Policy decisions. If the parties decide to avoid arbitration or prefer court proceedings, a choice of court provision will be appropriate. In essence, the ‘political’ questions asked in connection with a choice of court provision in commercial contracts are:
- What is the best choice to ensure as much as possible the continuation of business?
- Should we discourage court proceedings by providing for an unattractive procedure? Alternatively, do we need an expeditious court decision?
- Is a carve-out for certain action desirable (e.g. the right to seek protection under applicable intellectual property laws in a different jurisdiction)?
- Where should we engage a law firm?
The answers will follow from some very general observations of each party’s probable interests and power to settle disputes amicably. A Dutch in-house legal counsel will probably find that a counterparty will be inclined to compromise on German or French courts (as if a football team were sentenced by the UEFA to play its home matches outside its home country).
Exclusive jurisdiction. A choice of court is typically made under the assumption that the choice excludes the international jurisdiction of other courts. In Europe, making this explicit is not necessary: both the Brussels Regulation and the Lugano Convention (the regulation’s counterpart for non-EU Member States) determine that in the absence of such an express stipulation, jurisdiction of the appointed court over any dispute is exclusive. Since U.S. courts do not recognise the scope of the Regulation or the Convention and making this explicit requires only one word, including the word exclusive is recommended.
Relative jurisdiction. Normally, it is not necessary – and potentially a source of confusion – to express which level of court jurisdiction (relative competence) applies. It is unnecessary because local civil procedural law will determine the level (and does not always permit a choice); it can be a source of confusion if at the time of a dispute it appears that the drafter did not intend to choose the relative jurisdiction but rather was trying to be too clever. The parties might find themselves having precluded a right to appeal (e.g. because they appointed a Court of Appeals).