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AdActive Media v Ingrouille – Checking the fine print of your dispute resolution clause

The English Court of Appeal decision in AdActive Media Inc v Ingrouille [2021] EWCA Civ 313 is a reminder of the care that should be taken both when drafting dispute resolution clauses in contracts, and adhering to them when a dispute does arise.

In AdActive, the claimant commenced proceedings in California, relying upon a jurisdiction clause in the underlying contract in favour of the courts of California, and obtained a default judgment. The claimant then sought to have the judgment recognised in England, where the defendant resided. The defendant resisted the application for recognition on the basis that the claimant had pursued the Californian proceeding in breach of a different clause in the contract that provided for arbitration. English legislation, like the equivalent Cayman Islands legislation, prohibits recognition of a foreign judgment resulting from a foreign proceeding brought contrary to an agreement that the dispute in issue was to be settled other than by the foreign proceeding.

The difficulty for the defendant was that the contract appeared to provide for two different dispute resolution procedures – litigation in Californian courts (relied on by the claimant) and arbitration seated in Los Angeles (relied on by the defendant). The first instance English court recognised the Californian judgment, finding the arbitration clause to be fundamentally inconsistent with the litigation clause, and so void.

The Court of Appeal allowed the defendant’s appeal, explaining that the courts will strive to avoid the conclusion that a provision cannot, as a matter of construction, take effect, and found a way to read the apparently inconsistent litigation and arbitration clauses together. The upshot for the claimant was that it was unable to have its Californian judgment recognised in England, and will need to pursue the claims in arbitration.

AdActive Media v Ingrouille – Checking the fine print of your dispute resolution clause

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