See how we helped Michael

"Fantastic! The legal document I used was so comprehensive and easy to complete. It is very reassuring to know my business now has this level of protection"

Michael S, London

Choice of jurisdiction clause

Choice of jurisdiction clause

Contents

Jurisdiction clauses

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.

In the event of a dispute or a breach of contract, a jurisdiction clause would decide in which court (e.g. those of England & Wales or of another country) legal proceedings can be brought.

A jurisdiction clause can take various forms. If it states that all parties are bound to use only the courts of a particular country or state to the exclusion of all others, it's what is known as an exclusive jurisdiction clause.

Alternatively, it may only bind one party to use the courts of a particular area, while giving the other a choice. Or, the clause might name the courts of a particular country as having jurisdiction, but still allow the parties to use the courts of the country where they're resident or domiciled.

Jurisdictional clauses after Brexit

In contracts with businesses in the EU, exclusive jurisdiction clauses appointing the UK courts are expected to be upheld and enforceable throughout the EU.

However, if the jurisdiction clause is not exclusive, it will depend on the national domestic laws of the UK or the individual EU member states.

For a contract with a consumer in the EU, you can't bind them to the UK jurisdiction (more on this below).

Using a jurisdiction clause

Contracts with consumers and businesses based in the EU

Consumers

There are protections built in for consumers in the EU 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.

So, if you're selling to a consumer, you can only sue them in their country, and they can sue you in their EU home country, regardless of what your contract with them says.

Businesses

If you're selling to another business in the EU, you remain free to make use of an exclusive jurisdiction clause.

If you don't, the general default rule is that you must claim against the business in their home court.

That said, 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 a 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.

Consumers and businesses domiciled outside the EU

If you choose the UK as your jurisdiction in the contract, the UK courts will have jurisdiction. 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.

If your contract doesn't contain a choice of jurisdiction clause, the UK courts will apply default rules to decide if they have jurisdiction.

They 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.

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.

Copyright © 2021 Epoq Group Ltd. All trademarks acknowledged, all rights reserved

This website is operated by Epoq Legal Ltd, company number 3707955, whose registered office is at 2 Imperial Place, Maxwell Road, Borehamwood, Hertfordshire, WD6 1JN. Epoq Legal Ltd is authorised and regulated by the Solicitors Regulation Authority (SRA number 645296).