Cross-Border Disputes and Jurisdiction Issues
In an increasingly global society, with more and more reliance on e-commerce, there has never been more cross-border trade – and with cross-border trade comes disputes, and inevitable issues of legal jurisdiction.
Why is jurisdiction important?
When considering a dispute between two parties, the court will need to determine what the ‘Applicable Law’ is, and whether the court has jurisdiction. In the overwhelming majority of cases, this is a non-issue, however where the two parties are located in different countries and/or legal jurisdictions, this can be a vital issue for the court to determine.
Before the court can consider any substantive claim, it must first determine the applicable law. This could be the law of England & Wales, or in some cases English courts are able to apply the law of other jurisdictions where it is specified between the parties (for example, EU law, or in certain circumstances the law of other common law jurisdictions).
However, in the majority of cases the English courts will look to ensure that the applicable law is the law of England and Wales.
Alongside the applicable law, the court will need to be sure of its jurisdiction before considering any substantive claim. In many cases, the jurisdiction will be obvious (e.g. in domestic contracts where both parties are trading in England & Wales), or will be expressly specified in a contract. However, where a contract has an international element yet no jurisdiction is expressly specified, the court will need to consider the issue.
Contracts – How to ensure the court has jurisdiction
In general terms, where the contract has an international element (namely one or both parties are based outside of England & Wales, or where the contract involves the supply of goods or services to, from, or through more than one jurisdiction), it is sensible for the contract to specify the applicable law and the legal jurisdiction governing the contract, to avoid later issues of jurisdiction.
Parties to a contract have a relatively free hand when determining the jurisdiction to govern a contract, and can elect for whatever jurisdiction is most beneficial. However, in most international contracts the parties tend to elect for the jurisdiction of the courts of England & Wales, on the basis that the law within this jurisdiction is usually the most beneficial for the parties.
Care must be taken when electing for an alternate jurisdiction, as although the parties have relatively free reign, the jurisdiction must be that of a country – for example, a clause in a contract specifying that the applicable law/jurisdiction is that of ‘Jewish Law’ will not be valid.
Contracts – What happens if no jurisdiction is specified?
Where a contract is silent on the issue of applicable law and jurisdiction, either party to a claim (or the court may at its own discretion) raise an issue of forum non conveniens, commonly referred to as the ‘appropriate forum’ or ‘proper place’ doctrine.
When considering whether the courts of England & Wales have jurisdiction, it must first be considered whether the contract impliedly provides for such jurisdiction. For example, where two parties based in the UK contract to ship goods to France, or where two foreign-domiciled companies contract to provide services in the UK, there is an argument that it is implicit that England & Wales would be the correct jurisdiction.
In the absence of any obvious implication, the court will look to consider what is the ‘natural and appropriate forum’, with the closest and most real connection to the dispute at hand. If that forum is England & Wales then, subject to a number of other requirements, the courts will look to accept jurisdiction.
Disputes between UK jurisdictions
More commonly, a dispute will arise with implications across internal domestic borders, namely between Northern Ireland, Scotland, and England & Wales.
In these circumstances, the starting point is provided for by the Civil Jurisdiction and Judgments Act 1982, and confirms as a general rule that the correct jurisdiction is that where the Defendant is domiciled. For example, where a Scottish company is looking to sue a company based in London to recover unpaid debts, the correct forum would be the courts of England & Wales (subject to other considerations).
How can Ellis Jones help you?
For further information and detail on the impact of jurisdiction on cross-border contracts and disputes, and how Ellis Jones can help you, please visit the relevant section of our website. Alternately, to discuss your commercial dispute needs please contact a member of our expert Dispute Resolution Team on 01202 525333 or by clicking here to email us.