In Accentuate Limited v Asigra Inc (A company incorporated under the laws of Canada) [2009] EWHC 265, the English Court was asked to overturn the earlier decision of a District Judge which set aside an order giving the English claimant, Accentuate, leave to serve the Canadian defendant, Asigra, outside the jurisdiction and which granted a stay of proceedings.

The claimant and defendant had entered into an agreement for the distribution of software products (the Agreement). The Agreement contained a choice of Ontario law and an arbitration clause requiring all disputes to be settled by arbitration in Toronto. Upon the defendant giving notice of it intention to terminate the Agreement, the claimant commenced proceedings in England claiming breach of contract and compensation under Regulation 17 of the Commercial Agents (Council Directive) Regulations 1993 (SI 1993/3053) which implemented EU law providing (broadly) for compulsory compensation for a commercial agent on termination of agency contracts. The claimant was granted permission to serve the defendant out of the jurisdiction but this was subsequently set aside and a stay pursuant to Section 9 of the Arbitration Act, 1996 was granted. The defendant had started arbitration proceedings in Toronto in which the arbitrators found that they had jurisdiction and went on to issue a number of awards. Meanwhile, the claimant appealed the decision of the District Judge.

Tugendhat J, having found that the claimant had a reasonable prospect of success in showing that it was an agent (and so Regulation 17 applied), went on to consider the effect of the arbitration award. He considered that although English law takes the view that the arbitral tribunal can rule on its own jurisdiction, the tribunal cannot be the final adjudicator of its own jurisdiction. The judge held that the English court must give effect to the mandatory provisions of EU law, notwithstanding any expression to the contrary on the part of the contracting parties. He agreed with the claimant’s argument that, where an arbitration clause purports to apply a foreign law which does not give effect to a mandatory provision of EU law, then the agreement to arbitrate is void (and so the court should not grant a stay under Section 9).

The judge concluded that the claimant had a good arguable case that its claim for compensation under Regulation 17 fell within either:

• CPR r6.20(5)(c) (a claim made in respect of a contract governed by English law). The judge held that if Regulation 17 applies, then the choice of Ontario law cannot be applied. The only other candidate for the applicable law here was that of England and Wales; or
• CPR r6.20(6) (a claim is made in respect of a breach of contract committed within the jurisdiction). If compensation was payable at all, it was payable in England and so the breach occurred in England.

Accordingly, the judge had been wrong to order a stay of the English proceedings. Permission to serve out of the jurisdiction was to stand and the stay of proceedings was lifted.