Jurisdiction Chosen

Agreement for Jurisdiction

Parties can agree that a particular state’s courts will have jurisdiction. There is no requirement that there is any connection between the parties to the dispute and the forum (court) designated to hear the disputes.

Subject to the rules on exclusive jurisdiction in the Brussels 1 Regulation (Recast) the general principle is that a choice of jurisdiction clause in an agreement is valid. This is subject to an exception by which an agreement may be null and void as to a substantive validity under the law of the EU member state.

The agreement may be contained in an agreement dealing with other matters.  It may be contained in general conditions or small print. As long as the agreements comply with certain formal requirements, the agreement is binding and subject to certain limitations.  This will even apply where there is a question over the validity of the contract itself.

European Union rules apply even if the defendant is not domiciled in the EU as long as the claimant is.  The European Union rules do not apply where the parties have chosen a non-EU State. Other common rules may apply.

Consumer Protection Rules

The general principle  that a choice of jurisdiction clause in an agreement is valid, is subject to  specific limitations in

• consumer cases
• employment and
• certain insurance  cases.

There are mandatory rules designed to protect particular categories of persons parties. It is, in effect, presumed that he or she is the weaker party.

In a consumer, certain insurance and employment contracts, a clause specifying jurisdiction entered before the dispute has arisen is not effective. Therefore the mandatory rules requiring that they be sued in the jurisdiction of their domicile apply.

Requirement for Agreement

The formal requirements which must be complied with for such an agreement are as follows:

• the agreement must be in writing or evidenced in writing. It must be in a form which accords with practices
• the parties have established between themselves or
• in international trade or commerce in a form which accords with uses which the parties knew or ought to have been aware of and which in such trade or commerce is widely known to and regularly observed by parties to contracts of the type involved in the trade concerned.

The requirement for writing generally requires that the document is signed by both parties.  It may be contained in small print referred to in the signed document. An electronic note will usually suffice as writing. An agreement not in writing may still be effective under the second condition above.

The designated courts have exclusive power to hear unless the parties otherwise agree.  If neither party to the agreement is domiciled in the EU, the chosen Court may exercise jurisdiction unless it declines to do so.

Where parties regardless of the domicile agree that the courts of the member state are to have jurisdiction, this is upheld regardless of whether one or more of the parties to the choice of court are domiciled in an EU state. The validity of the agreement cannot be challenged solely on the basis that the contract itself is not valid. Where action is claimed to come within the exclusive jurisdiction of several courts, all court other than the court first seized of it, are to decline jurisdiction in favour of the court first seised.

Where courts of the state agreed to have jurisdiction are seised of the proceedings, all other courts are to stay proceedings until such time as the chosen court determines whether it has jurisdiction.

If the parties regardless of the domicile agree that the court or courts of an EU member state are to have jurisdiction to settle any disputes which have arisen or which may arise in connection with particular legal relationship, the court shall have jurisdiction unless the agreement is null and void as to a substantive validity under the law of that EU states. Jurisdiction shall be exclusive unless the parties have otherwise agreed.

The choice of jurisdiction clause must be in

• writing,
• evidenced in writing or
• in a form which accords with practices which the parties have established between themselves or
• in international trade or commerce in a form which accords with the usage of which the persons are or ought to have been aware and which in such trade or commerce is widely known to and regularly observed by parties to contracts of the type involved in the particular trade or commerce concerned

The provisions do not apply to a choice of jurisdiction clause designating a non-EU state. The Hague (Choice of Court) Convention  may apply.

The member states need not be specifically identified by its name; it may be referred to by description or classification in the contract. For example they might provide courts of the place where a party has its principal place of business have jurisdiction.

Because the choice of court rules derogate from the basic rules, the onus is on the person who asserts that a choice of law applies to establish that this is the case.

The must be a genuine consent to the choice of law. It should be expressly accepted in writing. Therefore, inclusion in terms of sale which are proffered and inserted in small print may not be sufficient.

If it is in a foreign language it may be necessary that it is translated in the circumstances to show genuine consent. If the terms are part of ongoing trading terms applicable to dealings as a whole, they may apply for the purpose of consent.

The agreement including the choice of law clause must be in writing. It does not necessarily require signature. Email acceptance would suffice. Small print on the back of a document should be expressly referred to. A choice of law buried in small print is insufficient.

However, if it is part of a regular course of business it may be deemed consented to.

The agreement will be strictly interpreted. It must clearly apply. The dispute must fall within the scope of the agreement.

The agreement may be contained in rules are byelaws which a party accepts. This may be in the rules of a trade or professional organisation.

The choice of law clause may not be challenged on the basis of the validity of the contract alone. In effect the choice of law agreement is independent of the contract.

The question of whether the requirements of the Regulation apply are matters of EU law. Even though the agreement will usually be subject to domestic law, it is a wholly separate question from the validity of the contract.

The validity of the choice agreement does not depend on traditional concepts of freedom of contract. Consensus as to jurisdiction is a matter of fact in accordance with the provisions of the Brussels Regulation. The party relying on a choice of jurisdiction clause must show there is a genuine consensus between the parties as to where the dispute would be litigated. Trade customs may determine the matter.

The National court decides whether the dispute falls within the scope of the clause. Disputes must arise from the legal relationship in connection with which the agreement was entered. It does not extend to disputes based on civil wrongs or breach of legislation.