Choosing and including the correct type of jurisdiction clause in a contract is important.
We consider the case of Conductive Inkjet Technology Ltd and Uni-Pixel Displays Inc  EWHC 2968 (Ch) where the parties could not agree on a jurisdiction clause and the contract was deemed to have been made in two jurisdictions.
Why include a jurisdiction clause?
A jurisdiction clause refers to the parties' choice of court in the event that a dispute arises. The choice of jurisdiction is important because:
- it allows parties to avoid certain courts if they wish
- it can save the time and cost of debating jurisdiction in the event of a dispute
- it can increase the possibility of enforcement of a court judgment
- in the absence of an effective jurisdiction clause, jurisdiction will be determined either by the appropriate rules or regulations
Choice of jurisdiction clause?
Choosing a jurisdiction clause is a decision not to be taken lightly and which should be accompanied by a choice of law. Issues to consider when making the choice include the language and quality of the court, the cost of litigation in that jurisdiction, the procedural rules in force and the ability to effectively enforce judgments in the chosen jurisdiction.
There are two main types of jurisdiction clause: exclusive jurisdiction and non exclusive jurisdiction.
An exclusive jurisdiction clause prevents parties from commencing proceedings in any court other than in the jurisdiction specified in the agreement.
Where a party ignores an exclusive jurisdiction clause and issues proceedings in a different forum in breach of the clause, proceedings cannot be commenced in the contractually appointed court until the court in that forum has confirmed it does not have jurisdiction.
Non-exclusive jurisdiction clause
A non-exclusive jurisdiction clause will enable parties to bring proceedings in the court of their chosen country or the court of any country which has jurisdiction to hear the dispute under that country's jurisdictional rules. It is not necessary to first of all start proceedings in the court which has been given non-exclusive jurisdiction.
Two jurisdictions at the same time?
The general rule is that a contract is formed at the time and place where acceptance of an offer is communicated to the party making that offer. For offers accepted by postal communication, acceptance of an offer is effective at the time of sending, provided the letter is correctly addressed and stamped. Where instantaneous communication is concerned, the contract is deemed to be made where the acceptance is received and the courts have to do their best in applying the test.
Notwithstanding the above, as a matter of principle, a contract can be made in two places at once where, for example, negotiations were held over the telephone.
In Conductive Inkjet Technology Ltd v Uni-Pixel Displays Inc, the High Court confirmed that principle when it decided that a contract can be made in two different jurisdictions for the purposes of establishing whether or not it had jurisdiction.
The case involved a dispute between English based company Conductive Inkjet Technology Ltd (CIT) and Texas based company Uni-Pixel Displays Inc (UPD) in which CIT claimed that UPD had used its proprietary information in breach of its obligations of confidence. The claim was based on a non disclosure agreement executed by email between the parties which was silent on the points of jurisdiction and governing law. The English court found that it had jurisdiction and accordingly permitted CIT to serve its claim out of the jurisdiction of the courts of England and Wales. The principle that the English courts had jurisdiction to allow CIT to do so was challenged by UPD.
The Court held that the non disclosure agreement was made in both England and Texas on the basis that i) the parties had agreed not to include governing law or jurisdiction clauses and that ii) it would be artificial to determine the place of the making of the contract by applying the traditional 'postal' rule. English jurisdiction could therefore be established and service out of jurisdiction was permitted on the basis that England was one of the two countries in which the non disclosure agreement was formed.
- It is best practice to agree an effective jurisdiction clause to be included in agreements.
- If it is not possible to include a jurisdiction clause, it may be possible to persuade a court that the contract was formed in both jurisdictions (particularly where the contract was negotiated and concluded over the telephone).
If you are in any doubt about what to do, please contact Paul Kirkpatrick on 03700 868390.