A jurisdictional clause enables parties to agree at the outset of their contractual relationship which country’s or countries’ courts are to have jurisdiction to hear disputes arising from the contract.
These clauses can differ between exclusive; preventing a party bringing proceedings against the other in the courts of any other country other than the country set out in the agreement; and, non-exclusive; identifying one country as having jurisdiction, but where proceedings can also be brought in another country that has legal jurisdiction over the contract. The latter allows parties some flexibility, but with that, it opens the door to the potential of parallel proceedings being commenced in a jurisdiction less favourable to them.
A Practical Application
Normally an exclusive clause is most fit for purpose and the wording will expressly state the exclusive jurisdiction where disputes will be heard i.e. ‘That the courts of England and Wales will have exclusive jurisdiction to settle any dispute or claim’. This gives the contracting parties some certainty moving forward in their relations and security in the case of any breach or default.
Governing Law Clause
The contract would also typically have an additional governing law clause. This sets out the system of law that will be used to interpret an agreement and any disputes that arise.
Again, the most practical application is to match the jurisdictional clause i.e. ‘any dispute or claim shall be governed by and construed in accordance with the law of England and Wales.’, providing judicial process and jurisprudence under the same system will reduce costs.
However, it is possible for parties to agree an alternative governing system of law through the clause and this may be because it is most relevant to the products or services handled. Proceedings can still only be brought in jurisdiction specified, but the jurisdictional court has to interpret the law according to the specified governing system of law, as pleaded by a practitioner of that system i.e. a barrister.
For example, an English court handling a dispute governed by Law of Netherlands would require a Dutch barrister to present the legal argument, and it would be for the court to consider what the highest court in the Netherlands would rule on the issue.
Things to consider:
- Which location are the assets of either party based? Any court order fiscal or otherwise will need implementation, so jurisdiction selection is important.
- Without governing and jurisdictional clauses there can be costly and lengthy disputes on where contract disputes should be heard. If both parties operate under separate jurisdiction, this is important.
- Are the contracting parties EU members? And as such will the Rome Convention and Hague Convention apply, validating English governing law and jurisdictional clauses?
- If the contracting parties are outside the EU, are they contracting states of the Hague Convention on Choice of Court Agreement?
It is essential to incorporate governing law and jurisdictional clauses into your contracts that contain any international elements, the repercussions of not can leave you dealing with serious legal disputes in countries you are not familiar with, and with costs that you were not prepared for.
International and Cross Border Dispute Advice
Monarch Solicitors specialist international and cross-border dispute solicitors provide a tailor-made approach to your needs and can help with a range of international dispute related issues. Please get in touch with us by either calling 0330 127 8888 or emailing [email protected] for an initial consultation.
