Prevent jurisdiction disputes: make choice of jurisdiction!

In a recent Dutch court case the judge had to decide whether the Dutch court had jurisdiction to settle a dispute between a Dutch supplier and one of his German customers. Dutch contract lawyer Hidde Reitsma, specialized in international trade contracts, sets out by which criteria a court considers their jurisdiction.

Basic principal: country of defendant has jurisdiction

In this case a Dutch supplier had a claim against the German buyer regarding unpaid invoices. He started a procedure at his local court in the east of the Netherlands. The German buyer however contested the jurisdiction of this court. He referred to the basic principal of the EU Execution Regulation (EEX-regulation) that jurisdiction is to be exercised by the EU country in which the defendant is domiciled. According to the German buyer he should have been therefore sued in the courts of Germany. The Dutch supplier argues, however, that parties have concluded a choice of jurisdiction clause. He refers to his General Terms and Conditions in which he specifically appointed the Dutch court to have exclusive jurisdiction to settle disputes.

Valid choice of jurisdiction agreement?

The court has to assess whether or not parties have indeed made a valid choice of jurisdiction. According to article 23 of the EEX-regulation parties can agree that a court or the courts of an EU Member State are to have jurisdiction to settle any disputes which have arisen or which may arise in connection with a particular legal relationship. In that case that court or those courts shall have exclusive jurisdiction unless the parties have agreed otherwise. Such an agreement-conferring jurisdiction shall be either:

• in writing or evidenced in writing; or
• in a form which accords with practices which the parties have established between themselves; or
• in international trade or commerce, in a form which accords with a usage of which the parties are or ought to have been aware and which in such trade or commerce is widely known to, and regularly observed by, parties to contracts of the type involved in the particular trade.

Court needs more information for decision-making

According to the court the first 2 manners are not applicable in this case. The Terms & Conditions are not submitted to the defendant. The mere reference to their existence on the supplier’s invoices is not sufficient. As to whether the third option is applicable here, the court has given the defendant the opportunity to file a written defense. Hereafter the court will give its final opinion.

AMS Law Firm for international jurisdiction disputes

Motions contesting jurisdiction can cause a considerable delay in an already lengthy litigation. Costs may increase, especially if the court refers you to a court abroad. All companies doing business with international trading partners should carefully review their contracts and the applicable T&C’s before suing another party. AMS offers legal advice and can provide suitable choice of jurisdiction agreements. For more information, please contact one of our lawyers.