Lola, she was a showgirl....but her contract had an asymmetric clause... Hipgnosis v Manilow: Insights into the operation of asymmetric jurisdiction clauses

Asymmetric jurisdiction clauses are common in commercial and financial contracts and play a fundamental role when relations between the parties break down.

However, not all jurisdiction clauses are as straightforward as they seem; for example, so-called “asymmetric jurisdiction” clauses may give each party different rights for where in the world they can bring a claim. For example, whilst one party may have to use a single jurisdiction for all of its claims, the other party might be given more of a choice. The Court of Appeal was recently asked to consider an asymmetric jurisdiction clause in the case of Hipgnosis v Manilow[1].

Background to the dispute

The dispute involved a Music Catalogue Agreement that singer-songwriter, Barry Manilow, had entered into with Hipgnosis SFH 1 Ltd. The agreement, under which Manilow sold royalty rights to his recordings in exchange for a purchase price from Hipgnosis, included a jurisdiction clause which treated each party differently.

The clause gave the English courts “exclusive jurisdiction” in most cases. However, Manilow could bring claims relating to the “purchase price” in the courts of either Los Angeles or New York City. In practice, Hipgnosis could bring a claim only in the English courts, whilst Manilow could bring a claim elsewhere for specific issues.

Between 2023 and 2024 Hipgnosis made repeated demands for royalty payments, which Manilow argued that he withheld as Hipgnosis had not paid an additional purchase price which was required on top of the original sum. Hipgnosis denied that an “additional purchase price” was due and issued proceedings in the English courts in August 2024 to claim the royalties.

Sixteen days later, Manilow brought his own proceedings to claim the additional purchase price from Hipgnosis. As permitted by the jurisdiction clause, Manilow exercised his option to bring the claim in Los Angeles and also applied to the English court for a stay of the English proceedings brought by Hipgnosis so that the dispute would be entirely litigated in Los Angeles.

The High Court’s view

In deciding to grant the stay, the High Court held that there was a “floating jurisdiction” between England and Los Angeles/New York, and that exercising the choice by commencing proceedings in Los Angeles within a reasonable time of Hipgnosis’ commencement of English proceedings effectively “crystallised” the choice of jurisdiction, such that no pricing claims brought by either party could proceed before the English courts.

Manilow’s right to choose a jurisdiction was preceded by “notwithstanding the foregoing”, which the High Court interpreted as meaning that Manilow’s claim in the US would revoke Hipgnosis’s existing claim in the UK.

Hipgnosis appealed the stay, arguing that the agreement contained an asymmetric jurisdiction clause, giving the English courts exclusive jurisdiction over its own claims and more limited jurisdiction over claims from Manilow relating specifically to the purchase price.

Judgment on appeal

The Court of Appeal found in favour of Hipgnosis and overturned the stay imposed by the High Court. The High Court’s conclusion had partly hinged on its construction of “notwithstanding the foregoing”, although the Court of Appeal saw no way in which these words could prevent Hipgnosis from bringing its own claim in English courts.

Instead, “notwithstanding the foregoing” simply gave a “limited qualification to the otherwise exclusive nature” of the English courts’ jurisdiction. Manilow was permitted to bring his own purchase price claims in Los Angeles (or New York), although the Court of Appeal insisted that such a claim would not extinguish a claim that Hipgnosis had already brought in the UK.

Similarly, although the clause required Hipgnosis to “submit to the jurisdiction of the courts located in Los Angeles", this only referred to claims brought by Manilow in Los Angeles, and not to any claims brought by Hipgnosis, which was still able to pursue claims in the English courts.

Manilow’s argument that Hipgnosis could simply re-start its own claim in Los Angeles also failed. Whilst it could respond to Manilow’s claim in Los Angeles, the agreement still required Hipgnosis to bring all of its own claims in the English courts. Using the High Court’s interpretation, Manilow’s claim in Los Angeles would make it impossible for Hipgnosis to bring any claim regarding the purchase price, which would be “contrary to the interests of justice”.

Manilow also argued that, following presumptions derived from existing case law, the parties could not have intended for the same issue (i.e. the purchase price) to be litigated in separate jurisdictions simultaneously; such parallel proceedings would surely lead to a “procedural nightmare”.

However, the Court of Appeal considered Manilow’s reliance on this presumption to be “misplaced”. The clause wording clearly allowed for Manilow and Hipgnosis to bring purchase price claims in separate jurisdictions in certain situations. Furthermore, any such problems would be caused not by Hipgnosis using the English courts, but by Manilow choosing to litigate in the US when he had the choice to also use the UK.

The judgment acknowledged that the possibility of parallel proceedings (resulting in judgments from different courts) is inherent in the nature of these clauses. However, the commencement of proceedings elsewhere in the world will not prevent English courts from hearing a claim where the agreement allows or requires one party to use this system. The Court of Appeal was keen to highlight the importance of clear wording in jurisdiction clauses to reflect what the parties intend.

Practical implications

The judgment on appeal may provide some comfort for parties subject to asymmetric jurisdiction clauses. As long as they commence proceedings in the jurisdiction specified in the agreement, then the choice of jurisdiction will be valid in the courts of England and Wales, regardless of where the other party may bring its own claims.

When drafting jurisdiction clauses, especially asymmetric jurisdiction clauses, ensure that the scope of each party’s rights and obligations is clearly defined. Anticipate potential scenarios where parallel proceedings could arise and include mechanisms to manage them. Asymmetric jurisdiction clauses have a role to play but can be a minefield and can be the source of satellite disputes between the parties, which generally speaking, are best avoided for commercial parties.