenell Windfarm Extension Limited (“DWEL”). DWEL was not a respondent, although it received service as an interested party.

The petitioner alleged that the individual respondents, acting through DWEL, had entered into memoranda of understanding concerning a windfarm at Dufftown, Moray, without the required authority. Its case relied principally on provisions of a shareholders’ agreement regulating board approval and the powers of an operating sub-committee.

The respondents challenged Scottish jurisdiction. They argued that the proceedings concerned the validity of DWEL’s constitution and therefore belonged exclusively in England and Wales, where DWEL was registered. Alternatively, they maintained that England and Wales was the more appropriate forum.

Lord Summers rejected both objections. The decision permits the Scottish proceedings to continue; it does not determine whether the alleged contractual breaches occurred or whether an interdict should ultimately be granted.

2. Summary of the Judgment

• No exclusive constitutional jurisdiction: the provisions relied upon concerned operational or administrative arrangements, rather than the validity of DWEL’s constitution.
• Decisions of corporate organs receive different treatment: under Schedule 4 to the Civil Jurisdiction and Judgments Act 1982, challenges to such decisions do not automatically fall within the exclusive jurisdiction of the courts at the company’s seat.
• Scottish jurisdiction was sufficiently pleaded: the petition’s jurisdictional averments allowed it to proceed.
• No sufficient basis for declining jurisdiction: the respondents had not demonstrated that England and Wales was the more suitable forum.
• Further procedure remained necessary: the court repelled the respondents’ two preliminary pleas and ordered a further hearing on expenses, procedure, and whether interim relief was sought.

3. The Statutory Framework

3.1 Exclusive jurisdiction over constitutional validity

Section 16 of the Civil Jurisdiction and Judgments Act 1982 gives effect to the rules allocating jurisdiction between different parts of the United Kingdom in Schedule 4. Paragraph 11(b) confers exclusive jurisdiction on the courts of the relevant company’s seat where proceedings have as their object the validity of its constitution, its nullity, or its dissolution.

The petitioner accepted that, if its proceedings challenged the validity of DWEL’s constitution, they should have been commenced in England and Wales. The decisive question was therefore the substantive object of the petition, not simply how the petitioner described it.

3.2 Constitutional disputes and corporate decisions are not equivalent

The judgment also distinguishes the domestic scheme from Article 24(2) of the Brussels I Regulation recast. The latter includes the validity of decisions of a company’s organs within its exclusive-jurisdiction provision.

Schedule 4 takes a different approach. Paragraph 4 provides a non-exclusive jurisdictional ground for proceedings concerning decisions of corporate organs, while paragraph 11(b) addresses the specified constitutional matters. The omission of corporate-organ decisions from paragraph 11(b) was central to the court’s reasoning.

4. Analysis of the Court’s Reasoning

4.1 “Constitution” does not encompass every internal arrangement

The respondents argued for a broad understanding of a company’s constitution, encompassing how it is constituted or made up and the arrangement of its parts. Lord Summers instead focused on arrangements fundamental to the company’s structure or operation.

The court treated section 17 of the Companies Act 2006 as useful guidance, rather than as a definition mechanically governing the 1982 Act. Section 17 identifies the articles and the resolutions and agreements falling within section 29 as elements of a company’s constitution.

The significance of section 29 lay in the character of the arrangements it addresses: special resolutions and certain agreements binding members collectively. Lord Summers considered that these arrangements commonly concern matters fundamental to a company’s workings.

Importantly, the court recognised that an agreement may be hybrid, containing both constitutional and non-constitutional provisions. The decision therefore does not establish that shareholders’ agreements are invariably outside a company’s constitution. Classification depends on the relevant provisions and the issue actually raised.

4.2 The provisions relied upon were operational or administrative

The petitioner relied on three provisions of the shareholders’ agreement:

• Clause 4.5: arrangements for the frequency, location, and format of board meetings;
• Clause 4.7: a requirement that board decisions receive approval from at least one director associated with each shareholder;
• Clause 5.6: a requirement for board approval of specified matters, with approval by the operating sub-committee declared “null and void”.

Lord Summers characterised these clauses as operational or administrative. They regulated meetings, approvals, and the allocation of decision-making responsibility rather than raising a question about the validity of the company’s constitution.

The expression “null and void” did not change that classification. The alleged nullity arose from non-compliance with an operational requirement. A contractual provision describing an unauthorised approval as void does not, merely by using that language, transform the dispute into one concerning constitutional validity.

Clause 4.1 provided further support. It required decisions to comply with both the agreement and “the Constitution”, suggesting that the agreement’s authors treated those instruments as distinct. That wording was a contextual indication rather than a universal rule about the relationship between shareholders’ agreements and constitutions.

The petitioner also relied on a delegated services agreement. No particular provision of that agreement was identified as constitutional, and the court regarded its subject matter as operational.

4.3 Registration was supporting evidence, not a complete test

Section 30 of the Companies Act 2006 requires documents within section 29 to be delivered to the Registrar of Companies. Lord Summers understood that the shareholders’ agreement had not been filed and inferred that it had not been regarded as constitutional when made.

That inference supported the court’s interpretation. It should not be elevated into a rule that an unfiled document can never be constitutional: the judgment’s broader reasoning examined the provisions’ substance, function, and context.

4.4 The object of the proceedings must be assessed substantively

The petition contained no express challenge to the validity of DWEL’s constitution. Nevertheless, Lord Summers accepted that exclusive jurisdiction would arise if reliance on the shareholders’ agreement necessarily entailed such a challenge.

This is an important qualification. A party cannot avoid an exclusive-jurisdiction rule simply by presenting a constitutional dispute as a contractual claim. Equally, a respondent cannot bring an ordinary contractual disagreement within that rule merely because it concerns internal company decision-making.

Here, the respondents did not establish that enforcing the contractual approval requirements necessarily challenged the constitution’s validity.

4.5 The surrounding statutory language supported a fundamental-matters interpretation

Lord Summers read “validity of the constitution” alongside the references to nullity and dissolution. Applying the ejusdem generis approach, he considered those subjects indicative of matters fundamental to the company’s makeup, rather than incidental operational arrangements.

The judgment also identified a practical rationale for exclusive jurisdiction: questions affecting constitutional validity or nullity may concern the integrity of the company register, making the jurisdiction in which it is maintained the natural place for resolution.

This reasoning supports a limited construction of the exclusive category. It does not mean that every constitutional dispute must involve correction of a register.

4.6 Challenges to corporate-organ decisions do not automatically require proceedings at the seat

The respondents argued that the operating sub-committee was an organ of DWEL and that a challenge to its decisions belonged exclusively in England and Wales. They relied on the broader wording of Article 24(2) of the Brussels I Regulation recast.

The court rejected that argument because the governing domestic legislation deliberately distinguishes such decisions from constitutional-validity disputes. Paragraph 4 supplies a non-exclusive ground of jurisdiction; it does not make the company’s seat the only permissible forum.

This does not mean that Scotland automatically has jurisdiction over every dispute concerning an English company’s decisions. An appropriate jurisdictional basis remains necessary. In this case, the court held that the petition’s averments were sufficient.

The agreements’ non-exclusive English jurisdiction clauses did not prevent that result. They permitted proceedings in England but did not require litigation there alone.

5. Precedents and Other Authorities Cited

5.1 McGowan v Summit at Lloyds, 2002 SC 638

This was the central authority on the distinction between exclusive constitutional jurisdiction and non-exclusive jurisdiction over corporate decisions.

Lord Summers relied on Lord Reed’s explanation at paragraph 11 that the omission of decisions of corporate organs from the exclusive-jurisdiction provision was deliberate. Those proceedings instead fall within the non-exclusive special jurisdiction addressed by paragraph 4 of Schedule 4.

The authority therefore directly answered the respondents’ attempt to import the broader European rule into the domestic allocation of jurisdiction. The court’s task was to apply the distinction enacted in Schedule 4, not to replace it with Article 24(2). Its observation that European Court of Justice jurisprudence had no bearing was directed to that particular statutory difference.

5.2 Spiliada Maritime Corporation v Cansulex Ltd, [1987] AC 460

This authority supplied the test for the respondents’ alternative plea of forum non conveniens. At page 474, the relevant question was whether:

“there is some other tribunal, having competent jurisdiction, in which the case may be tried more suitably for the interests of all the parties and for the ends of justice.”

Its role was distinct from that of the exclusive-jurisdiction rules. Even if Scotland possessed jurisdiction, the court still had to consider whether another competent forum was more suitable. Lord Summers concluded that the circumstances did not justify declining to proceed.

5.3 Company-law commentary

The judgment also referred to Gower Principles of Modern Company Law, 12th edition, page 210, paragraph 10.12, when concluding that the respondents had not demonstrated constitutional provisions in either agreement. This was supporting academic authority, not a judicial precedent.

6. Why the Forum Non Conveniens Plea Failed

The dispute had substantial Scottish connections. The windfarm was in Scotland, most witnesses were said to be there, and the anticipated wrongs against which protection was sought were apprehended there.

The petitioner also maintained that contractual construction principles and the relevant statutory company-law provisions presented no material obstacle to a Scottish hearing. The respondents suggested that English estoppel might become relevant and differed from Scots personal bar. Lord Summers accepted that there could be a difference but found no sufficiently developed basis for assessing its relevance to this dispute.

The judgment therefore did not hold that English and Scots law are identical. It held that a speculative legal difference did not establish the superiority of the proposed alternative forum.

Other considerations supported continuing in Scotland:

• No corresponding English proceedings had been commenced despite the petition having been served some time earlier.
• There was consequently no existing English action requiring consideration of a stay to avoid interference with its progress.
• No evidence established that English litigation would be cheaper.

The absence of English proceedings was a contextual factor, not a rule that an alternative action must already exist before a forum objection can succeed.

Lord Summers also agreed that interim interdict could be competent pending contemplated English proceedings. That observation concerned the availability of protective relief; it was not a grant of such relief in this case.

7. Impact and Limits of the Decision

7.1 The company’s seat does not absorb every internal dispute

The decision confirms that a company’s registration in England and Wales does not necessarily require every dispute about its management to be litigated there. Courts must identify the actual object of the proceedings and apply the correct domestic jurisdictional category.

7.2 Contractual governance provisions require individual examination

Future disputes may turn on whether a particular clause concerns constitutional validity or operational compliance. The hybrid-agreement analysis makes provision-by-provision examination more useful than broad labels such as “shareholders’ agreement”.

There remains a fact-sensitive boundary. Board approval and shareholder representation provisions can be commercially fundamental, yet the court treated the particular clauses before it as operational. The judgment should not be read as conclusively classifying every approval or veto arrangement.

7.3 Drafting choices matter

Clear distinctions between articles, shareholders’ agreements, and delegated management arrangements may assist later jurisdictional analysis. Equally, parties seeking a mandatory forum should recognise that a non-exclusive jurisdiction clause does not achieve that result.

7.4 Forum objections require concrete support

The treatment of witnesses, location, costs, and potentially applicable legal doctrines illustrates the practical evidence needed to establish that another forum is more suitable. An undeveloped reference to a possible doctrinal difference was insufficient.

7.5 The substantive dispute remains unresolved

As an Outer House decision on preliminary objections, the judgment provides first-instance guidance rather than an appellate resolution of the contractual dispute. It does not establish that the memoranda were unauthorised, that the agreements were breached, or that interdict should issue. Expenses and further procedure also remained open.

8. Complex Concepts Simplified

Interdict and interim interdict

Scottish court orders prohibiting conduct. Interim interdict provides temporary protection before final determination.

Exclusive jurisdiction

A rule requiring a defined category of dispute to be heard only in the designated courts.

Non-exclusive jurisdiction

A basis allowing proceedings in specified courts without necessarily excluding other courts that also have jurisdiction.

Company constitution

The company’s foundational governance framework, including its articles and qualifying resolutions or agreements. Not every management contract necessarily forms part of it.

Organ of a company

A body through which the company acts, such as its board. The respondents argued that DWEL’s operating sub-committee was such an organ.

Forum non conveniens

A plea asking a court that has jurisdiction not to exercise it because another competent forum is more suitable for the parties and the interests of justice.

Ejusdem generis

An interpretive principle under which associated words help identify the kind of subject matter a statutory provision addresses.

Sist and by order hearing

A sist pauses proceedings. A by order hearing brings the case before the court for directions or further submissions.

9. Conclusion

The judgment draws a clear jurisdictional distinction between challenges to a company’s constitutional validity and disputes about compliance with operational agreements. It also confirms that the UK’s domestic rules do not make challenges to corporate-organ decisions exclusively justiciable at the company’s seat.

The Scottish proceedings could therefore continue. The central lesson is to examine the substance of the claim and the particular provisions relied upon—not merely the company’s place of registration or the terminology used in its agreements.