Exclusive Jurisdiction Clauses - The New Trump Card

March 4, 2015

When negotiating an international agency or a distributorship agreement, you should think carefully about the country in which you want any disputes arising out of or in connection with the agreement to be resolved, if that eventuality should ever arise and then draft the clause which will provide this outcome (the “exclusive jurisdiction clause”). This might not seem like an important consideration when all is rosy at the outset, but it could save a lot of uncertainty and, therefore, costs if and when things do go wrong further down the line. 

Indeed, if you are already party to a distributorship or agency agreement and are thinking about issuing court proceedings, you will need to check your agreement to see whether it contains an exclusive jurisdiction clause in favour of an EU member state court.  If it does, you should only issue proceedings in that member state’s court.  To do otherwise is likely to be a futile endeavour, especially if your opponent plays its exclusive jurisdiction trump card.

This is especially so given the recent changes to the EU jurisdictional rules in commercial matters, which apply to court proceedings commenced from 10 January 2015 (the “recast Brussels Regulation”). Even if you do not think that you will become involved in litigation, the recast Brussels Regulation sends a clear message to all that exclusive jurisdiction clauses are the new trump card.

Exclusive jurisdiction clauses: prevention IS better than cure

The recast Brussels Regulation addresses the problems that can arise from the concept of the court in which proceedings are commenced first (that is, the “first seised”). 

Previously priority was given to the court first seised, meaning that a principal or agent could issue proceedings in its chosen court (for example, the Italian courts) even if to do so was in breach of an exclusive jurisdiction clause in an agency or distributorship agreement in favour of the English court. As a result, if the defendant to the proceedings did not want to litigate the dispute in Italy, it would have to incur costs challenging the jurisdiction of the Italian court (and succeed) before the dispute could be litigated in the correct forum (that is, the English court).  This process could take many months.

The recast Brussels Regulation prevents litigation being commenced other than in the court in which proceedings are supposed to be commenced. It follows that where there is an exclusive jurisdiction clause in favour of an EU member state court (for example, the English court), proceedings should be commenced in the English court.  If they are not, as in the above example, the Italian court would have to stay its proceedings until the English court declared that it had no jurisdiction (which would be unlikely, given the exclusive jurisdiction clause!)

Goodbye to painstaking service out rules

The recast Brussels Regulation has also relaxed the rules around service of proceedings on defendants who are domiciled outside of the EU.

Where there is an English jurisdiction clause, the claimant will no longer require the court’s permission to serve proceedings on a defendant outside of the EU regardless of where the other party is domiciled.  This should make the process of serving the claim form on a defendant domiciled out of the EU much quicker and cheaper.

Victory shall be yours! Enforcing a member state judgment elsewhere in the EU

The recast Brussels Regulation has scrapped the process of “exequatur” where, before a judgment of an EU member state court could be enforced in another EU member state, it first had to be declared enforceable or registered in the court of that other member state.  Again, the removal of this hurdle should make the enforcement of a judgment from one member state in another member state quicker and cheaper.

Exclusive jurisdiction? More mumbo jumbo from the lawyers? An understandable but wrong question when a principal or a supplier appoints an agent or distributor in another country – not least as a way of limiting exposure on termination!


Related pages:

Agency, Distribution and International Trade more

icons Addthis Print Contact Register

Contact

tel: +44 (0) 20 7628 2000
10 Finsbury Square, London, EC2A 1AF
View map


For more information

 image

Rebecca Richardson
Associate
Direct dial: +44 (0)20 7614 2629
rrichardson@foxwilliams.com

Accreditations

  • Top Ranked Chambers UK 2014 - Leading Firm
  • Ranked in Chambers Europe 2013 - Leading Individual
  • Ranked in Chambers Global 2014 - Leading Firm
  • Legal 500 - Leading Firm
  • The Lawyer UK 200 - Listed Firm
  • The Law Society Excellence Awards 2012 - Shortlisted
  • Investors in People - Bronze