Factual and Procedural Background
The dispute concerns two commercial agreements entered into between Plaintiff and Defendant, both directors of Company A, which is authorised by the Financial Conduct Authority (FCA) as an Electronic Money Institution. Defendant, the sole shareholder of Company A, agreed to sell his shares to Plaintiff, who advanced a loan of €700,000 to Defendant secured by a pledge of those shares pending Plaintiff’s FCA approval as shareholder. The agreements at issue are a Share Pledge and Loan Agreement (SPLA) and a Share Purchase Agreement (SPA), both dated 21 July 2022. Plaintiff seeks repayment of the loan under the SPLA, while Defendant challenges the jurisdiction of the court. The core procedural issue is whether this court or the courts of the Republic of Cyprus have jurisdiction, based on conflicting jurisdiction clauses in the two agreements.
Legal Issues Presented
- Whether the dispute arises out of the SPLA or the SPA for jurisdictional purposes.
- In the event the dispute arises out of or is connected with both agreements, which jurisdiction clause prevails.
Arguments of the Parties
Defendant's Arguments
- Clause 14 of the SPA confers exclusive jurisdiction on the courts of the Republic of Cyprus for disputes arising out of the SPA.
- Clause 3.2 of the SPLA does not exclude the application of clause 14 of the SPA.
- Since Plaintiff’s pleadings raise disputes under the SPA, those must be resolved in Cyprus before enforcement of any SPLA rights in Scotland.
- Clause 14 is an exclusive jurisdiction clause, whereas clause 16 of the SPLA is non-exclusive, requiring this action to be sisted pending Cypriot proceedings under the Hague Convention 2005.
- The agreements were intended to cover different periods and aspects, with no express priority between them.
- Potential dual litigation in two courts is a consequence of Plaintiff’s case framing.
Plaintiff's Arguments
- Clause 16 of the SPLA confers jurisdiction on this court for disputes arising out of the SPLA.
- The SPA forms an appendix and commercial background to the SPLA, which governs the loan repayment claim.
- The action is brought under the SPLA, specifically clause 9.1(b), not the SPA.
- The parties intended disputes under the SPLA to be decided by the courts of the United Kingdom, overriding conflicting earlier agreements like the SPA.
- Following the reasoning in Fiona Trust and Holding Corporation v Privalov, rational businessmen would intend one tribunal to decide disputes arising from their relationship.
- There is no clear language in the agreements requiring disputes to be split between different courts.
Table of Precedents Cited
| Precedent |
Rule or Principle Cited For |
Application by the Court |
| Fiona Trust and Holding Corporation v Privalov [2007] UKHL 40 |
Interpretation of arbitration clauses and assumption that parties intend disputes to be resolved by a single tribunal. |
The court applied the principle that the agreements should be construed to avoid splitting disputes between multiple courts unless clear language requires otherwise. |
| EJR Lovelock Ltd v Exportles [1968] 1 Lloyds Rep 163 |
Doctrine that irreconcilable jurisdiction clauses may render both void for uncertainty. |
The court noted that neither party asked to find clauses irreconcilable or void; thus, the court did not apply this principle to invalidate jurisdiction clauses. |
| Douglas v Glenvarigill Company Ltd 2009 SCLR 379 |
Commercial principle of "one-stop adjudication" to avoid multiple proceedings. |
The court endorsed the notion that parties likely intended disputes to be resolved by a single tribunal to promote commercial sensibility. |
| Hrvatske Šume v BP (2021) C-242/20, [2022] I L Pr 9 |
Restitution claims closely linked to pre-existing contractual relationships may fall within contract jurisdiction. |
The court found this did not add to the jurisdiction argument as the restitution claim related to the SPA, and no jurisdiction was pleaded for such claims in this court. |
Court's Reasoning and Analysis
The court began by acknowledging that both jurisdiction clauses are clear in isolation: clause 16 of the SPLA provides non-exclusive jurisdiction to courts of the United Kingdom, whereas clause 14 of the SPA confers exclusive jurisdiction to courts of Cyprus. The court then addressed the key question of which agreement the present dispute arises out of.
Objectively assessing the pleadings, the court noted that although Plaintiff asserts the claim arises solely under the SPLA, the allegations include breaches of both agreements. Crucially, the SPLA imposes a standalone obligation on Defendant to submit FCA paperwork, which is alleged to have been breached independently of the SPA. Moreover, Plaintiff’s claim for repayment of the loan is referable only to the SPLA, as evidenced by reliance on clause 9.1(b) of that agreement.
The court rejected the argument that the SPA’s exclusive jurisdiction clause automatically ousts this court’s jurisdiction, emphasizing that the SPLA’s clause 16 grants non-exclusive jurisdiction here. The court found no clear language in either agreement that disputes connected with both agreements must be split between two forums, nor that the Cypriot courts have jurisdiction to resolve the entire dispute.
The court reasoned that requiring a two-stage litigation process—first in Cyprus to determine SPA breaches, then in this jurisdiction to enforce SPLA rights—would be commercially impractical, costly, and contrary to the parties’ likely intentions. Applying the principle from Fiona Trust, the court construed the agreements to avoid multiple proceedings unless explicit language dictated otherwise.
The court also considered but did not find the entire agreement clauses decisive, given the parties’ clear intention to be bound by both agreements and the SPA’s role as an integral part of the SPLA.
Finally, the court noted a related restitution claim pleaded by Plaintiff arising from the SPA but did not consider it relevant to the jurisdictional decision.
Holding and Implications
The court REPELLED Defendant’s plea of no jurisdiction and the alternative plea of forum non conveniens, which was not insisted upon. The court confirmed that it has jurisdiction to determine the claim for repayment of the loan under the SPLA pursuant to clause 16.
The decision means that the proceeding may continue in this jurisdiction without being sisted or dismissed pending any proceedings in Cyprus. No new precedent was set; the ruling applies the established principle that parties are presumed to intend for disputes to be resolved by a single tribunal absent clear language to the contrary. The case will proceed to a by order hearing to regulate future procedure, with expenses reserved.