Lloyd's Maritime and Commercial Law Quarterly
RESISTING JUDICIAL REVIEW OF DISCRETIONARY CONTRACTUAL POWERS
Jonathan Morgan*
Braganza v BP Shipping
MSC v Cottonex
Just what are the limits of the jurisdiction assumed by the courts—it has certainly not been expressly conferred by those drafting contracts—to review discretionary powers in contracts? Earlier criticism in this Quarterly has had little effect on this lustily growing aspect of judicial review.1 Yet, despite its onward march, and despite the presence of senior academic support for it,2 we think it worth trying again to question the direction of travel—the aim being to slow down the expansion, and indeed to roll it back. When judicial review is being imported into straightforwardly commercial contexts, and justified by the putative general doctrine of good faith, what might originally have had the glimmer of good sense about it (in certain contexts) has been carried too far. Suggestions that review of discretionary decisions for “abuse of power” be elevated to mandatory status—on a par with the unexcludability of liability for fraud—betray a similar surfeit of enthusiasm. The youthful exuberance of this doctrine is evidently appealing to some, and no doubt gratifying to the judges wielding the power that it affords them. But it is in the highest degree doubtful that sophisticated commercial parties would want anything to do with it.
It may be that review can be justified for certain well-defined questions of fact. Also (although surely controversially), it could be justified on squarely paternalistic grounds in situations of power imbalance between the parties. But, even if so, its scope should be confined to such cases (which are well illustrated by the recent decision in Braganza v BP Shipping Ltd).3 Judicial review should not be generalised to encompass commercial contracts such as the contract of carriage in MSC Mediterranean Shipping Co SA v Cottonex Anstalt.4 And, should the temptation to review prove too strong to resist in such cases (which we hope it will not—though we are not entirely naïve), at the very least it must be recognised as a default rule. That is to say, an implied term based on the presumed intentions of the parties,5 that must necessarily yield to a contrary expressed intention in the contract. In other words, the review jurisdiction must be readily excludable. The justification for this is freedom of contract.
Two recent cases
The dispute in MSC v Cottonex
6 arose from the carriage by sea of a containerised consignment of cotton to Chittagong. The defendant shipper was unable to redeliver
1. J Morgan, “Against judicial review of discretionary contractual powers” [2008] LMCLQ 230.
2. R Hooley, “Controlling contractual discretion” [2013] CLJ 65.
3. [2015] UKSC 17; [2015] ICR 449; [2015] 1 WLR 1661; noted by W Courtney (2015) 131 LQR 552.
4. [2015] EWHC 283 (Comm); [2015] 1 Lloyd’s Rep 359.
5. Not that we accept that sophisticated commercial parties do generally intend their discretionary decisions to be reviewable for “abuse of power”: see Morgan, supra, fn 1.
6. [2015] EWHC 283 (Comm); [2015] 1 Lloyd’s Rep 359.
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