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COMMERCIAL CONTRACT VOCABULARY A-Z: J - JURISDICTION CLAUSES

A jurisdiction clause is a clause in a contract which fixes the venue where any disputes which arise in relation to that contract must be decided. ‘Venue’ means the courts or tribunals of a specified (named) country [or state, especially in the United States]. Jurisdiction clauses are a kind of boilerplate clause [1].


Commentary

Paragraph 1

Parties to commercial contracts should always think carefully about what should happen if a dispute arises in relation to the contract. In particular, a decision should be made about how those disputes should be resolved, and where. This is particularly important, for example, in cross-border commercial contracts, where the parties come from different countries (or ‘jurisdictions’). For example, if a dispute arises in a contract between a Brazilian company and a French company, in which jurisdiction should that dispute be resolved?


Paragraph 2

The parties will generally negotiate and agree the jurisdiction where any disputes will be settled. Of course, there are different ways in which contractual disputes can be settled - for example, litigation and arbitration, among others. It is important to remember that a jurisdiction clause represents the decision of the parties to resolve their dispute in a court rather than by arbitration. If the parties choose arbitration as a means of resolving a dispute, an ‘arbitration clause’ will be required, and not a jurisdiction clause.


Paragraph 3

Many factors will have to be considered in relation to making decisions about jurisdiction, including:

· Convenience – it may be easier, cheaper, and more convenient for you to bring (or defend) proceedings in your own jurisdiction.

· A preferred judicial system – some jurisdictions and legal systems, for example, are believed to be more sympathetic to buyers, and others to sellers.

· Enforcement – once you have a judgment in your favour, it needs to be enforced. For example, the location of any assets which a defendant has may be important here.


Paragraph 4

A jurisdiction clause in a contract may look something like this:

The parties submit all their disputes arising out of or in connection with this Agreement to the exclusive jurisdiction of the Courts of England & Wales".


Paragraph 5

It is vital to incorporate a well-drafted jurisdiction clause into your commercial contract. If you do not, complex rules will apply which will probably make resolving the dispute much more costly and lengthier to resolve.


Paragraph 6

As we have said many times, great care must always be taken when drafting clauses, including boilerplate clauses such as a jurisdiction clause. Great care must also be taken during the lifecycle of the contract. Forgetting to incorporate a jurisdiction clause is at best careless and at worst negligent. However, what happens if the contract contains more than one jurisdiction clause?


Paragraph 7

That situation sounds unbelievable, but it was a situation the English High Court has recently (20th January 2021) had to deal with in the case of Helice Leasing S.A.S v PT Garuda Indonesia [2021] [2]. The basic background to the case is that Helice (the lessor) leased (under a lease agreement) a Boeing 737 aircraft to PT (the lessee). Helice commenced proceedings against PT when PT allegedly failed to pay any of the rent for the aircraft between January and October 2020.


Paragraph 8

Interestingly, the lease agreement contained two ‘jurisdiction’ clauses (although clause - clauses 13.2 and 15.2(a). Clause 13.2 stated:


"Each of Lessor and Lessee hereby agrees that any dispute arising out of or in connection with this Lease Agreement, including any question regarding its existence, validity or termination, shall be referred to and finally resolved by arbitration under the Rules of the London Court of International Arbitration (the "LCIA Rules"), which rules are deemed to be incorporated by reference into this clause.


Clause 15.2(a) stated:

"If an Event of Default occurs, and for as long as it shall continue, Lessor may at its option (and without prejudice to any of its other rights under this Lease Agreement or that may arise by operation of Applicable Law), at any time thereafter:

(b) proceed by appropriate court action or actions to enforce performance of this Lease Agreement or to recover damages for the breach of this Lease Agreement;"



Paragraph 9

PT applied for a stay of the proceedings, on the basis that the parties had chosen arbitration as a method of dispute resolution. The High Court agreed and the judge, Mr Justice Calver, granted a stay of proceedings. In reaching that decision, the court applied the reasoning in a previous case called Fiona Trust v Privalov [2007] [3].


Paragraph 10

This case provides a good example of why commercial contracts should be carefully drafted, and reviewed, to ensure that this kind of expensive and unnecessary situation (which appears to have been a mistake) does not happen.

Notes:

[1] For boilerplate clauses, see the following post: https://www.cambridgelegalenglish.com/post/commercial-contract-vocabulary-a-z-b-boilerplate-clauses

[2] [2021] EWHC 99 (Comm). The full judgment can be read here: https://www.bailii.org/ew/cases/EWHC/Comm/2021/99.html

[3] [2007] UKHL 40



EXERCISE 1

1. In paragraph 1, find a phrase (adjective) which means ‘multinational’.

2. In paragraph, find a collocation (word combination – here a verb and a noun) that means ‘to settle a disagreement’.

3. In paragraph 2, find a word (a noun) which means the process of taking legal action in a court.

4. In paragraph 3, find a word (a noun) which means to compel (or force) compliance with a law, regulation, or rule, etc.

5. In paragraph 3, find a word (noun) meaning something valuable.

6. In the example jurisdiction clause in paragraph 4, which word (a verb) means to give authority to someone or something else?

7. In paragraph 5, which word (adjective) means ‘expensive’?

8. Which noun in paragraph 6 means from the start or beginning of something until it ends?

9. What kind of agreement did the parties have in the case of Helice v PT, referred to in paragraph 7?

10. What word (an adverb) in paragraph 7 means something which is claimed to be the case?

11. In paragraph 8, what compound adverb in clause 13.2 of the agreement between the parties means ‘under this agreement’.

12. What phrase in paragraph 9 do you think means a ruling by the court which stops further proceedings in a case?



EXERCISE 2

Do you know the following?

1. The noun form of the verb ‘to resolve’.

2. The positive and negative adjectival forms of the verb ‘to negotiate’.

3. The negative form of the adjective ‘convenient’.

4. The positive adjective form of the noun ‘enforcement’.

5. The noun form of the verb ‘applied’.






ANSWER KEY


EXERCISE 1

1. cross-border

2. to resolve a dispute

3. litigation

4. enforcement

5. assets

6. submit (you ‘submit to’ something)

7. costly

8. lifecycle

9. A lease agreement

10. allegedly

11. hereby

12. a stay of proceedings


EXERCISE 2

1. resolution

2. negotiable/non-negotiable

3. inconvenient

4. enforceable

5. application

Note: This post is for educational and study purposes only. It is not intended to be, or offer, legal advice. If you need legal advice, you should always consult an appropriate lawyer.


© Cambridge Legal English Academy 2021

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