An exclusive jurisdiction clause in an agreement states where a dispute may be resolved, should one arise. However, in the absence of such a clause, the High Court of England and Wales has recently decided that a contract can, in principle, be made in two separate jurisdictions at the same time. In this situation, either party to the agreement could seek to enforce the contract in its home jurisdiction.
In Conductive Inkjet Technology Ltd v Uni-Pixel Displays Inc [2013] EWHC 2968 (Ch), the court considered a dispute between two parties, one based in England and the other in Texas. The agreement in question was a non-disclosure agreement, which did not include a choice of law and jurisdiction clause as the parties were not able to agree on one during negotiations. The parties agreed the contract in an email exchange, and it was then signed by Conductive Inkjet Technology (CIT) in England and by Uni-Pixel Displays (UPD) in Texas. CIT then claimed that UPD made use of certain proprietary information and such use was, amongst other claims, in breach of the agreement and in breach of UPD’s obligation of confidence, and sought permission to serve claims on UPD in England. UPD challenged this by arguing that English courts did not have jurisdiction in the matter.
The general English law position on contract formation is that a contract is made at the time and place where acceptance of the relevant offer is communicated to the offeror. There are two main rules as to when and where acceptance is communicated:
1.
The reception rule applies to relatively instantaneous forms of communication, and provides that time and place of contract is when the acceptance is received by the offeror. This was established in Entores Ltd v Miles Far East Corporation [1955] EWCA Civ 3 and confirmed in Brinkibon Ltd v Stahag Stahl G.m.b.h. [1983] 2 AC 34 (both cases involving telexes). In Brinkibon, Lord Wilberforce commented that: "In the case of successive telephone conversations it may indeed be most artificial to ask where the contract was made..." but he concluded that the courts simply have to do their best with the test.
2.
The postal rule applies to delayed forms of communication, with acceptances being deemed to be effective at the place and time of sending, provided the offeree correctly addresses and stamps the letter (Adams v Lindsell (1818) 1 B & Ald 681).
In the Conductive case, Roth J found that the parties had expressly agreed not to incorporate a choice of law and jurisdiction clause, and that it would be artificial to determine the place of the contract by applying the traditional postal rule, which would result in the place of the contract being determined by which party happened to send the fully executed document. The English Civil Procedure Rules (*1.) establish the principle that the English courts should be able to exercise jurisdiction over foreign defendants where the subject matter of the dispute has a sufficient connection to England, and it would be arbitrary to make a decision as to the connection to English jurisdiction simply on the basis of the order in which a document was signed.
It should be noted that exclusive jurisdiction clauses in agreements may not be watertight. For example, the courts may apply the forum non conveniens test to see whether there are any exceptional reasons for departing from an exclusive jurisdiction clause. This doctrine allows a court with jurisdiction to dismiss a civil action where an appropriate and more convenient alternative forum exists.
However, having an exclusive jurisdiction and governing law clause certainly does reduce the uncertainty that parties may face if a dispute arises and the contract is silent on the matter. By stipulating jurisdiction and governing law, the parties may avoid wasting time and money in preliminary disputes as to where a matter should be heard, before even being able to argue the issue at hand. Moreover, the parties can actively choose jurisdictions which are practical and convenient, considering, for example, ease of access to the courts (and legal representation) by the parties and other individuals who may be involved in potential litigation, the language of the courts, the ease with which the courts can apply the governing law chosen by the parties, and the enforcement of any judgment or award. Also relevant may be the speed of the litigation process (bearing in mind the backlog of cases which some courts may face), and of course the costs associated with any dispute resolution.
(*1.)
The objective of Civil Procedure Rule 6.36 and Practice Direction 6B.3.1 is to enable the court to exercise jurisdiction over foreign defendants where the subject matter of the dispute has a sufficient connection with England. Once the court has looked at the grounds on which the applicant relies, pursuant to Rule 6.37(3) the court must decide, in its discretion, whether England would be the most appropriate forum for the bringing of the claim.