Choice of Court Agreements
1. Term and function
By way of a choice of court agreement, sometimes also referred to as a jurisdiction agreement or forum selection clause, the parties agree on a court to decide their dispute (the forum prorogatum). In the case of an exclusive choice of court agreement, the parties exclude jurisdiction of all other courts potentially competent under the objective heads of jurisdiction (PIL) (the fora derogata). The choice of court (prorogation) is independent from the exclusion of all other courts (derogation). The two sides of the same coin may be governed by different legal regimes, and the invalidity of one does not necessarily result in the invalidity of the other. In the case of a non-exclusive choice of court agreement the parties do not exclude jurisdiction under the objective heads of jurisdiction but simply add one head of jurisdiction to choose from.
Choice of court agreements are a manifestation of party autonomy in procedural law. State interests in regulating jurisdiction by way of objective heads of jurisdiction step aside in favour of the parties’ choice of their forum. They serve the parties’ interests—as the case may be—in legal certainty, congruence of jurisdiction and the applicable law in the case of combined jurisdiction and choice of law clauses, neutral jurisdictions, particularly competent courts in specific matters (eg patent or maritime matters) or in ensuring enforcement in the country of judgment. As a downside, choice of court agreements enable the stronger party to force the weaker party before the former’s home courts. This may in effect render access to justice impossible or at least very burdensome for the weaker party. To cut off such undue exercise of negotiating power, choice of court agreements are often restricted or even prohibited with regard to specific groups of persons, in particular consumers, insurance holders and employees (see eg Arts 13, 17, 21 Brussels I Regulation (Reg 44/2001) and Art 2 (1)(a) of the Hague Convention on choice of court agreements). The protection of certain groups of persons regularly extends to choice of law (choice of law by the parties) (see eg Arts 5(2)3, 6(2), 7(3), 8(1) Rome I Regulation (Reg 593/2008)).
2. History and the development of the law
Early instances of choice of court agreements were already present in Roman law under the formular process. Roman citizens could opt for the jurisdiction of the praetor peregrinus (usually competent for disputes amongst foreigners) and, vice versa, foreigners could agree on the jurisdiction of the praetor urbanus (usually competent for disputes amongst Roman citizens); Ulp. D. 5,1,2,1 cites in that regard the lex Iulia iudiciorum dating from AD 17. Consent by the respective praetor was not required. A valid agreement on jurisdiction required concurring submissions in favour of the chosen jurisdiction that could be revoked as long as the respective praetor had not yet been seized. Furthermore, the parties had to be aware of the fact that the chosen jurisdiction was not the regular one. Mistake, deceit and duress rendered the jurisdiction agreement invalid.
Under the ius commune, choice of court agreements in favour of a foreign court were prohibited, following the feudal concept of Dingpflicht subjecting all persons to the judicial powers of the territory’s sovereign. The prohibition against derogating from the domestic jurisdiction was kept in several European systems until recently (until the early 1990s in Italy and Spain in favour of their own citizens who would always be allowed to bring a claim in their home country). Another aspect reminiscent of the ius commune is the fact that many national regimes of civil procedure regulate only the prorogation while remaining silent with regard to the derogation of its jurisdiction (see eg § 38 German Zivilprozessordnung, § 104(1) Austrian Jurisdiktionsnorm, Art 22(2) Spanish Ley Orgánica del Poder Judicial, Art 23 Brussels I Regulation). Derogation is expressly regulated in Dutch civil procedure (Art 8 no 2 Wetboek van Burgerlijke Rechtsvordering).
Today, choice of court agreements are recognized throughout the Member States of the European Union and in the Brussels I Regulation. However, the concepts underlying choice of court agreements and their enforcement differ. The dividing line runs along the legal families of common law and civil law. Most civil law jurisdictions regard a choice of court agreement as a procedural agreement. It directly confers jurisdiction upon the chosen court and takes away jurisdiction from the other courts. It does not, however, contain a promissory element that is capable of being enforced like a contractual promise. Consequently, the prorogation cannot be enforced by way of an injunction or an order for specific performance. Rather, the faithful party has to contest the jurisdiction of any other court in the proceedings before it. In contrast, English common law regards a choice of court agreement as a contract just as any other contract on substantive law issues. It denotes rights and obligations. The promise not to sue in any other than the chosen forum (in the regular event of an exclusive choice of court agreement) can be enforced directly by way of an anti-suit injunction or indirectly by the threat of damages for breach of the choice of court agreement. By way of an anti-suit injunction the designated court prohibits the other party from commencing or continuing proceedings in any other than the chosen forum in breach of the choice of court agreement. An anti-suit injunction is based on the in personam jurisdiction of the designated court. Disregarding the anti-suit injunction constitutes a contempt of court which may trigger monetary fines, seizure of assets or even (but rather rarely) imprisonment. Furthermore, disregard of the anti-suit injunction bars the recognition and enforcement of the decision rendered by any other than the chosen court in the country where the anti-suit injunction was issued. In practice, anti-suit injunctions are a very effective tool to enforce choice of court agreements. This holds particularly true in case of torpedo actions brought for the sole purpose of delaying the resolution of the dispute. The downside of anti-suit injunctions lies in their effect on the foreign proceedings. Although formally only addressed at the opponent party, an anti-suit injunction interferes with the power of the court seized to determine its jurisdiction. Whether anti-suit injunctions issued by the English courts with regard to foreign proceedings before other Member State’s courts are compatible with the Brussels I Regulation was unclear for some time. The major issue was not the nature of the choice of court agreement, but rather whether an anti-suit injunction fits into the jurisdiction regime and the underlying principles of the Brussels I Regulation. Finally, the ECJ held that anti-suit injunctions (in a case not concerned with a choice of court agreement) are generally incompatible with the Brussels I Regulation since they interfere with the competence of the court seized to determine its jurisdiction and violate the principle of mutual trust between the Member States’ courts underlying the Regulation (ECJ Case C-159/02 – Turner  ECR I-3855). The matter is closely linked to the relationship between the lis pendens rule under Art 27 of the Brussels I Regulation and exclusive choice of court agreements. Traditionally, the English courts took the view that exclusive jurisdiction agreements (designating an English court) took priority over the lis pendens rule. When seized with an action under a choice of court agreement, they did not stay the proceedings or dismiss the claim even if another Member State’s court was seized prior to the English court. Rather, they continued with the proceedings and regularly issued an anti-suit injunction with regard to the foreign proceedings (Continental Bank NA v Aeakos Compania Naviera SA  1 WLR 588 (CA)). The ECJ put an end to this practice by giving priority to the lis pendens rule in the Gasser case (ECJ Case C‑116/02  ECR I-14693). Although systematically correct under the present framework of the Brussels I Regulation, the decision in Gasser enables delaying tactics by way of torpedo actions which seriously undermine the effectiveness of choice of court agreements. But the ECJ’s decisions in Gasser and Turner do not only affect direct enforcement of choice of court agreements. Even a damages claim based on the alleged breach of a choice of court agreement might be incompatible with the Brussels I regime. Although the damages claim does not directly interfere with the competence of the court seized to decide on its jurisdiction, it constitutes an ex post judgment on the jurisdiction of the foreign court seized. The issue has not yet been referred to the ECJ for a preliminary ruling, while the English courts already award damages based on the breach of a choice of court agreement (Union Discount Co Ltd v Zoller  EWCA Civ 1755 (CA)). Under the European Commission’s proposal for a reformed Brussels I Regulation (COM(2010) 748 final), the lis pendens rule is reversed in the case of exclusive choice of court agreements. According to Art 29(1) in connection with Art 32(2) of the proposal, it is exclusively for the (Member State) court designated in the agreement to determine the choice of court agreement’s validity and scope: the non-designated court has no jurisdiction until the designated court has declined jurisdiction.
3. The European regime
Jurisdiction by way of a choice of court agreement under Art 23 is one of the most important heads of jurisdiction of the Brussels I Regulation in practice. As far as its scope of application stretches, Art 23 supersedes the national rules on choice of court agreements; national restrictions on the choice of a foreign court are not applicable. The standard for a valid choice of court agreement under Art 23 is in several respects lower than the standard in most Member States.
a) Territorial scope of application
The territorial scope of application of Art 23 stretches very far in relation to the rules on choice of court agreements of the Member States and non-Member States alike. According to Art 23 in conjunction with Art 4, it is sufficient that one of the parties to the choice of court agreement has its domicile or seat in a Member State and that there is a cross-border element, even if only in relation to a non-Member State (ECJ Case C-412/98 – Josi Reassurance  ECR I-5925, para 42 (concerned with Art 17 of the Brussels Convention as the predecessor of Art 23 Brussels I Regulation)). Under the Commission’s reform proposal the requirement of a domicile or a seat of one of the parties in a Member State is repealed. Hence, even a choice of court agreement by parties none of whom is domiciled or has its seat in a Member State in favour of a Member State court would be governed by Art 23.
Article 23 deals only with the prorogation of a Member State court and the ECJ held (again in relation to Art 17 of the Brussels Convention) that Art 23 does not apply to the derogation of the jurisdiction of a Member State court in case of the prorogation of a non-Member State court. Rather, the derogation is governed by the national law of the respective forum (ECJ Case C-387/98 – Coreck Maritime  ECR I-9337). This status quo remains unaffected by the Commission’s reform proposal which does not address the problem of reflective effect. Whether the ECJ’s decision in Owusu (ECJ Case C-281/02  ECR I-1383), concerned with forum non conveniens in relation to Art 2 Brussels I Regulation, might result in disregarding choice of court agreements in favour of non-Member States, thus giving priority to jurisdiction under Art 2, is even under the Commission’s reform proposal unclear.
b) Material scope of application and validity requirements
Article 23 does not regulate all requirements for a valid choice of court agreement. It merely requires a factual agreement of the parties and adherence to specific formal requirements. Valid forms are written forms, an oral agreement followed by written confirmation or even a form consistent with a practice which the parties have established between themselves or international trade usage (eg bills of lading, letters of confirmation and terms of commercial auctions). Practice and trade usage are particularly relevant with regard to choice of court agreements in standard contract terms. According to Art 23(2) an electronic form providing a durable record (eg an e-mail electronically stored or printed) is equally sufficient. The formal requirements’ primary purpose is to ensure the consensus between the parties. If one of the required forms is kept, there is a rebuttable presumption of a consensus. And if there is consensus, there is in turn a rebuttable presumption of an exclusive choice of court agreement. Furthermore, Art 23(5) prohibits derogations from the exclusive head of jurisdiction concerning rights in rem or tenancy in immovable property (Art 22(1)) and from the special heads of jurisdiction concerning insurance (see Art 13), consumer (see Art 17) and employment matters (see Art 21). Article 23(5) in conjunction with Arts 13, 17 and 21 is exhaustive; there is no general prohibition of unfair or abusive choice of court agreements. The European legislature did not follow the model of Art 4(3) of the Hague Convention on the Choice of Court of 1965. Choice of court agreements in standard contract terms are, however, subject to the restrictions in the national laws implementing the Unfair Standard Contract Terms Directive (Dir 93/13); this concerns consumer contracts (consumer contracts (PIL)) in particular (ECJ Case C-240/98 – Océano Grupo  ECR I-4941, para 26: application of the Directive ex officio).
Several further aspects regarding the validity of choice of court agreements are not addressed by Art 23, and they can also not be resolved by way of autonomous (European) principles. Consequently, they are governed by the law applicable to the respective aspect under the general rules of private international law. Such aspects are in particular mistake, deceit or duress, a right of revocation, personal capacity and succession in law. Although the invalidity of the main contract does not as such affect the validity of the choice of court agreement (even if it is part of the main contract) under the doctrine of separability, there is a presumption that the law applicable to the main contract equally governs the choice of court agreement; such a presumption is not barred by Art 1(2)(e) Rome I Regulation (excluding choice of court agreements from the material scope of application of the Rome I Regulation). With regard to mistake, deceit and duress one might refer (albeit cautiously) to the rules contained in the Principles of European Contract Law (PECL) (or in the DCFR) as representing a uniform European regime: Art 1:201 PECL provides for a general duty to act in good faith; Art 4:107 and 4:108 PECL provide for a right of avoidance in case of deceit and duress; Art 4:109 PECL allows for a similar right where the economic distress or inexperience of the other party has been unfairly exploited.
In its reform proposal (COM(2010) 748 final), the Commission suggests a ‘harmonised’ conflict of law rule on the substantive validity of the choice of court agreement in Art 23(1). By referring to the law of the designated Member State as such, however, this includes this state’s conflict of law rules since the Rome I Regulation is according to its Art 1(2)(d) not applicable.
c) Personal scope of application
The possibility to agree on a forum of choice is not restricted to certain groups of persons by Art 23 as in most Member States’ laws. Even those Member States providing for restrictions in a domestic context (usually restricted to b2b relationships) lift those restrictions in the cross-border context (cf § 38(2) German Zivilprozessordnung and French case law deviating from Art 48 Code de procédure civile).
d) Forum conveniens
For the choice of court agreement to confer jurisdiction, Art 23 does not require a substantial or personal connection to the chosen forum. In particular, jurisdiction must not be declined for forum non conveniens reasons as is possible under English law, although even English courts are very cautious in respect of forum non conveniens in the case of exclusive choice of court agreements.
4. Distinguishing submissions to jurisdiction
Choice of court agreements under Art 23 Brussels I Regulation have to be distinguished from submissions to jurisdiction/entering an appearance pursuant to Art 24 Brussels I Regulation. Both merely require a cross-border element and one party domiciled or seated in a Member State. And both perform a similar function: party autonomy enables the parties to deviate from the objective heads of jurisdiction.
Systematically, a submission to jurisdiction may either be regarded as an implied agreement on jurisdiction subsequent to the commencement of the proceedings or, alternatively, be explained in terms of a procedural preclusion of rights. Article 24 Brussels I Regulation regards it as an implied agreement on jurisdiction. Consequently, both choice of court agreements and submissions to jurisdiction are dealt with in the same section under the heading ‘Prorogation of Jurisdiction’. This systematic understanding prevails particularly in those Member States that provide for a distinct rule on submission to jurisdiction supplementing the rule on choice of court agreements; cf Arts 38–40 German Zivilprozessordnung, Art 9 Dutch Wetboek van Burgerlijke Rechtsvordering, Art 22(2) Spanish Ley Orgánica del Poder Judicial and Art 43 Greek Code of Civil Procedure. In contrast, the model of procedural preclusion applies in those national regimes that do not contain an express provision on submission to jurisdiction (eg French, Belgian and Luxembourg law). Under English law, submission to jurisdiction is regarded as a distinct head of jurisdiction; it is neither associated with an implied agreement nor with a preclusion of rights.
Besides these systematic divergences there is convergence with regard to the prerequisites of a valid submission to jurisdiction. Usually, an act to be understood objectively as entering an appearance suffices to establish jurisdiction. A subjective element, particularly an intention to enter an appearance, is not required. Errors of law do not render the submission invalid. The term ‘entering an appearance’ in Art 24 Brussels I Regulation has to be interpreted autonomously. This results in a very wide understanding as is the case under most national laws. Any oral or written defence amounts to a submission to jurisdiction regardless of whether it relates to the material subject matter of the dispute or procedural issues (§ 39 German Zivilprozessordnung and § 104(3) Austrian Jurisdiktionsnorm do not regard submissions merely concerned with procedural issues as entering an appearance). Under most European national regimes as well as under Art 24 Brussels I Regulation there are no formal requirements for a submission to jurisdiction. It merely has to meet the requirements for a valid procedural act under the respective lex fori. The judge is under no obligation to inform the parties about the lack of jurisdiction and the consequences of entering an appearance. Due to the great degree of convergence between Art 24 Brussels I Regulation and most national regimes in the EU, there is often no practical need to sharply distinguish the respective scopes of application.
Like a choice of court agreement, a submission to jurisdiction does not supersede the heads of exclusive jurisdiction under Art 22, but, unlike choice of court agreements, a submission is valid even in consumer, insurance and employment matters. In its reform proposal, however, the Commission makes that dependent on the defendant receiving information regarding his right to contest the jurisdiction of the court and the consequences of entering an appearance (Art 24(2)). In case of a submission to the jurisdiction of a court different from the one initially chosen, the submission prevails over the earlier choice of court agreement.
5. Unification efforts
Several attempts to agree on an international Convention on choice of court agreements were made under the auspices of the Hague Conference on PIL.
The Hague Convention on Jurisdiction of the Selected Forum in the case of International Sales of 15 April 1958 and the Hague Convention on the Choice of Court of 25 November 1965 have not yet entered into force and it is unlikely that they ever will.
A final attempt was made in 2002. As it became clear that the project of a comprehensive global convention on jurisdiction (jurisdiction (PIL)) as well as recognition and enforcement of foreign judgments in civil and commercial matters had failed, the negotiating countries focused on choice of court agreements (in particular the effect of prorogation and derogation as well as the recognition and enforcement of decisions based on such choice of court agreements). After several drafts and the inclusion of carve-outs from the scope of application (Art 2) as well as options for reservations (Art 21), on 30 June 2005 the Hague Conference agreed on a Convention on choice of court agreements. The Convention comprises several key elements. First, pursuant to Art 5(2) the designated court is not entitled to decline jurisdiction under the forum non conveniens doctrine. Secondly, pursuant to Art 6 a non-designated court seized must dismiss or suspend a claim brought in breach of the choice of court agreement (but it is allowed to verify the validity and scope of the choice of court agreement itself); however, pursuant to Art 7 this does not cover applications for interim relief (see the respective provision in Art 31 Brussels I Regulation). Thirdly, decisions rendered by the designated court have to be recognized and enforced in the other Convention countries pursuant to Arts 8 ff. Although anti-suit injunctions are not expressly prohibited under the Convention, its systematic structure militates strongly against them. Compared with the Brussels I regime, the Hague Convention allows parallel actions since it does not follow the strict lis pendens rule. Both the designated court and the court seized may decide independently on the validity and scope of the choice of court agreement and on the merits of the claim.
The scope of application of the Hague Convention is subject to numerous limitations and carve-outs. First, pursuant to its Art 1(1) it applies only to exclusive choice of court agreements. Secondly, various fields of law (far more than under Art 1(2) Brussels I Regulation) are excluded by Art 2 from the personal and material scope of application. These are most prominently choice of court agreements involving consumers or employees, large areas of intellectual property law apart from copyright and licensing disputes, actions based on anti-competitive behaviour or unfair competition, actions in delict/ tort, actions for personal injury, actions based on the transport of persons or goods as well as insolvency matters. Thirdly, according to Art 21 each contracting state may exclude specific matters (unilaterally) from the material scope. Fourthly, under Art 19 each contracting state may provide for the power of its courts to decline jurisdiction despite an exclusive choice of court agreement if there is no connection between that state and the parties or the dispute. Thus, contracting states shall be free in determining whether they want to offer their courts for purely external cases lacking any connection to the designated state. This option is particularly problematic. From a systematic viewpoint it contradicts the prohibition of forum non conveniens considerations under Art 5(2), and from a practical viewpoint it presents an obstacle to the choice of neutral fora.
To date (June 2011) only Mexico has ratified the Convention; the United States (19 January 2009) and the EU (1 April 2009) have signed it; recently, the Commission suggested the ratification by the EU. The relationship of the Hague Convention to the Brussels I Regulation is not entirely clear. While the Brussels I Regulation does not address the relationship in its Art 71(1), Art 26(6) of the Hague Convention provides that the Convention will step back and give way to the Brussels I regime in intra-Community cases with no connection to third countries.
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