Choice-of-court agreements

Abstract

Introduction Choice-of-court agreements (also called ‘jurisdiction agreements’ or ‘forum-selection Agreements’) are agreements as to where litigation will take place. They are one of the most important jurisdictional devices of modern times. If the courts respect them, they enable the parties to know in advance where the case will be brought. This in turn makes it possible to plan ahead and to ensure that the terms of the contract, and the activities that take place under it, will not be regarded as unlawful by the court hearing the case. 1.1 Court specified Choice-of-court agreements usually confer jurisdiction on a particular court (for example, the Federal District Court for the Southern District of New York) or the courts of a particular country (for example, the courts of England). It is, however, possible to specify two or more courts – for example,‘either the Tokyo District Court or the Kobe District Court’– in which case, the claimant may bring proceedings in either. It is even possible to make the choice of court depend on which party is bringing the action – for example, ‘X may bring proceedings in the courts of England; Y may bring them in the courts of Belgium’. 1.2 Exclusive jurisdiction In addition to conferring jurisdiction on the court chosen, a choice-of-court agreement may deprive other courts of jurisdiction, thus making the jurisdiction exclusive. Unless this is done, the choice-of-court agreement will not provide the predictability that is so important. Where it is done, a choice-of-court agreement has two functions: a jurisdiction-conferring function and a jurisdiction-depriving function. These two functions are not treated the same by the courts. Most courts are willing to accept jurisdiction if it is conferred on them, but they may not be so happy when it comes to giving up jurisdiction that they would otherwise have had. 1.3 Asymmetric choice-of-court agreements An asymmetric choice-of-court agreement is a choice-of-court agreement that is more favourable to one party than to the other. They are much loved by banks. International loan agreements often provide that proceedings by the lender against the borrower may be brought in the court chosen or in any other court having jurisdiction under its law, while proceedings by the borrower against the lender may be brought only in the court chosen.