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

08/03/2020 | 06:12am

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 the German proceedings was to be determined by English law. The letter was essentially part of an overall agreement package and it would be odd to think that the parties had intended different jurisdictional arrangements to apply to different elements of the package in the absence of express language;

b. the dispute concerning the letter originated from the parties' borrower/ lender relationship and although the facility agreement between Etihad and Air Berlin provided a basis for the legal doctrines advanced in Germany, there was a good arguable case that the Comfort Letter was not a binding contractual commitment but a statement of intention ancillary to the actual lending agreement;

c. that the jurisdiction clause contained within it an agreement not to sue in other jurisdictions. The jurisdiction clause was an agreement for exclusive jurisdiction in England and within the meaning of article 31(2) of Brussels Recast. In asymmetric clauses each obligation could be considered on its own. In this case the clause included a provision by Air Berlin not to sue in jurisdictions other than England and that promise was capable of being protected by article 31(2), notwithstanding that the English court was the second seised. It was irrelevant that the obligations under the clause were different for the different parties: that was their contractual bargain. That decision was also consisted with the decision in Nikolaus Meeth v Glacetal Sarl [1979] 1 CMLR 520.

Whilst our civil law colleagues often appear to be disparaging of anything other than complete symmetry in contractual obligations the decision in the Air Berlin case followed well-established authority. The rationale behind article 31(2) is to enhance party autonomy and avoid tactical jurisdictional litigation. Bearing in mind that rationale, there is no logical justification or juridical basis for treating symmetrical and asymmetrical clauses differently: the correct approach is to focus on the term which has been breached by issuing in a court or jurisdiction other than the one set out in the parties' agreement.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Robert Temmink
Quadrant Chambers
Quadrant House
10 Fleet Street
London
EC4Y 1AU
UK

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