jurisdiction clause

A jurisdiction clause is a contractual provision which designates the Courts which the parties agree will hear disputes, and/or the place of an arbitration. Thus, in the event of a dispute between the parties, the parties decided in advance the place - usually the courts of a country - that the disputes will be heard and determined.

In contracts between two or more English parties, a jurisdiction clause will be unnecessary if the parties intend that disputes will be determined by English Courts. Jurisdiction clauses should be used in contracts where there is a foreign element to the contract, such as a company formed outside the jurisdiction; the offer or acceptance of the contract is to take place abroad; goods or services are to be supplied (lex solutionis) from abroad; both the parties are foreign companies but wish to have the disputes arising from the contract heard in England.

Types of Jurisdiction Clauses

Jurisdiction clauses may be expressed in a variety of ways and with different degrees of particularity. An exclusive jurisdiction clause may read, 'The parties irrevocably submit to the exclusive jurisdiction of English Courts', and a non-exclusive jurisdiction clause as, 'The parties submit to the non-exclusive jurisdiction of English Courts'. An exclusive jurisdiction clause prevents the parties litigating in any forum other than the chosen place. A non-exclusive jurisdiction agreement precludes either party from later arguing that the forum identified is not an appropriate forum on grounds foreseeable at the time of the agreement.

In international contracts and agreements, such clauses are important, as the provision resolves at the outset where disputes will be heard and determined, failing further agreement between the parties.

Parties are not limited to fixing a single jurisdiction for disputes to be heard. For instance, contracting parties may agree that if Party A is to issue proceedings they will be issued in England; and if Party B issues a civil lawsuit, it will do so in a named country (for the purposes of English Private International Law) such as Russia or a State of the United States of America. In international trade contracts (& disputes arising out of them), jurisdiction clauses are able to be tailored as the parties require so as to cater for a wide variety of disputes; it may be that the parties wish  to designate the courts of one country to deal with one type or category of disputes (such as defective goods), but have disputes in respect to other categories heard by another (such as late delivery).

The Brussels Regulation plays in important part in determining which Courts amongst the Member States of the European Union have jurisdiction.  In cases where the Regulation fixes the exclusive jurisdiction as one of the Member State's Courts, jurisdiction clauses and agreements which attempt to displace the rules are of no effect.

Jurisdiction and choice of law clauses survive termination and repudiatory breaches of contract and remain enforceable by both parties.

Jurisdiction and Choice of Law

Jurisdiction clauses should be distinguished from choice of law clauses, which serve a different purpose. Choice of law clauses fix the law of the contract (the lex contractus), and dictate the rules of the legal system under which contract will be determined, such as the "law of England". Jurisdiction clauses indirectly fix the lex fori, namely the procedural law of the place where disputes are to be heard.

Breach of Contract and Anti-suit Injunctions

Under English law, issuing a civil lawsuit contrary to the terms of an exclusive jurisdiction clause contained in a contract is a breach of contract (other than where the Brussels Regulation applies). Judgments obtained abroad contrary to an exclusive jurisdiction clause designating England as the forum for disputes are susceptible to not being recognised or enforced in England pursuant to section 32 of the Civil Jurisdiction and Judgments Act 1982.

Anti-suit injunctions may be available to prevent off-shore legal proceedings in the event that the parties have agreed to a jurisdiction for disputes to be heard to the exclusion of all others. English Courts may prevent a defendant over which it has jurisdiction from commencing a civil lawsuit in a foreign court when it is necessary to do so. An anti-suit injunction may issue where litigation before the foreign court is or would be vexatious or oppressive. Vexatious and oppressive conduct includes where the foreign proceedings are forum non conveniens, such that (1) England is the more appropriate forum, and (2) the justice of the case requires that the claimant in the foreign court should be restrained from continuing the litigation abroad.

Where English Courts are the forum conveniens, and there is no legitimate personal or juridical advantage in the claimant in the foreign proceedings being allowed to pursue them, it does not automatically follow that an anti-suit injunction should be granted, as the interests of international cooperation between Courts of different countries also factor in the reasoning of English Courts.

Anti-suit injunctions involve interference with due process of a foreign court. Exclusive jurisdiction clauses are not seen to interfere with the process of foreign courts as the English Court is requiring a contracting party to adhere to the terms of contract (because it merely operates in personam upon a person subject to the jurisdiction of the English Court). In the case of non-exclusive jurisdiction clauses, the greater the connection between the parties and the foreign Court, the less an English Court will be inclined to interfere with the conduct of the proceedings in the foreign Court.

Applications for a stay of proceedings on the basis of forum non conveniens in proceedings commenced in England pursuant to a non-exclusive jurisdiction clause will usually fail unless the grounds relied on factors were unforeseeable at the time the contract was entered into.