Trouble In The Middle East, Or Europe, Or England & Wales?

• Published date: 03 August 2020
• Subject Matter: Finance and Banking, Litigation, Mediation & Arbitration, Insolvency/Bankruptcy/Re-structuring, Financial Services, Insolvency/Bankruptcy, Trials & Appeals & Compensation, Civil Law
• Law Firm: Quadrant Chambers
• Author: Robert Temmink

At a time when the world's busiest airport by international passenger traffic, Dubai International is operating fewer than two dozen flights a day (as opposed to its usual complement of more than a thousand), and 80% of Emirates' full wide-body fleet are parked and wrapped at DXB or DWC, things have not been easy for Etihad in the neighbouring emirate of Abu Dhabi either.

In April 2017 Etihad entered into various finance agreements with Air Berlin. The finance documents included a Facility Agreement which contained an asymmetric jurisdiction clause (i.e. a clause containing different provisions regarding jurisdiction depending on which party had initiated proceedings), and a letter of comfort which set out Etihad's intention 'to continue to provide the necessary support to Air Berlin to enable it to meet its financial obligations as they fall due for payment for the foreseeable future and in any event for 18 months from the date of this letter'. The Comfort Letter had no jurisdiction clause.

Despite Etihad's financing, Air Berlin entered into insolvency and an Administrator was appointed. The Administrator commenced proceedings against Etihad in Germany alleging a breach of the comfort letter, alternatively a pre-contractual claim in culpa in contrahendo on the basis that Etihad used its negotiating power during the negotiations between the parties to avoid providing a clearly binding statement whilst, at the same time, inspiring the trust of Air Berlin that it would adhere to the commitment in the Comfort Letter.

Etihad sought declarations in England that the Berlin claims were subject to the English court's exclusive jurisdiction within Regulation 1215/2012 (Brussels Recast) article 25; that it was not liable for breach of the Comfort Letter because it did not create a binding promise to provide financial support; and that it was not liable on in culpa in contrahendo because the facts relied on in the German proceedings did not give rise to a cause of action known to English law.

In a judgment by Mr Justice Jacobs [2019] EWHC 3107 (Comm) the Court followed earlier cases, including Commerzbank Aktengesellschaft v Liquimar Tankers Management [2017] EWHC 161 (Comm), but found that even in the absence of prior authority it would have had no difficulty in finding:

a. since the jurisdiction clause was in the Facility Agreement which was expressly governed by English law, the question of whether the clause extended to the Comfort Letter and the other claims in...