Jurisdiction Agreement: Everything You Need to Know
A jurisdiction agreement is a very important component to all parties to a contract or other formal agreement. 3 min read
A jurisdiction agreement is a very important component to all parties to a contract or other formal agreement. You need to include a clause in your contract that states where one or both parties can sue if it becomes necessary to do so. Having a say in which jurisdiction you can use will have a plethora of benefits. The last thing you will want to deal with is having to travel a great distance to resolve a dispute, adding time, money, and inconvenience to an already frustrating situation. Including a jurisdiction agreement in your contract will prevent that from happening.
You should always include a jurisdiction clause when the parties involved want to have all disputes that occur within an agreement to be determined using a specific national court. If you want to submit to a certain court, you could find it hard to argue those courts are not an appropriate venue for any disputes.
If you do not include an effective jurisdiction clause, the venue will be decided by referring to rules held by international law. This could have a negative outcome that can result in extra costs and time spent on getting a resolution.
How Do I Decide Which Jurisdiction to Choose?
A jurisdiction clause can help determine the country that is associated with at least one party to the agreement. It could also provide for the jurisdiction that is neutral to all parties involved.
There are three general reasons for deciding on a specific venue for jurisdiction:
- Convenience- You could want to be sued or sue in your home country
- Preferred Judicial System- The civil litigation process is different in all jurisdictions. Some are more preferable than others, depending on if you are the defendant or claimant. For instance, if you are going to sue a lender, you will want your case heard in a jurisdiction that has a good judicial system and will ensure you get a fair outcome.
- Enforcement- Where you choose to have your claim processed will have a major effect on how well it can be enforced. The judgment’s worth will highly depend on how well it can be enforced. The location of the defendant’s assets also needs to be considered.
What Is the Difference Between Exclusive and Non-Exclusive Jurisdiction Clauses?
There are three options when you are drafting a jurisdiction clause:
- All parties will submit to a particular court with exclusive jurisdiction
- All parties will submit to the non-exclusive jurisdiction of a certain court
- One party will submit to the exclusive jurisdiction of one court while the other party submits to the non-exclusive jurisdiction
The clauses of an exclusive jurisdiction include:
- To limit the issue to one court’s jurisdiction
- You will know where you can both sue a party and be sued by another party
- You receive more protection since another court will not take on a dispute with an exclusive jurisdiction clause
- The clauses of a non-exclusive jurisdiction include:
- They provide a place for the hearing in a certain jurisdiction without prejudice to either party to move to another court if necessary
- You will have certainty in that you will know that your dispute will be heard in a certain jurisdiction with other jurisdictions available if necessary.
There is also a hybrid clause that will benefit one party to the contract. It will often be in loan agreements. The borrower is restricted to filing a lawsuit in a specific venue with the bank retaining the right to have the lawsuit occur in their preferred jurisdiction.
A hybrid clause is negotiated if there is not a balanced power of negotiation among all the parties. It will leave one of the parties in a more favorable position.
You always need to expressly include the jurisdiction clause to your contract. It is essential that the contract is clear on the agreements of which jurisdiction will be used. Do not allow the standard terms of the contract to be swapped, as this will result in an argument as to which party’s terms will have exclusive jurisdiction.
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