Are Exclusive Jurisdiction Clauses Binding on Hong Kong Courts?
In a recent Hong Kong decision, the High Court elaborated on when it would exercise its discretion to depart from an exclusive jurisdiction clause.
Under Hong Kong law, Courts will enforce an exclusive jurisdiction clause in favour of a foreign country. However, this rule is not absolute and can be departed from in exceptional cases, as the Courts have the power to exercise a margin of discretion to withhold stay of proceedings in exceptional circumstances.1
The High Court explored one such exceptional circumstance in Madison Communications Private Ltd v Le Ecosystem Technology India Private Ltd and Le Corporation Ltd. The Court stated that even if an exclusive jurisdiction clause was applicable between the parties, no stay of proceedings should be ordered if there is a lack of credible defence, as this would amount to a ‘strong cause’ to override any exclusive jurisdiction clause. It was highlighted in this case that the Defendants failed to particularise its defence in any of its supporting affirmations, which left the Court with a clear impression that the Defendants never intended the matter to proceed to trial in any jurisdiction but were only seeking to delay the proceedings of their application. The Court was of the view that granting any stay would be a “futility”. In essence, the Court noted that without any credible defence, there is simply no legal issue to be resolved in any specific jurisdiction, therefore, exercised its discretion to depart from the exclusive jurisdiction clause.
It should be noted that the other issue in the case was whether a third party could rely on an exclusive jurisdiction clause to which it is not a signatory. This issue was resolved by the principle of privity of contract and it was concluded that the 2nd Defendant (the Hong Kong company) was in fact not privy to the contract which contained the exclusive jurisdiction clause and, therefore, could not rely on it. But the Court also took the opportunity to assert that an exclusive jurisdiction clause is not absolute, and it can and will be departed from in exceptional circumstances, particularly in this case where there was no credible defence.
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1Re Team Y & R Holdings Hong Kong Ltd  3 HKLRD 778, (Deputy High Court Judge Le Pichon).