Guide to Governing Law and Jurisdiction clauses with sample clauses.
This guide is to facilitate the understanding of governing law, jurisdiction and related clauses. It considers briefly the questions which arise in deciding which country / territory's court or courts will have jurisdiction to hear disputes arising under an agreement and which laws. It is not intended to provide a detailed analysis of the law, but gives general guidance on the most important matters to be taken into account. The following is a summary of the key clauses:
The purpose of a jurisdiction clause is to ensure that disputes arising under an agreement are heard by the courts of a selected state. It determines which Court will hear a dispute between the parties and apply the chosen law. Whether or not such a clause will be effective depends on a number of complex issues.
It is possible to choose one law as governing the contract e.g. Singapore Law, but give jurisdiction to the Courts of another country e.g. India, although for obvious reasons it is usually sensible to make them the same. In many contracts, governing law and jurisdiction are dealt with together in one clause but they should nevertheless be considered and, if necessary, negotiated separately.
Arbitration and forms of ADR are alternatives to having disputes determined by a judicial process.
Governing Law Clause
A governing law clause is included to determine the law which will apply to an agreement and to disputes arising under it. It (also choice of law) provides which set of legal principles will be applied in determining the rights and obligations of the parties to a contract e.g. whether valid contract formed, whether debt owing, whether right to damages for breach of contract etc. All contracts should include a governing law clause. Such a clause may not always be effective. Particular courts may in some circumstances apply their own procedural and related rules to the determination of disputes, irrespective of the parties' choice of law.
Agents for Service of Process
Where a foreign counterparty submits to the jurisdiction of the courts, it is good practice to require that it also appoints an agent for service of process in that jurisdiction. This avoids the need for permission to serve out if required at common law and also makes service of process much easier to effect in practice. Service of process is important both for legal reasons (as it founds jurisdiction at common law) and practical reasons (trying to serve a Claim Form abroad can take weeks and be costly). Wherever a party is or is likely to be resident abroad at any time, they should agree to appoint an agent for service of process.
One of the issues to be considered when selecting a jurisdiction, is where any judgment may need to be enforced. Enforcement of foreign judgments under common law can be complicated: this section summarises the relevant provisions.
States and their emanations are usually immune from suit in national courts. However, in some circumstances a state may be deemed to have waived this immunity, or it may do so expressly. A waiver of sovereign immunity clause should be included when contracting with a State or state entity.