International trade contracts: which court has jurisdiction?
When doing international business it is not always clear for the parties which court has jurisdiction when seeking remedies in disputes. Every country has their own rules regarding the competence of courts but what if these rules both appoint a different court? Luckily most traders are one step ahead and agree on jurisdiction on forehand. Dutch contract lawyer Marco Guit, specialized in international trade contracts, explains more.
How to agree on which court of which state has jurisdiction?
Whether laying down a forum selection in the individual sales contract or using a general jurisdiction clause in standard terms and conditions, it is wise to agree on some sort of jurisdiction to avoid endless litigation regarding conflicts of competence. When two (or more) European trade partners debate the jurisdiction of a court, the EU Regulation “Brussels I” (EEX-regulation in Dutch) is applicable (this regulation will be replaced by a new one in the near future). The regulation lays down rules governing the jurisdiction of courts in civil and commercial matters.
Agreement conferring jurisdiction: written or in common form
According to article 23 of this regulation parties can agree that a court or the courts of an EU Member State are to have jurisdiction to settle any disputes which have arisen or which may arise in connection with a particular legal relationship. In that case that court or those courts shall have exclusive jurisdiction unless the parties have agreed otherwise. Such an agreement-conferring jurisdiction shall be either:
- in writing or evidenced in writing; or
- in a form which accords with practices which the parties have established between themselves; or
- in international trade or commerce, in a form which accords with a usage of which the parties are or ought to have been aware and which in such trade or commerce is widely known to, and regularly observed by, parties to contracts of the type involved in the particular trade.
Jurisdiction clause in standard terms: common practice?
If for mentioned agreement is laid down in writing (e.g. part of a sales contract) and signed by both parties, there is little reason for debate. When a jurisdiction clause is only laid down in standard terms and conditions however, it is a different case. While handing over or signing standard terms is not common in international trade, not all contract parties are aware that their trading partner has conferred jurisdiction to a specific court (often in their own country of office). Then you can argue whether parties actually agreed on the jurisdiction. In these disputes the court dealing with the jurisdiction conflict, needs to assess whether having such a clause in standard terms is a common practice in the particular trade of parties (see article 23 sub 3 Brussels I Regulation). This depends on the specific circumstances.
Dutch law firm in jurisdiction disputes commercial trade
Always check the terms and conditions of your trading partner, especially when doing business overseas. Don’t just rely on the agreements made in your contract. And if you want to be completely sure, let a lawyer take a look at your contract and the general terms and conditions. This way you can avoid being forced to litigate in little European obscure courts.