Presley also entered into a loan agreement with Masureel on the same day as the joint venture agreement. The loan agreement was attached as an exhibit to the joint venture agreement. It contained a choice of law and choice of forum clause that provided: “This agreement shall be governed by and construed in accordance with Belgian law. The courts of Kortrijk have non-exclusive jurisdiction for any dispute which may arise under or in connection with this agreement.”
Masureel, claiming that Presley had failed to pay as required by the loan agreement, brought an action in the Kortrijk court for payment. Presley defended on the grounds that the joint venture agreement and the loan agreement “constituted one whole,” and that the dispute arising under the loan agreement was within the scope of the agreement to arbitrate. She also counterclaimed for breach of the joint venture agreement.
The Belgian court held that it had no jurisdiction to hear the counterclaim, which was within the scope of the agreement to arbitrate. But it held that it did have jurisdiction to hear Masureel’s claim, as the parties had evidently intended that disagreements about the loan agreement could be litigated in the court notwithstanding the arbitration agreement in the joint venture agreement. It awarded damages to Masureel. On appeal, the Court of Appeals in Ghent affirmed, explaining that hearing claims but refusing to hear counterclaims, when the scope of the arbitration agreement so required, was correct except in the rare case where the claims and counterclaims are “indivisible,” and that wasn’t the case here.
Masureel sought recognition and enforcement of the judgment in the Texas state courts in Houston. Presley opposed recognition and enforcement on the grounds that the judgment was contrary to the parties’ agreement to arbitrate the dispute (as we have seen before, this is one of the grounds for nonrecognition under the UFMJRA). The trial court recognized the judgment, and on appeal, the court affirmed. The court decided the question under Texas law, and its decision seems clearly correct, as it seems pretty plain that the parties intended to allow lawsuits regarding the loan agreement. But the court also noted that the agreement was governed by Belgian law, and that Presley had given no reason to think that the Belgian courts had gotten the Belgian law of arbitrability wrong. 1
Photo credit: LimoWreck
- The parties’ choice-of-law clauses could have more clearly indicated that Belgian law governed both the main contract and the arbitration agreement, but it seem pretty clear that that was the parties’ intent. ↩