Choice of jurisdiction clause

Choice of jurisdiction clause

Contents

When you trade on a global basis, you must consider which country's courts will hear any disputes in relation to your contract. It's advisable to expressly agree this in the contract. If you don't, default rules will determine which country's courts have jurisdiction. If you're selling goods to a buyer in the EU, these rules are more straightforward than if the buyer is outside the EU.

Contract is with a person based within the EU

If you're selling to someone who has their home in another EU member state, the country whose courts have jurisdiction to hear disputes relating to the contract depends on whether:

  • you're selling to a consumer, and
  • you have an express term in the contract choosing the jurisdiction.

The Brussels I Regulation (recast) and Lugano convention will govern which court has jurisdiction in the EU.

Contract contains a choice of jurisdiction clause

If you're a buyer or seller based in the UK, and your sale-of-goods contract includes a written term stating that the courts of a country in the EU will have jurisdiction, generally this choice will be enforced in the EU. Unless you've agreed otherwise, the court you've chosen will have exclusive jurisdiction, meaning no other court will be able to deal with disputes. If the parties have chosen a court of an EU member state, this court will have jurisdiction regardless of where the parties are based.

However, there are important exceptions, one of which applies to consumer contracts where the seller carries out business in, or directs their commercial activities to, consumers in an EU member state. This has been interpreted to mean that if the consumer can buy goods on a website accessed in the consumer's home country, the seller has directed their commercial activities to the consumer's country. Consumers are regarded as the weaker party, so they'll always have a right to bring their claim against the seller in their home court. This is the case even if the contract of sale says otherwise. A consumer will have the choice as to whether to sue a seller in the consumer's country, in the country stated in the contract, or in the country where the seller is based. If you sell goods online, you should therefore consider whether you want to restrict access to your goods to particular countries in order to avoid being sued by consumers in others.

You'll only be able to sue a consumer in the consumer's country, regardless of what jurisdiction you've chosen in the contract.

So, if you're selling to another business, you can choose the courts of one of the EU member states to have exclusive jurisdiction. However, if you're selling to a consumer, you can only sue them in their country, and they can sue you in their home country, regardless of what your contract with them says.

Contract doesn't contain a choice of jurisdiction clause

If you've not chosen a country whose courts will have jurisdiction, the general EU default rule is that you must claim against a defendant based in the EU in their home court. In a sale-of-goods contract, there's an alternative option of suing in the courts of the country where the contract should have been performed, i.e. where the goods should have been delivered. So, if you're selling to another business in the EU, you could either sue them in their home country or in the country where you delivered the goods, if that's different. They could choose to sue you in the country of delivery, or in the UK as your home court.

If you're selling to a consumer and haven't chosen the jurisdiction in your contract, the rules applying to consumers set out above will also apply. You'll only be able to sue the consumer in their country, but they'd have the choice to sue you in their country or yours.

Contract is with a person based outside the EU

Assuming you're based in the UK, if the other party to the sale contract is based outside the EU, other laws will apply.

Contract contains a choice of jurisdiction clause

If you choose the UK as your jurisdiction in the contract, the UK courts will have jurisdiction. This applies if you're a buyer or seller based in the UK, and the other party to your contract has their home outside the EU.

The special rules that allow consumers to choose to sue in their home court and to be sued only in their home court don't apply to consumers outside the EU.

However, if the other party brings proceedings against you in a country outside the EU, or if you sue the other party in a country outside the EU, that country's courts will apply its laws to determine where the dispute should be heard.

Contract doesn't contain a choice of jurisdiction clause

If your contract is with a person based outside the EU and doesn't contain a choice of jurisdiction clause, the English courts will apply default rules to decide whether they have jurisdiction. If you serve the other party with your claim while they're physically present in England, an English court would have jurisdiction to hear the dispute. They also have jurisdiction if the other party agrees to this. If the other party doesn't agree to this, the English courts will apply special rules to decide whether to allow you to serve a claim outside England.

The courts in England will usually have jurisdiction to deal with a claim brought against you by a claimant outside the EU if your home is here.

Stay of proceedings

Even if a UK court considers that it has jurisdiction, in some circumstances it might decide that the court of another country is more appropriate to deal with the dispute. The UK court would then stop the claim from going ahead here, so that a foreign court could deal with the dispute. This is called a stay of proceedings.

Enforcement of foreign judgment

The rules on when a court in England will enforce a foreign judgment are complicated. It largely depends on which country's courts have given the judgment, and what the judgment is for.

In general, judgments of EU courts are recognised and enforced in the courts of other member states. EU judgments should be registered before being enforced in the UK.

Conclusion

It's usually better to have an express choice of jurisdiction clause in your contract. This choice will usually be upheld by a court. If you don't have this clause, the rules that apply are quite complicated. However, in sales to a consumer in the EU, you can't take away the consumer's right to sue the seller in the consumer's country by providing otherwise in the contract. If a claim is brought against you outside the EU, the law of the country where you're sued will determine the effect of the choice of jurisdiction clause. It will also determine which court will have jurisdiction.