Conditions for the validity of exclusive jurisdiction clauses

Issue 4 Exclusive jurisdiction clauses

In light of the thrust of the discussions in the Working Group with respect to jurisdiction and choice of court clauses under draft article 76, the view was expressed that exclusive arbitration clauses should be permissible and should be enforced on the same grounds as exclusive choice of court clauses.

Conclusions reached by the Working Group regarding exclusive jurisdiction clauses

Should the draft instrument allow for exclusive jurisdiction clauses?

Should exclusive jurisdiction clauses be enforceable against third parties?

Further consideration should be given to the issue of whether exclusive jurisdiction clauses should be allowed pursuant to the draft instrument, and whether they should apply with respect to third parties

The reservation to article 11 was based on the premise that the article did not allow for exclusions he did not agree that article 11, paragraph 1 did not permit exclusions.

The exclusive jurisdiction clause should contain the name and location of the chosen court

It was suggested that exclusive jurisdiction clauses were quite common in the commercial context, since they provided a means to increase predictability and to reduce overall costs for the parties.

Accordingly, it was indicated that the goal of the draft subparagraph 83 (b)(ii) was to allow for arbitration agreements in those cases where an exclusive jurisdiction clause would be recognized under draft article 76 of the draft convention, relating to the recognition of exclusive choice of court clauses.

It was suggested that the requirement that an exclusive jurisdiction clause be expressly agreed might negate the perceived need to limit their validity to proposed new article 88a volume contracts.

It was suggested that this provision should be revisited once the Working Group has made its decision regarding exclusive jurisdiction clauses.

Article 76 of A CN.9 WG.III WP.56 (which the U.S. opposes in its current form) also deals with the enforceability of exclusive choice of forum clauses.

There was strong support for the suggestion that the draft instrument should indeed allow for exclusive jurisdiction clauses, particularly if the possibility for the abuse of such clauses was tempered by addition of certain conditions that would have to be fulfilled in order for such clauses to be valid.

Cases by text and article

In this connection, it was pointed out that, in order to be effective, an exclusive jurisdiction clause must bind third parties.

The view was also expressed that exclusive jurisdiction clauses should be limited to cases of derogation by certain volume contracts from the provisions of the draft instrument pursuant to proposed new article 88a (see above, para.

The parties to the initial contract of carriage should expressly agree that they would extend the exclusive jurisdiction clause to the third party

As a general rule, the exclusion of the provisions of the relevant treaty was complete and in exceptional cases, it was partial, or optional.

It was suggested that provisions could be included in the draft instrument requiring that certain conditions be fulfilled prior to the valid exercise of an exclusive jurisdiction clause. The conditions suggested were as follows

Furthermore, it must be remembered that this issue would be essentially irrelevant to the extent that exclusive forum selection clauses are fully enforceable.

Further, it was suggested that the other requirements for derogation from the draft instrument set out under proposed new article 88a should also be fulfilled in order to allow for the valid operation of exclusive jurisdiction clauses (see above, para.

Further, it was suggested that attaching conditions to prevent abuse would eliminate the possibility of surprise, which, it was submitted, was the key concern with respect to exclusive jurisdiction clauses in a commercial context.

The Working Group considered the general question of whether the draft instrument should allow for parties to the contract of carriage to agree to an exclusive jurisdiction clause.

A note of caution was raised regarding the possibility of overstating the importance of including or excluding exclusive jurisdiction clauses in the draft instrument.

Ms. Schmidt (Germany) said that although an exclusion covering the subject matter of draft paragraph 6 could be made under draft article 18, paragraph 2, it would be preferable to include an exclusionary provision under draft article 9 because it was unclear which instruments for claiming payment were excluded under draft article 2.

The view was expressed that the application of exclusive jurisdiction clauses to third parties should not be limited to the context of proposed new article 88a volume contracts, but that the principle should extend to all contracts of carriage.

While it was admitted that there was a danger that exclusive jurisdiction clauses could pose a danger in adhesion contracts, it was submitted that when contracts were freely negotiated there were strong commercial reasons for making the choice of court provisions exclusive.

Article 3, paragraph 1 Bilateral and regional arrangements

In this regard, the revised paragraphs (1) bis, (1) ter and (3) have been included so as to strengthen the safeguards contained in the article against discriminatory or otherwise exclusionary practices by the procuring entities (A CN.9 575, para. 33).

A smaller number of delegations expressed the strongly held view that the draft instrument should not allow parties to a contract of carriage to agree to exclusive jurisdiction clauses.

Following the enactment of the Equality Act 2004, he had sought legal advice with regard to the reservation on article 11, paragraph 1, which was being maintained because of very limited exclusions in the Employment Equality Act 1998.

In terms of another suggestion, both draft articles 17 and 18 could be drafted in the same way, either as without prejudice clauses or as exclusion clauses.

Article 3, paragraph 2 Bilateral and regional arrangements (adjustment)

It was observed that those opposed to exclusive jurisdiction clauses were generally opposed to their application to third parties, and that those in favour of their inclusion in the draft instrument were also generally in favour of extending them to third parties, perhaps with additional conditions.

The contrary view was expressed, that exclusive jurisdiction clauses should never apply to third parties, since they were not parties to the contract.

In his view, exclusions should not be permitted where consensus had been reached on a draft article.

Article 3, paragraph 3 Bilateral and regional arrangements (lex specialis)

The Relationship Agreement also anticipates the conclusion of supplementary arrangements to implement its terms.

It would not only afford legal certainty to courts but would also obviate the need for a large number of exclusions under draft article 18, paragraph 2, resulting in a tattered patchwork of reservations to the draft convention.

Further, it was noted that this issue was of such importance in some jurisdictions that there were domestic provisions in place to override the operation of exclusive jurisdiction clauses.

The Secretariat was requested to prepare draft text on exclusive jurisdiction clauses, bearing in mind the discussion and concerns set out in paragraphs 156 to 167 above.

Draft article 18, paragraph 2, provided for exclusions from the scope of application of the draft convention, whereas draft article 9, paragraph 6, referred to exclusions agreed between the parties.

The Chairman noted that draft article 18 was worded in such a way that it might arguably be seen to provide Contracting States with the option of excluding the provisions in the draft convention pertaining to the validity of electronic originals.