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

Kestrel Ltd and Dunmore Ltd agree in their contract that 'the courts of Country X shall have exclusive jurisdiction.' Kestrel later sues Dunmore in the courts of Country Y, where Dunmore has assets. Which statement is most accurate?

A jurisdiction clause identifies which court may hear a dispute, while a governing law clause identifies the law applied to decide it. They are separate questions, so choosing a court does not automatically choose the law, though parties often align them.

  1. AA jurisdiction clause decides which court may hear disputes, whereas governing law decides which law is applied to the meritsCorrect
  2. BA jurisdiction clause automatically selects the law applied to the contract and nothing more is needed
  3. CA jurisdiction clause only binds the courts of the country where the defendant has assets

Explanation

Jurisdiction and governing law are distinct concepts: the first concerns which court hears the dispute, the second which law decides it. The clause expresses the parties' agreement on forum; it does not bind courts by location of assets, and a court may apply foreign law.

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