What to keep an eye out for – jurisdiction clauses in commercial contracts

A jurisdiction clause is vital in any commercial contract, to provide certainty, but especially when the contracting parties are in different jurisdictions.

A clause of this type should, at the very least, encompass details of the following:

1. Which country’s court has jurisdiction to hear the dispute (jurisdiction); and
2. The substantive law that will apply to the interpretation of the agreement if a dispute arises (governing of law).

This article will focus on the former.

There are 3 primary types of jurisdiction clause, which we set out here:

Exclusive

This type of clause requires one court jurisdiction to hear a dispute emanating from the contract in question (the dispute must fall within the confines of the clause).  This would consist of an obligation not to pursue the dispute in another jurisdiction.

Non-exclusive

This type of clause specifies a court jurisdiction to hear a dispute but it does not preclude the parties from commencing proceedings in a different jurisdiction.

Asymmetric

This type of clause would allow different parties to commence proceedings in different jurisdictions. Most commonly, these clauses allow one party to commence proceedings in one specific jurisdiction and another to commence proceedings in any court that has jurisdiction. The validity of these clauses hangs in the balance and will depend on which jurisdiction is interpreting it.

The appropriateness of the above types of jurisdiction clauses will depend on the contract itself, details of the parties, their locations and ultimately, what is agreed upon between them.

Should you need any advice on a jurisdiction clause within a commercial contract please contact our commercial litigation team here without delay.