EU-Singapore Trade: Forum Selection Clauses (1/2)Friday, 17 March 2017
In 2016, The Netherlands imported over EUR 4,2 billion worth in goods from Singapore. Dutch exports were even more sizeable: almost EUR 4,9 billion. Add to that amount the export of services, worth over EUR 6,6 billion, and it is clear that both countries are major trading partners. Given these close business ties, it will come as no surprise that from time to time, Dutch and Singaporese companies run into contractual conflicts. If that happens, those companies may have to go to court. But which court?
The Convention of 30 June 2005 on Choice of Court Agreements (including explanatory report) is an instrument of international law relevant for answering these questions. Signed by the EU, USA, Mexico, Singapore and the Ukraine, it entered into force as between the EU and Singapore in 2016.
The Convention aims to promote international trade and investment through enhanced judicial co-operation, by laying down uniform rules on jurisdiction and on recognition and enforcement of foreign judgments in civil or commercial matters (Article 1(1)). It applies when EU and/or Singaporese parties conclude an exclusive choice of court agreement: “an agreement concluded by two or more parties [in writing or otherwise accessible] and designates, for the purpose of deciding disputes which have arisen or may arise in connection with a particular legal relationship, the courts of one Contracting State or one or more specific courts of one Contracting State to the exclusion of the jurisdiction of any other courts” (Article 3(a))).
Parties do not have to designate an individual court. A reference such as “the courts of State [X] have jurisdiction” is permitted, as long as it concerns a group of courts in the same country. Furthermore, it is not required to state that the agreement is exclusive. Designating specific courts will automatically render it exclusive.
Jurisdiction: basis principle
The basic principle of the Convention is that the EU and Singapore recognize exclusive choice of court agreements. This means that the national court parties have designated must in principle decide the case (Article 5(1))). It cannot defer to foreign courts that may also attract jurisdiction (Article 5(2)). Foreign courts must in principle suspend or dismiss legal proceedings, in case an exclusive choice of court agreement applies that points to another forum (Article 6).
Jurisdiction: look out for scope and drafting pitfalls
It would be misleading to suggest that every exclusive choice of court agreement produces the desired effect. Drafting these type of clauses is no easy task. The Convention contains a number of exceptions and pitfalls. I will discuss the most poignant.
Firstly, in order for the Convention to apply, the case must have some ‘international’ aspects to it. This is a broad concept (Article 1(2)). For example, it includes any case in which parties seek recognition or enforcement of a foreign judgment (Article 1(3)).
Secondly, certain civil and commercial matters are excluded from the Convention ratione materiae. Carve-outs include arbitration; family law issues; carriage of passengers and goods; tort or delict claims for damage to tangible property; antitrust matters; infringement of certain IP rights; employment agreements; et al. (Article 2).
Thirdly, the exclusive choice of court agreement, even though it is considered to be separate and severable from the rest of the contract, can be null and void under the law that applies before the designated court (Article 5(1)). In that case, the parties’ choice fails.
Fourthly, please note that it remains possible to approach courts in other States for interim measures or injunctions (Article 7).
Fifthly, foreign courts also seized of the case may nevertheless accept jurisdiction to hear the case (Article 6). In particular if:
- the agreement is null and void under the law of the State of the chosen court;
- a party lacked the capacity to conclude the agreement under the law of the State of the court seized;
- giving effect to the agreement would lead to a manifest injustice or would be manifestly contrary to the public policy of the State of the court seized;
- for exceptional reasons beyond the control of the parties, the agreement cannot reasonably be performed; or
- the chosen court has decided not to hear the case.
If you require more information on drafting contracts or Dutch or EU courts, please feel free to contact one of our international commercial litigation experts, Adriaan Buyserd.