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Brussels Recast: The importance of the exclusive jurisdiction clause

silver pen on top of a contract Print publication

08/05/2015

The recent update to the Brussels Regulations on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (Brussels Recast) [1], which applies to legal proceedings commenced on or after 10 January 2015, has focused attention on the importance of a well-drafted exclusive jurisdiction clause in any commercial contract.

Under the previous regulations [2], where parties to proceedings were in different jurisdictions they had to contend with the cumbersome ‘court first seised’ rule [3]. This meant that, in many cases and even in breach of jurisdiction clauses, there would be a “race to court” with each party seeking to get its case heard in their national court (or the court which looked to provide the best tactical advantage for them). Would-be defendants would often artificially issue a claim for a negative declaration of liability, actively engaging in litigation to avoid the risk of fighting its case in an unfamiliar or unfavourable jurisdiction.

This issue has been resolved by the new regulation. Brussels Recast provides that where a dispute centres on a contract with a valid jurisdiction clause, the court of the jurisdiction named in that clause will have the first right to determine whether it has jurisdiction to hear the claim.

This represents a real improvement on existing rules:

  • The parties will have certainty as to which court has jurisdiction to hear the claim; and
  • The parties can participate in pre-action correspondence and without prejudice discussions for as long as necessary without the risk of legal proceedings being issued prematurely.

Brussels Recast has significantly improved the regime for determining jurisdiction in cross-border contract disputes. However, in order to obtain the full benefit of this amendment, it is crucial that contracts contain an exclusive jurisdiction clause. For more information and to check that your contracts offer the protection you need, please contact Walker Morris’ Commercial Dispute Resolution team.

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[1] Regulation (EU) 1215/2012 of the European Parliament and of the Council of 12 December 2012
[2] Council Regulation (EC) 44/2001
[3] The rule provided that the second court to issue in the “race” to hear proceedings relating to a particular dispute had to stay its proceedings until the court first seised had determined whether it had jurisdiction, regardless of any contractual jurisdiction clause.  The rationale for the rule was to prevent parallel proceedings, but in practice it was criticised for leading to additional costs, delay and potentially even rendering judgments ineffective.

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