(b) Choices of court

Policy decisions. If the decision to avoid arbitration or prefer court proceedings is made, a choice of court provision will be appropriate. In essence, the ‘political’ questions asked in connection with a choice of court provision in commercial contracts are:

  • What is the best choice in order to ascertain the continuation of business as much as possible?
  • Should we discourage court proceedings by providing for an unattractive procedure? Alternatively, do we need to have an expeditious court decision?
  • Is a carve-out for certain action desirable (e.g. the right to seek protection under applicable intellectual property laws in a different jurisdiction)?
  • Where should we engage a law firm?

The answers will probably follow from some very general observations of each party’s probable interests and power to settle disputes amicably. A Dutch in-house legal counsel will probably find that a counterparty will be inclined to compromise on German or French courts (as if a football team were sentenced by the UEFA to play its home matches outside its home country).

Exclusive jurisdiction. A choice of court is typically made under the assumption that the choice excludes the international jurisdiction of other courts. Making this explicit is not necessary: both the Brussels Regulation and the Lugano Convention (i.e. the regulation’s counterpart for non-EU member states) determine that in the absence of such an express stipulation jurisdiction of the appointed court over any dispute is exclusive. Since U.S. courts do not recognise the scope of the Regulation or the Convention and it requires only one word, including the word exclusive is recommended.

Relative jurisdiction. Normally, it is not necessary and potentially a source of confusion to express which level of court jurisdiction (relative competence) applies. It is unnecessary because local civil procedural law will determine what relative jurisdiction applies (and it does not always permit the choice); it can be a source of confusion if at the time of a dispute it appears that the drafter did not intend to choose the relative jurisdiction but rather was trying to be too clever. The parties might find themselves having precluded a right to appeal (e.g. because they appointed a Court of Appeals).

U.S. particularities. If a U.S. court is appointed, there exists a possibility that court proceedings could be initiated in a federal court instead of a state court. In short, federal courts may have jurisdiction in matters where (federal-U.S.) interstate aspects come into play and, amongst others, in matters related to bankruptcy or intellectual property rights (both these legal areas are subject to federal legislation).

Another particularity would be to exclude the right to demand a jury trial. This right might also be invoked in other jurisdictions, depending on national law. The arguments in favour of arbitration (see the preceding paragraph (a)) apply here as well, especially when it comes to speed of the procedure and expertise (quod non) of the jury. Note that under several U.S. state laws, such exclusion must be made conspicuously (i.e. printed in all caps), because it is a deviation of each person’s constitutional right to have a jury try the facts of a dispute (and not the court itself). An example of such waiver is:

EACH OF THE PARTIES HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHTS TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.

Or with more certainty that the waiver is effective:

EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY ACTION, SUIT OR PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF SUCH ACTION, SUIT OR PROCEEDING, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) EACH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) EACH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (iv) EACH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.