Australia: Cooper Grace Ward - Foreign judgments, foreign contracts and dangers of jurisdiction clauses
Not surprisingly, parties concentrate on the commercial aspects of the deal when negotiating a contract but often overlook the jurisdiction and choice of law clauses commonly found in the tail end of agreements.
When negotiating a contract with a foreign entity, it is important to be conscious of whether the agreement includes a jurisdiction clause and how the clause will operate in the event of a dispute. It is equally important to be aware of the agreement’s choice of law, as this will ultimately decide the dispute.
The jurisdiction clause may result in you being sued in a foreign court and a foreign judgment enforced against you.
A jurisdiction clause gives legal authority to a particular court or courts in a specified jurisdiction (for example, a foreign country) to enable a party to sue on the contract. Jurisdiction clauses can be:
- exclusive – limiting disputes to the chosen court or jurisdiction;
- non-exclusive – nominating a court of preference between the parties without prejudicing the rights of the parties to commence proceedings in another jurisdiction; or
- one-way – a less commonly used clause where one party agrees to the exclusive jurisdiction of a court while the other party is entitled to commence proceedings in another jurisdiction.
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