Jurisdiction means the geographic area over which legal authority extends or the power of a court to deal with legal claims.
A jurisdiction clause is intended to clarify which courts will have the power to deal with any disputes relating to the contract. It will usually be found towards the end of the contract and next to a governing law clause (which specifies the law that governs the contract).
A jurisdiction clause will usually specify:
- which court will hear any dispute arising out of the contract and
- whether such court has exclusive or non-exclusive jurisdiction to hear the dispute.
Having a jurisdiction clause in a contract is useful where either party to the contract is in a different country, provides services or products in a different country or has assets in another country. It helps to create legal certainty as to which court has the power to hear and deal with the dispute.
There are a number of factors to consider when deciding which court should have jurisdiction including, for example, that the parties may choose a court because it is their home court and they feel more comfortable.
If there is no jurisdiction clause agreed by the parties, local and international law will govern where proceedings can be brought. The lack of a jurisdiction clause in a contract can add uncertainty to a dispute situation and can lead to additional time and resource in deciding in which court to bring the claim. Even when a court has been chosen, this choice may be open to challenge by the other party adding to the complications and risk. The UK’s withdrawal from the EU has added to the complexity associated with determining applicable jurisdiction.
For more information please contact Gustaf Duhs or any member of the commercial contracts team at Stevens & Bolton LLP
Gustaf Duhs