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Copyright © International Chamber of Commerce (ICC). All rights reserved. ( Source of the document: ICC Digital Library )
Introduction
To manage risk and provide for legal certainty, parties usually agree in advance where they will resolve any disputes that arise between them. These jurisdiction agreements perform two main functions:
• A positive function granting jurisdiction (i.e. giving a selected court a basis of jurisdiction which it may not otherwise have had); and
• A negative function depriving jurisdiction (i.e. taking away jurisdiction from courts that would otherwise have had it).
Parties will often elect to submit their disputes to a court that is wholly unconnected with the parties themselves or their contract. As noted by Avril Haines in her report to the Permanent Bureau of the Hague Commission:
"Being able to bring suit in a forum which is unconnected to the dispute or the defendant may be of importance to parties who prefer to choose a truly neutral forum for disputes arising out of their contractual relationship or who wish to take advantage of the special expertise of the judges in a particular court."1
Where said agreements are upheld by the courts, parties have the freedom to choose to have their dispute tried before the courts of a State with which there is no connection.2 For example, many cases tried in the Commercial Court in London involve non-English parties who have agreed upon trial in England.3
This paper focuses on jurisdiction agreements which confer 'exclusive' jurisdiction to a particular court, namely where the parties agree that all disputes arising out of the contract must be resolved in only one jurisdiction, thereby depriving all other courts of jurisdiction.
This paper will consider the reasons for which a court may refuse to enforce the parties' exclusive jurisdiction agreement, and in particular whether certain courts require an objective link between the chosen jurisdiction and the contract.
The first part of this paper focuses on the international conventions regimes. Several multilateral conventions seek to create certainty in the field of jurisdiction and the recognition and enforcement of judgments and the importance of such jurisdiction agreements. The Brussels I Regulation,4 its Recast5 and the Lugano Convention6 all create regimes requiring EU Member States or contracting States (as applicable) to give effect to choice-of-court agreements granting jurisdiction to the courts of an EU Member State or a contracting State (as applicable). The Convention of 30 June 2005 on Choice of Court Agreements adopted by the Hague Conference on Private International Law (the "Hague Convention") seeks to achieve a similar regime on an international level but is yet to come into force. Where such regimes apply, courts of EU Member States or contracting States (as applicable) have no discretion in accepting or declining jurisdiction irrespective of the connection of the contract to the chosen forum (subject to requirements of form, and certain exempt subject matters).
The second part of this paper will consider how courts respond to choice-of-court agreements where mandatory conventions do not apply.7 Where international conventions have no application, the courts retain their discretion to decide whether to enforce an exclusive jurisdiction agreement. Unsurprisingly, the exercise of this jurisdiction is not uniform.
Many national courts are content to accept jurisdiction if it is conferred on them, regardless of the existence or absence of an 'objective link' between their jurisdiction and the parties / their contract or dispute. However, these courts may be reluctant to give up jurisdiction that they would otherwise have, but for the parties' agreement without carrying out certain checks.
Other national courts require a connection between the chosen court and the parties / their contract or dispute, while some will only give effect to the parties' choice-of-court agreement if it does not infringe upon their domain of exclusive jurisdiction.
Lastly, some jurisdictions will not enforce choice-of-court agreements at all.
The second part of this paper will consider each of these approaches in turn and will also consider safeguards against potential adverse effects of the parties' choice of jurisdiction.
1 EU Regulation and Convention Regimes - No Discretion
Choice-of-court provisions in international conventions provide legal certainty and predictability.8 Where the parties exclusively choose the courts of an EU Member State or a State that is party to an international Convention (a contracting State), they can be certain that (i) the court chosen will have no discretion to decline jurisdiction for reasons of inconvenience; and (ii), in principle, any court of other EU Member States or contracting States (as applicable) will dismiss the case for lack of jurisdiction.
The Brussels I Regulation and the main international conventions will now be examined in more detail.
a) The Brussels I Regulation
Where one or more of the parties is domiciled in an EU Member State,9 the Brussels I Regulation applies to civil and commercial disputes.10 It leaves little discretion to the EU Member State's courts and makes choice-of-court agreements binding. Article 23 provides that where the parties have agreed that the courts of an EU Member State are to have jurisdiction to settle disputes, then those courts shall have exclusive jurisdiction.
The Court of Justice of the European Union ("CJEU") case of Trasporti Castelletti Spedizioni Internazionali SpA v. Hugo Trumpy SpA11 has confirmed that there is no requirement for a connection between the selected court and the underlying contract.
In that case, bills of lading giving exclusive jurisdiction to the English courts were entered into between Castelletti (an Italian company) and Trumpy (also an Italian company, agent for Danish carrier). When a dispute arose, Castelletti brought an action against Trumpy before the Italian courts.
The Italian Supreme Court of Cassation referred the case to the CJEU for a preliminary ruling on whether the contractually designated court (i) must not only be a court of an EU Member State, but (ii) must also have a connection to the nationality of the parties, to the contract or to the place of performance and/or conclusion of the contract, or whether the first condition is sufficient without there being any other link with the substance of the relationship.
The CJEU held that parties need not choose a court with a link to the case. Article 17 of the Brussels Convention (now Article 23 of Brussels I Regulation) is to be interpreted as meaning that the choice of court in a jurisdiction clause may be assessed only in the light of the requirements laid down in this Article.
A valid choice-of-court agreement will only be trumped under the Brussels I Regulation if:
• The matter falls within the exclusive jurisdiction of another EU Member State court. Article 22 of the Brussels I Regulation contains provisions on exclusive jurisdiction in disputes concerning certain types of subject matter, which override a choice of jurisdiction clause. This includes disputes about immoveable property, the formation, constitution and dissolution of corporations and the validity of their decisions, the validity of entries in public registers, trademarks and patents, and actions for the enforcement of judgments;
• The matter falls within special rules regarding disputes arising out of insurance, consumer and employment contracts (Articles 8 to 21);
• The defendant has submitted to a jurisdiction other than to challenge jurisdiction (Article 24) or
• The courts of another EU Member State have been seised first (Articles 27-28).12
Since its adoption, it has been recognised that some of these provisions are unduly restrictive. In particular, the requirement for one party to be domiciled in an EU Member State for a choice-of-court provision to be upheld and the fact that a court first seized court trump parties' choice-ofcourt agreement were recognised to have a unduly chilling effect on the effectiveness of Article 23.
b) Recast Brussels I Regulation
The Recast Brussels I Regulation13 is due to come into force on 10 January 2015. Whereas Article 23 of the Brussels I Regulation only applies if one of the parties is domiciled within the EU, Article 25 of the Recast Brussels I Regulation will apply if the parties have chosen to give jurisdiction to a court in the EU.14 In other words, all choice-of-court agreements in favour of an EU Member State court will be governed by the provisions of the Regulation, irrespective of the parties' domiciles.15
The Recast Brussels I Regulation also creates an exception to the previously absolute rule that any court other than the first seised must stay its proceedings pending a decision by the court first seised. Under the new Article 3(2), if the parties have conferred exclusive jurisdiction on a particular court of an EU Member State, that court may proceed to hear the case even if it was not first seised. Priority will be given to the court specified in the jurisdiction or choice-of-law clause and the 'first in time' rule is abolished. In so doing, the Recast Brussels I Regulation strengthens parties' choice-of-court agreements, insofar as an EU court is chosen. The fate of a choice-of-court agreement giving exclusive jurisdiction to a court outside the EU under the Recast Brussels I Regulation is uncertain.16
c) Lugano Convention
The Lugano Convention is applicable to relations (i) between the EU Member States (other than Denmark) on the one hand and Norway, Switzerland and Iceland on the other hand, and (ii) between Norway, Switzerland and Iceland. For the purposes of this section 1.c), each of the EU Member States (other than Denmark), Norway, Switzerland and Iceland is a "Lugano Contracting State".
Article 23(1) of the Lugano Convention provides that if the parties, one or more of whom is domiciled in a Lugano Contracting State, have agreed that the courts of a Lugano Contracting State are to have jurisdiction to settle any disputes, which arise in connection with a particular legal relationship, those courts shall have exclusive jurisdiction.
Article 23(3) states that where parties have agreed that the courts of a Lugano Contracting State are to have jurisdiction to settle their disputes, but where none of the parties is domiciled in a State bound by the Lugano Convention, the courts of other Lugano Convention States shall have no jurisdiction over their disputes unless the chosen court has declined jurisdiction.
d) Hague Convention
The Hague Convention has been signed (but not ratified) by the USA. Mexico has formally acceded to the Hague Convention and, on 10 October 2014, the EU Justice Ministers approved a decision ratifying the Hague Convention. The next steps are for EU Member States to approve the Hague Convention, and for the European Parliament to give its consent. Once this consent is given, the decision will be adopted by the European Council, and the Hague Convention will enter into force.
It may be argued that, under the Recast Brussels I Regulation, full effect will only be given to exclusive jurisdiction clauses in favour of non-EU courts when the Hague Convention comes into force, and then only between parties to the Convention. There may be an opportunity for the CJEU to clarify this point once both the Recast Brussels I Regulation and the Hague Convention come into force.
Contracting States to the Hague Convention agree that their courts will take jurisdiction where parties have included exclusive choice-of-court agreements in contracts regarding international matters.
Article 5(1) provides that a court designated by an exclusive choice-of-court agreement has jurisdiction to decide a dispute to which the choice-of-court agreement applies, unless the agreement is null and void under the law of the State of the designated court. Under Article 5(2), the chosen court is not permitted to decline to exercise jurisdiction on the ground that the dispute should be decided by a court in another State.
Article 19 permits a Contracting State to make a declaration to limit the application of the Hague Convention so that its courts may not have to entertain disputes which have no connection with that State even if its courts have been designated in an exclusive choice-of-court agreement between the parties.17
As Rapporteurs Hartley and Dogauchi note, this provision was heavily debated:
"[Article 19] provides that a State may declare that its courts may refuse to determine disputes to which an exclusive choice-of-court agreement applies if, except for the location of the chosen court, there is no connection between that State and the parties or the dispute. In practice, parties sometimes choose the courts of a State with which neither they nor the facts of the case have any connection. The reason is that neither party wants to go before the courts of the other party's State; so they agree to choose the courts of a neutral State. Some countries welcome this. Others feel that it imposes an undue burden on their judicial systems. The purpose of Article 19 is to accommodate States in the latter category."18
To date, no Article 19 declarations have been made. The European Commission has indicated that it does not intend to make such a declaration19 whilst certain US commentators have argued in favour of a declaration.20 If such declarations were made, it would reintroduce a possibility for State courts to decline jurisdiction on forum non conveniens grounds, thereby undermining the convention's aim of predictability and certainty.
2 Outside Convention Regimes - Court's Control and Discretion Remains
Where neither the Brussels I Regulation (or its Recast) nor any conventions apply, how courts will approach a parties' choice of jurisdiction clause will depend on a number of factors, some lying in the courts' discretion whilst others being dictated by various statutes. From one jurisdiction to another, the parties' freedom to choose the court(s) to rule on their disputes may be (a) unfettered in principle but, in practice, slightly limited in its negative effect, or (b) restricted by the requirement of a connection between the chosen court(s) and the dispute, or (c) limited to residual matters (which are not within the exclusive domain of certain courts), or (d) simply nonexistent. Furthermore, (e) even when the parties' right to choose a forum for their disputes is recognised, in the parties' own interest, it is subject to certain safeguards.
a) Freedom of Choice of Jurisdiction
Most jurisdictions will enforce the parties' choice-of-court agreement without the requirement for a link between the chosen court and the dispute.
The English Courts will readily take jurisdiction on the basis of a choice-ofcourt agreement in their favour - even where there is no connection to England. As already noted, a large number of cases heard in the London Commercial Court involve non-English parties.
French law also does not require a link between the chosen court and the dispute or parties in an international contract with a choice-of-court clause. The French courts take jurisdiction if the parties have selected such courts in their contracts, even if there is no objective link between the choice of jurisdiction and the country. The French Cour de Cassation has confirmed that parties can choose to submit their dispute to the jurisdiction of the courts of a neutral country even if there is no objective link with that country.21
Similarly, under Section 38 of the German Code of Civil Procedure (Zivilprozessordnung, "ZPO"), no objective link between the choice of jurisdiction and the country is taken into account in assessing whether to uphold the parties' choice-of-court clause.
In the United States, at a federal level, most courts can exercise personal jurisdiction on the basis of a parties' contractual forum selection clause, regardless of whether there is an objective link between the parties' choice of forum and the connection of the parties' contract to that particular forum. US Courts will generally exercise jurisdiction based on the parties' forum selection clause, except where the public interest weighs against the exercise of jurisdiction or the forum selection clause is unfair or unreasonable.
The seminal case is the US Supreme Court decision in Bremen M/S v. Zapata Off-Shore Co 20.22 A US corporation and a German company entered into a contract to tow a drilling rig from Louisiana to Italy, providing for jurisdiction of the English courts. The dispute that arose under the transaction was wholly unconnected with England or English law. Ignoring the choice-ofcourt agreement, the US company sued in the US. Overturning the decision of the Court of Appeal (which held that the claim should be heard in the US as England had no connection with the dispute other than the forum selection clause), the US Supreme Court held that:
"The choice of that forum was made in an arm's length negotiation by experienced and sophisticated businessmen, and, absent some compelling and countervailing reason, it should be honored by the parties and enforced by the courts."
In many jurisdictions the court in which proceedings were brought can decline or accept jurisdiction, using its discretionary powers, despite the parties' jurisdiction agreement, if the 'strong cause' test is satisfied.
Common law jurisdictions operate a discretionary rule in relation to foreign choice of jurisdiction agreements, in effect imposing a forum non conveniens limitation on the effectiveness of the agreement of the parties.
In England, the courts have a broad discretion to decide whether to grant a stay of proceedings to prevent injustice, or to decline to assume jurisdiction on grounds that there is another jurisdiction available to hear the claims and that the other jurisdiction is clearly the more appropriate forum.23
The English courts will generally uphold an exclusive jurisdiction agreement and hold the parties to their contractual choice unless a 'strong cause' is shown why this should not be so. The policy of keeping parties to their bargain will apply equally to jurisdiction agreements in favour of a foreign court and in favour of English courts.24 When considering the 'very strong reasons', the English courts will not take account of factors of convenience that were foreseeable at the time that the contract was entered into save in exceptional circumstances which involve the interests of justice.25
The 'strong cause' test was set down by the English courts in The Eleftheria.26 The defendants, who were Greek ship owners, sought the stay of proceedings brought in England, on grounds that the bill of lading contained a jurisdiction agreement in favour of the Greek courts. The English courts granted a stay in favour of the Greek courts. The Eleftheria established that where a plaintiff sues in England in breach of an agreement to refer disputes to a foreign court, the English court has discretion whether to stay the English proceedings or not. It was held that the discretion should be exercised by granting a stay unless 'strong cause' for not doing so could be shown. The burden of showing this is on the plaintiff. In exercising this discretion, the case held that the court will take into account a number of considerations, which are essentially the same as those taken into account under the English doctrine of forum non conveniens, such as:
• In what country the evidence on the issues of fact is situated, or more readily available, and the effect of that on the relative convenience and expense of trial as between the English and foreign courts;
• Whether the law of the foreign court applies and, if so, whether it differs from English law in any material aspects;
• With which country either party is connected, and how closely;
• Whether the defendants genuinely desire trial in the foreign country, or are only seeking procedural advantages; and
• Whether the plaintiffs would be prejudiced by having to sue in the foreign court because they would be deprived of security for that claim; be unable to enforce any judgment obtained; be faced with a time-bar not applicable in England; or for political, racial, religious or other reasons be unlikely to get a fair trial.
In Evans Marshall & Co v. Bertola,27 the claimant and the first defendant had agreed to refer disputes under the relevant contract to the Barcelona Court of Justice. The claimant brought proceedings against the first defendant in England and obtained permission to serve out of the jurisdiction on grounds that injunctions were sought to prevent acts from taking place in England and that breach of contract had taken place in England. The first defendant sought to have the permission to serve out of the jurisdiction set aside on grounds that it was not an appropriate case for service out in light of the Barcelona jurisdiction clause. The English courts applied the 'very strong reasons' test to overcome the Barcelona jurisdiction clause and found that the jurisdiction of the English courts was made out on the basis that the claims for injunctive relief directly concerned acts in England and that there was no available equivalent interlocutory relief in Spain.
The case of Citi March Ltd v. Neptune Orient Lines28 concerned a bill of lading that contained a Singapore jurisdiction clause. The claimant was able to show strong cause as to why it should not be kept to its bargain to sue in Singapore as this would avoid multiplicity of proceedings involving different parties.
In Donohue v. Armco29, the parties entered into several agreements containing an exclusive English choice-of-court agreement in connection with the sale of an insurance business. One side brought US proceedings against the other (and several non-parties) alleging fraud and claiming under the Racketeer Influenced and Corrupt Organizations Act ("RICO"). The US defendants sought an anti-suit injunction. The House of Lords held that parties to contracts containing exclusive choice-of-court agreements were, in principle, entitled to such relief, but the injunction would be refused in this case as the US proceedings against the non-parties would continue in any event, creating a risk of duplication of proceedings and irreconcilable judgments (an undertaking not to pursue the RICO claims diminished the risk of injustice to the US defendants of taking this course).
In the United States, forum selection clauses are binding on the parties unless the defendant can show that its enforcement would be unreasonable, unfair, or unjust. The US Supreme Court in The Bremen30 held that the choice of forum clause should be enforced and that the burden of proof was on the party seeking to breach the choice-of-court agreement to show that,
"trial in the contractual forum will be so gravely difficult and inconvenient that he will, for all practical purposes be deprived of his day in court. Absent that, there is no basis for concluding that it would be unfair, unjust or unreasonable to hold that party to his bargain."31
The 'strong cause' test has been adopted by other common law jurisdictions such as Canada and New Zealand. A defendant may obtain a dismissal or stay if he/she can show 'strong cause' why trial in New Zealand is not in the interests of the parties and of the ends of justice.32 Similarly, the courts of the British Virgin Islands ("BVI") may take jurisdiction where both forum non conveniens considerations and the circumstances generally militate strongly in favour of the BVI being the appropriate jurisdiction for the relevant dispute to be determined.
In some cases, a court that is not named as the chosen court in a contract may refuse to give effect to a choice of jurisdiction agreement on the basis that the chosen forum has an insufficient connection to the parties or the dispute.
Notwithstanding the lack of a formal requirement for an objective link in England, the need for some type of connection can be relevant in a finding that the English courts do have jurisdiction despite a choice-of-court agreement designating another State's courts. The English case of The El Amria33 related to a claim for breach of contract of sea carriage from 92 | ICC Institute of World Business Law Jurisdictional Choices in Times of Trouble Alexandria to Liverpool that was governed by a jurisdiction clause in favour of the courts of Alexandria, Egypt. England was found generally to be the forum with the closest connection to the dispute and the evidence. In reaching that decision the court examined a broad range of connecting factors to ascertain whether or not strong cause was established. The English courts applied the test in The Eleftheria to assess whether or not to take jurisdiction. The court was swayed by the 'potential disaster' of multiple proceedings involving different parties concerning the same or related allegations in both England and Egypt. The court also considered the location of almost the entirety of the evidence in England to be important.
In The Fehmarn case,34 the bill of lading provided that all disputes were to be heard by the Russian courts. Lord Denning held that:
"The English Courts are in charge of their own proceedings; and one of the rules which they apply is that a stipulation that all disputes should be judged by the tribunals of a particular country is not absolutely binding. It is a matter to which the Courts of this country will pay much regard and to which they will normally give effect, but it is subject to the overriding principle that no one, by his private stipulation, can oust these Courts of their jurisdiction in a matter that properly belongs to them."
Lord Denning then embarked on an analysis of the facts of the case to ascertain which country the dispute was more closely connected. He concluded that it was more closely connected to England rather than to Russia, and therefore refused to stay the proceedings. The extent to which this decision was influenced by the Cold War climate prevalent at the time is unclear.
In the United States, similar jurisprudence exists. In the case of Copperweld Steel Co. v. Demag-Mannesmann-Bohler, a USA steel caster brought a claim in both contract and tort against a German steel manufacturer in the US federal court. The district court held that a choice of forum clause in the contract pointing to German courts was 'unreasonable',35 since the evidence and the activities relating to the dispute were all in the United States. The federal appellate court subsequently upheld this decision.
French courts, in non-EU cases, will not uphold an exclusive jurisdiction agreement if the dispute cannot be considered as 'international' but rather exclusively related to France, the choice of jurisdiction being the only 'international element' of the contractual relationship.36
Brazilian courts will not deny jurisdiction, despite the choice of jurisdiction, when the defendant is located in Brazil; the obligations under the contract must be performed in Brazil; or the action arises from an act that occurred or which takes place in Brazil.37 The filing of a claim before a foreign court does not prevent a Brazilian court from hearing the same dispute.38
A Korean court may exercise jurisdiction over a case in violation of a choice-of-court clause if it determines that the chosen foreign court's lack of connection to the dispute and the parties is enough to justify ignoring an otherwise valid clause. For example, the Korean courts refused to enforce a choice-of-court agreement between two Korean companies that conferred jurisdiction on the New York courts.39 The Supreme Court of Korea supported the lower court's decision to hear the case, notwithstanding the choice-of-court agreement, since there was no 'reasonable connection' between the dispute and the New York court. The court further held that any choice-of-court agreement might be found invalid if it is unduly unreasonable or unfair.
Hong Kong courts will usually respect the parties' choice of jurisdiction in a contract. However, the Hong Kong courts may claim jurisdiction over a dispute in certain situations, despite the choice of jurisdiction, where the defendant is domiciled or ordinarily resident within Hong Kong; the contract that is the subject of the dispute was made in Hong Kong; the breach of contract took place in Hong Kong; or the whole subject matter of the action is land or movable properties situated in Hong Kong.
b) Connection Between the Chosen Court and the Dispute Required
In China, the Civil Procedure Law of the Peoples' Republic of China previously provided in Article 242 that parties to a contractual dispute that had a foreign element (or over property rights/interests involving a foreign element) could grant jurisdiction to any court that had practical connections with the dispute. The most recent case law suggested that the test for 'practical connection with the dispute' was an objective one, taking into account a number of factors, including the defendant's place of domicile, where the contract is signed and performed, the location of the subject matter of the contract and the place parties' place of business registration.
However, in August 2012, Article 242 was deleted. How the Chinese courts will now treat choice-of-court clauses where one of the parties is a foreign entity is a question of statutory interpretation. One view is that rules governing the treatment of choice-of-court clauses where one of the parties is a foreign entity have been supplanted by the rules governing domestic contractual disputes. This approach would mean that, under Article 34 of the Civil Procedure Law of the Peoples' Republic of China, the parties are entitled to grant jurisdiction in favour of any court provided they have 'actual connections with the dispute'. It is possible that this new 'actual connection' test is in substance no different to the 'practical connection' test as applied by the Supreme Court in its previous case law.
Maltese courts normally respect contractual clauses choosing the forum for the resolution of disputes arising under the contract, provided there is a reasonable connecting factor between the jurisdiction chosen and the subject matter of the contract or the parties. However, the courts do retain a residual jurisdiction and have on occasion declared that they were competent notwithstanding a contrary contractual provision, for example if either the evidence is more readily available in Malta, or if it is clear that the chosen jurisdiction had no particular connection or affinity with the dispute and/or the parties.
Certain courts will decline jurisdiction even if the parties have selected them, if there is no objective link between the contract and/or the parties, and the selected forum. The rationale behind this policy can easily be surmised: States do not wish to see their courts overburdened and congested with cases that are unconnected to them (except for the choice-of-court clause).
For example, the Swedish courts have the discretion to dismiss an action when the connection with Sweden is weak.40
Under Swiss law (and in matters falling outside the Lugano Convention), even if a court in Switzerland is the chosen court in a valid forum selection clause, the court may decline jurisdiction, except when one party has its domicile, ordinary residence or business establishment in the agreed upon Canton or Swiss law governs the matter of dispute.41
c) Exclusion of Matters Reserved Exclusively to Certain Courts
Russia is an example of a jurisdiction that recognises choice-of-court agreements except for matters reserved exclusively to the Russian courts.
Until recently, jurisdictional clauses in favour of foreign state courts were deemed not to have legal effect, and a Russian court assumed jurisdiction despite the presence of such a jurisdictional clause in a contract (unless provided otherwise in an international treaty to which Russia is a party).
However Articles 247.3 and 249 of the Arbitrazh Procedure Code of the Russian Federation expressly provide that Russian courts should recognise exclusive jurisdiction agreements. On 9 July 2013, the applicability of this rule was confirmed by the Presidium of the Supreme Arbitrazh Court of the Russian Federation through Informational Letter No. 158, in accordance with which clauses which establish exclusive competence of a foreign State court are to be recognised by Russian courts unless such the matter falls within the scope of exclusive jurisdiction of Russian Arbitrazh courts.
Russian legislation establishes a list of situations where Russian courts have exclusive jurisdiction, which include disputes relating to property owned by the Russian State (including privatisation and expropriation); immovable property located in Russia; patents, trade mark and other IP rights in Russia; registering or winding-up Russian entities; and challenging resolutions of boards of Russian entities.
Chinese law provides in Article 246 of the Chinese Civil Procedure Law ("CCPL") that the courts of China shall have exclusive jurisdiction over disputes concerning the performance within China of contracts of Chineseforeign equity joint ventures, Chinese-foreign contractual joint ventures, or Chinese-foreign cooperative exploration and development of natural resources. In addition, certain actions shall be under the exclusive jurisdiction of specific Chinese Courts. In accordance with Article 34 of the CCPL, if: (1) a lawsuit involves a dispute over real estate, the court of the place where the real estate is located shall have jurisdiction; (2) a lawsuit involves a dispute over harbour operations, the jurisdiction shall rest with the court of the place where the harbour is situated; and (3) a lawsuit arises out of the dispute over succession, jurisdiction is proper where the decedent was domiciled upon his death, or where the major estate is located.42
Egyptian courts have mandatory jurisdiction in all claims (except for those relating to real property abroad) against Egyptian citizens and foreign persons domiciled in Egypt. In addition, Egyptian courts have jurisdiction in claims relating to property in Egypt or contracts that are implemented in Egypt.
d) Exclusive Jurisdiction Agreements Never Enforced
A small number of States will refuse to enforce forum selection clauses as a matter of law.
For example, UAE law entitles the UAE courts to accept jurisdiction to hear all cases against UAE entities as well as foreign entities that are domiciled in the UAE. Jurisdiction will also be taken over a foreign entity that has no domicile in the UAE in certain circumstances, including where the action relates to assets located in the UAE or relates to a contract or obligation executed, entered into or implemented in the UAE. In these circumstances, it is the current policy of the UAE courts not to permit a restriction of their own jurisdiction unless the subject matter relates to immovable property that is located outside the UAE. Accordingly, the UAE courts almost always assume jurisdiction in respect of claims that they are competent to hear, irrespective of any jurisdiction agreement between the parties. If parties to a contract agree to grant jurisdiction to a non-UAE court when the UAE courts would have had jurisdiction, then, as a matter of public policy, the UAE courts may not uphold the agreement providing sole jurisdiction to a non-UAE court.
A South African court will exercises jurisdiction in a contractual dispute if the normal basis for jurisdiction exists, even if the parties have agreed that claims will be brought in the courts of a foreign jurisdiction.
In the United States, courts of the states of Idaho43 and Iowa44 do not recognise choice-of-court agreements.
e) Common Safeguards Against the Parties' Choice of Foreign Courts
Many jurisdictions seek to protect the parties against the adverse effects of their own choice of courts.
Most courts will accept jurisdiction despite the exclusive jurisdiction clause in favour of another jurisdiction, if the foreign court chosen by the parties has declined its competence.45
In the English case of Carvalho v. Hull Blyth Ltd,46 an Angolan resident agreed to sell shares to an English company established in Angola with no assets in the U.K. The buyer failed to pay the full price. Carvalho sued the buyer in England. The contract contained a choice-of-court agreement in favour of the District Court of Luanda, Angola. The buyer asked the court to stay the proceedings. The English court refused to do so. The reason was that, after the contract was made but before payment was due, a revolution had occurred in Angola, which became a sovereign independent State. Previously, it had been a Portuguese-ruled territory, applying Portuguese law and was part of the Portuguese court system (including a right of appeal to Lisbon). After the revolution, Portuguese judges were replaced by Angolan judges and appeals to Lisbon were abolished. Though Portuguese law still applied, it was subject to the spirit of the Angolan revolutionary process. The English Court of Appeal stated that even though the named court continued to exist physically and administer substantially the same law, it was now a court administering the law of a sovereign independent state without the final right of appeal to Lisbon, with differently selected judges. This meant that, though there was still a court called the 'District Court of Luanda', it was not in fact the court designated in the contract. The latter no longer existed.
A Swiss court will accept jurisdiction on the basis of necessity in cases where the court initially selected by the parties is inaccessible because of war or natural disaster. The position is similar under German law where, in very special circumstances, frustrated choice of jurisdiction agreements will be corrected.
Most jurisdictions will invalidate otherwise valid exclusive jurisdiction clauses that violate public policy. For example:
• Section 38 of the German ZPO allows parties to determine by agreement the competent court to a dispute arising from their contractual relationship. This agreement will be respected unless it entails a denial of justice or constitutes a violation of public policy.
• The Japanese courts have held that an exclusive jurisdiction agreement should be valid in principle, unless this would lead to an unacceptable result that violates public policy.47
• Under Finnish law, any clause of a contract (including a choice-of-court agreement) may be adjusted on grounds of inequity.48
• Article 5(2) of the Swiss Private International Law Statute provides that: 'A choice of jurisdiction is ineffective if a party is abusively deprived of protection at a place of jurisdiction provided by Swiss law.'
• The Bermuda courts may claim jurisdiction on public policy grounds if they find that the foreign proceedings contemplated or pending are vexatious or oppressive.49
• The Israeli courts will dismiss the action where there is a foreign jurisdiction agreement unless there are special circumstances, for example where the plaintiff is unable to bring his action abroad or would be faced with demonstrable discrimination. This was shown in a case where the other State involved was Iraq.50
As mentioned above, the European conventions place certain absolute limits on the parties' choice-of-court agreements. In the Brussels I Regulation, these are set out in Article 22. Pursuant to Article 23(5), any attempt to confer jurisdiction on a court that is contrary to the matters in Article 22 'shall have no legal force'. This same approach is seen in situations where the conventions do not apply.
As such, a choice of jurisdiction agreement will not be effective if it seeks to oust the forum's jurisdiction over matters stated to be the exclusive domain of the courts, i.e. mostly matters concerning certain types of parties in need of protection and matters which are, by essence, confined within national boundaries. This usually includes employment matters; consumer matters; family matters; inheritance matters;51 status or legal capacity of natural persons; rights in rem in immovable property; insurance-related dispute where the insured is located in the jurisdiction; disputes concerning the appointment of liquidators over companies incorporated in the forum; and acts of public/State entities.
3 Concluding Remarks
This review shows that the courts' discretion in evaluating the parties' choice-of-court agreements will be paramount when a case falls outside the scope of application of the Brussels I Regulation or the Lugano Convention. In such a case, there is no uniform approach to a choice-of-court agreement. Some courts will reject all choice-of-court clauses whilst some may disregard such a provision only in very limited circumstances.
This range of possibilities highlights the vigilance that parties and their legal advisers must exercise before committing to an exclusive jurisdiction clause. Indeed, should a court deny the jurisdiction of the agreed forum, the parties would find themselves in a situation where (i) it is unclear where the claim can validly be brought and/or (ii) litigation has to take place in a jurisdiction which neither party desires or is familiar with.
It remains to be seen whether the entry into force of the Hague Convention will lead to a more consistent approach across jurisdictions. This will depend on how many States ratify this instrument and how many declarations will be made, notably under Article 19 of the Hague Convention, "that [the Contracting State's] courts may refuse to determine disputes to which an exclusive choice-of-court agreement applies if, except for the location of the chosen court, there is no connection between that State and the parties or the dispute". In any event, the Hague Convention will also have to be articulated and/or reconciled with the Recast Brussels I Regulation, for instance with regards to the approach to agreements giving jurisdiction to non-EU courts (which currently seems uncertain under the Recast Brussels I Regulation).
1 A. D . Haines,' Choice-of-Court Agreements in International Litigation: Their Use and Legal Problems to Which they Give Rise In The Context of the Interim Text' - Preliminary Document No. 18 of February 2002 for the attention of Commission I (General Affairs and Policy of the Conference) of the XIXth Diplomatic Session - April 2002 (hereafter, the "2002 Hague Convention Report"), para. 5.
2 W. W . Park, International Forum Selection (Kluwer 1995) pp. 13-14: "a typical court-selecting jurisdiction clause in an international contract normally provides for the exclusive jurisdiction of courts in a country other than the residence of either party."
3 In a recent speech, High Court judge , Mrs Justice Carr , noted that of 705 rulings by the English Commercial Court, between 2008 and 2013, 61 percent of litigants were from outside the UK. She noted that overseas litigants came to London because it was a 'safe and neutral forum' overseen by an independent judiciary and that 'English law provides litigants with a significant arsenal of powerful interlocutory weapons including freezing injunctions and search orders'. Source: <http://www.ft.com/cms/s/0/8f336886-f07e-11e2-b28d-00144feabdc0.html#ixzz31VnNef87> (accessed 12.05.2014).
4 Council Regulation (EC) No. 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters.
5 Regulation (EU) No 1215/2012 of the Eur opean Parliament and of the Council of 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (recast)
6 Convention on jurisdiction and the enforcement of judgments in civil and commercial matters signed in Lugano on 30 October 2007 and published in the Official Journal on 21 December 2007.
7 In this exercise the analysis is restricted to cases where the validity of the choice-of-court agreement has not been in question. It will also be assumed for the purpose of this paper that a defendant has not submitted to the jurisdiction of the court seised in breach of the exclusive jurisdiction agreement.
8 "The objective of the [Hague Convention on Choice of Court Agreement] is to make exclusive choice-of-court agreements as effective as possible in the context of international business." T. Hartley and M. Dogauchi, Explanatory Report on the Preliminary Draft Convention on Choice of Court Agreements Prel. Doc. No 25 of March 2004, para. 1.
9 Denmark opted out of the Brussels I Regulation but concluded an agreement with the EU on jurisdiction and the recognition and enforcement of judgements in civil and commercial matters that extended the provisions of this regulation to Denmark. This agreement entered into force on 1 July 2007.
10 Similar rules also apply in European Free Trade Association("EF TA") states (Norway, Switzerland and Iceland) under the Lugano Convention.
11 Trasporti Castelletti Spedizioni Internazionali SpA v. Hugo Trumpy SpA (C- 159/97) [1999] E.C.R. I-1597; [1999] I.L.Pr. 492
12 JP Morgan v. Primacom [2005] EWHC 508 (Comm); [2005] 2 Lloyd's Rep. 665. This scenario will disappear with the entry in force of the Recast Brussels I Regulation, Arts. 31(2)-(4).
13 Regulation1215/2012/EU .
14 The agreement concluded between the EU and Denmark mentioned in end note 9 above will be amended from 15 January 2015 in order to be in line with the Recast Brussels I Regulation.
15 Art. 23 is replaced by a new Art. 25(1) which provides:" If the parties, regardless of their domicile, have agreed that a court or the courts of a Member State are to have jurisdiction to settle any disputes which have arisen or which may arise in connection with a particular legal relationship, that court or those courts shall have jurisdiction, unless the agreement is null and void as to its substantive validity under the law of that Member State. Such jurisdiction shall be exclusive unless the parties have agreed otherwise." (emphasis added)
16 Concerns have been expressed as to the ability of EU courts to honour jurisdiction clauses in favour of courts outside the EU if the conditions set out in Articles 33 and 34 of the Recast Brussels I Regulation are not met.
17 Art. 19 provides" Declarations Limiting Jurisdiction: A State may declare that its courts may refuse to determine disputes to which an exclusive choice-of-court agreement applies if, except for the location of the chosen court, there is no connection between that State and the parties or the dispute.".
18 T. Hartley & M. Dogauchi, Explanatory Report on Convention of 30 June 2005 on Choice of Court Agreements (The Hague, Netherlands 2007) paras. 229-230.
19 "Union law recognises choice-of-court agreements in situations where the choice of court is the only connection to the State of the chosen court. Union law does not require an additional connection to the chosen State besides the choice of court. There, therefore, seems no reason to exclude such situations from the scope of the [Hague] Convention. This was confirmed in the consultations carried out by the Commission among Member States regarding possible declarations under Art.s 19-20. The Commission therefore does not propose making declarations under these Arts." Proposal for a Council Decision on the approval, on behalf of the European Union, of the Hague Convention of 30 June 2005 on Choice of Court Agreements /* COM/2014/046 final - 2014/0021 (NLE).
20 See C. Tate, 'American Forum Non Conveniens in Light of the Hague Convention on Choice of Court Agreements' (2007) 69 University of Pittsburg Law Review 165.
21 Cass. com. 19 Dec. 1978, Clunet 1979.366, n. Gaudemet-Tallon, Rev. Crit. 1979.617, n. Huet (the French court considered valid the choice-of-court agreement between two French parties that chose a Swiss forum). In another case, the Paris Court of appeal held that the choice of a court that has no objective link with the dispute is valid in the absence of any fraud (CA Paris, 10 October 1990, n° 90/4408).
22 Bremen M/S v. Zapata Off-Shore Co. (1972) 407 US 1.
23 D. Joseph, Jurisdiction and Arbitration Agreements and their Enforcement (Sweet & Maxwell, 2010), para. 10.01.
24 Ibid., para. 10.05.
25 Winnetka Trading Corp v. Julius Baer International Ltd [2008] EWHC 3146 (Ch), at [18].
26 The Eleftheria [1969] 1 Lloyd's Rep. 237 at 242.
27 Evans Marshall & Co v. Bertola [1973] 1 WLR 349.
28 Citi March Ltd v. Neptune Orient Lines [1997] 1 Lloyd's Rep. 72.
29 Donohue v. Armco [2002] UKHL 64.
30 Bremen M/S v. Zapata Off-Shore Co. (1972) 407 US 1.
31 Ibid.
32 J. Fawcett( ed.), Declining Jurisdiction in Private International Law (Clarendon Press, OUP 1995) (hereinafter "Fawcett") at p.57.
33 The El Amria [1981] 2 Lloyd's Rep. 119.
34 The Fehmarn [1958] 1 WLR 159 at 161-2 (CA).
35 Copperweld Steel Co. v. Demag-Mannesmann-Bohler, 578 F.2d 953 (3rd Cir. 1978).
36 Cass. Civ .1,17Dec ember1985, n° 84-16338.
37 Brazilian Civil Procedure Code, Article 88.
38 Brazilian Civil Procedure Code, Article 90.
39 Judgment 96da20093 (9 Sept. 1997). Referred to in the 2002 Hague Convention Report, p. 6.
40 As reported in the2002 Hague Convention Report, page 4.
41 Swiss Private International Law Act, Art. 5(3). This provision is seldom applied. Courts in Zurich will tend to accept jurisdiction even in cases where they could decline it, if there is at least some nexus between the dispute and Switzerland or even substantial assets of a party located in Switzerland which could be relevant at the enforcement stage.
42 M . Zhang,'International Civil Litigation in China: A Practical Analysis of the Chinese Judicial System' (2002) 25 (59) Boston College International & Comparative Law Review.
43 Idaho Code § 29-110(1)" Every stipulation or condition in a contract, by which any party thereto is restricted from enforcing his rights under the contract in Idaho tribunals … is void as it is against the public policy of Idaho."
44 Davenport Mach & Foundry Co, v. Adolph Coors Co., 314 N.W.2d 432, 437 (Iowa 1982) ("We hold that clauses purporting to deprive Iowa courts of jurisdiction they would otherwise have are not legally binding in Iowa.").
45 For example, under French law see: Cass. 1re civ., 30 sept. 2009, n° 08-17.587: JCP G 2009.346, note E. Cornu; Rev. crit. DIP 2010.133, 1re esp., note H. Gaudemet-Tallon.
46 Carvalho v. Hull Blyth Ltd [1979] 1 WLR 1228.
47 Supreme Court judgment of 28 Nov. 1975. Koniglike Java China Paletvaat lijnen BV Amsterdam (Royal Interocean Lines) v. Tokyo Marine and Fire Insurance Co (1976) 20 Japanese Annual of International Law 106, referred to in Fawcett, at p.53.
48 Finnish Contracts Act 1929 (amended in 1999), s. 36.
49 However, the Bermudian Supreme Court is generally reluctant to intervene. In the case of Santel Ltd v. IPOC International Growth Fund Ltd an anti-suit injunction preventing the Defendants pursuing a RICO action in New York against the plaintiffs was refused on the grounds that the court did not have a sufficient interest to intervene notwithstanding the alleged unconscionability of the foreign proceedings.
50 Oneon UInsurance Co Ltd v. Moshe, 17 PD 646 (1963), referred to in Fawcett, at p.48.
51 For example, Brazilian courts will claim automatically jurisdiction over the following disputes, regardless of a choice of jurisdiction in a contract (Art. 89, CPC) over disputes concerning real property located in Brazil; inventory of property transmitted through inheritance, if the assets that compose the inheritance are in Brazilian territory.