It is surprisingly common for business agreements to be signed without a term in the agreement stating which courts and which law will decide any dispute which may arise.
If a dispute does arise in such circumstances can one party demand that the English courts have the power to decide the case based on English law?
If the parties are both based in the EU the position is usually that the dispute is governed by the law of the country where the provider of the services or seller of goods has its habitual residence. This itself can be open to dispute as to the definition of habitual residence and how it is to be applied in a given set of facts.
Where one of the parties in based outside the EU the question then is which system of law does the contract have the most real and substantial connection? What happens where for example the goods were ordered by an English company for delivery in England but placed with a manufacturer based in China and where the goods were manufactured? There can be arguments on either side and although Chinese law is probably the winner in that case it is easy to see how much better it would have been to have a simple one line clause in the contract stating that English law governs the agreement. Most competent law firms can offer this service at a very reasonable cost potentially saving many thousands of pounds down the line.
The question of which courts have the power or ‘jurisdiction’ to decide a case can follow a different set of rules and it is possible to end up in a situation where English courts have jurisdiction but the matter is to be decided on the law of a foreign state with a foreign lawyer appearing as an expert on matters of their law. An English court will hear disputes subject to foreign law but expert evidence will be required to advise the courts of the foreign law. Needless to say this will be very expensive.
If the United Kingdom leaves the EU without a Withdrawal Agreement on a so called no-deal basis there may be a level of uncertainty, at least in the short-term, as to how and to what the extent courts in the EU will recognise contractual clauses which provide for English law and English disputes as the chosen law and court. Where the contract is silent over the law and jurisdiction the position is likely to be similar to the current position where one party is based outside the EU.
This blog was written by: Allan Kornbluth
DISCLAIMER: Please note that this post sets out the general position under the general law. It should not be acted upon in any specific circumstances without taking specific legal advice as to those circumstances. Also, it should not be relied upon, acted upon or treated as a substitute for specific advice relevant to particular circumstances. If you do require specific advice please contact us for assistance.