Jurisdiction (Subject Matter)

• Author: International Law Group

In 1993, The Wharf (Holdings) Limited (Wharf), a Hong Kong company, won a franchise to operate a cable television system in Hong Kong. During the preparation of its bid, Wharf needed a partner with experience in the cable industry and negotiated separately with two U.S. companies, United International Holdings, Inc. (UIH) and NYNEX Network Systems Company (NYNEX), so that it could present them as experienced partners in the endeavor. UIH agreed to provide technical expertise for Wharf's bid and in return expected to receive 10% of the shares of the Hong Kong cable television system.

After Wharf won the bid, its board of directors stalled UIH's participation and informed UIH that it "is not ready to entertain your investment at this time." UIH brought an action in federal court premised on Section 10(b) of the Securities and Exchange Act of 1934 and Colorado law. The jury found in favor of UIH and awarded $67 million in compensatory and $58.5 million in punitive damages. Wharf noted an appeal.

The U.S. Court of Appeals for the Tenth Circuit affirms. One of Wharf's arguments on appeal was that Hong Kong law governed the relationship between Wharf and UIH. Since it barred the application of U.S. federal securities law, it prevented the exercise of federal jurisdiction. Wharf pointed to several documents that the parties had drafted - but never signed - that provided that Hong Kong law governed and that the parties would submit to the non- exclusive jurisdiction of Hong Kong courts.

The Court finds the unsigned documents insufficient to constitute binding forum-selection and choice-of-law provisions. Moreover, the Court disagrees with the premise underlying Wharf's argument, i.e., that forum-selection or choice-of-law issues implicate a court's subject matter jurisdiction.

"Forum selection issues raise concern not of subject matter jurisdiction but of improper venue or...