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ACCA Applied Skills · Corporate and Business Law (Global) · International trade, international legal regulation and conflict of laws

A contract between a buyer in Country P and a seller in Country Q contains a clause giving the courts of Country Q exclusive jurisdiction. The buyer sues in Country P's courts instead. What is the most likely effect of the clause?

The clause is an exclusive jurisdiction clause choosing the forum, and courts will normally uphold it, so the buyer is likely to be held to Country Q's courts. It is different from a governing law clause and is not an arbitration agreement.

  1. AIt determines the governing law of the contract but has no effect on which court hears the case
  2. BIt is a jurisdiction clause which the Country P court will normally uphold, so the buyer is likely to be held to Country Q's courtsCorrect
  3. CIt is unenforceable because parties cannot agree where disputes are heard
  4. DIt requires the dispute to go to arbitration rather than a court

Explanation

A jurisdiction clause chooses the forum (court) that will hear disputes, and courts normally enforce exclusive clauses. It is distinct from a governing law clause, which chooses the law applied. It does not create arbitration.

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