Jurisdiction and applicable laws is the necessary provision for making a good international contract. Without the provision of jurisdiction and applicable laws, parties will make it uncertain as to where and how to settle the dispute possible arising in the international trade.So, you should consult a lawyer if you’re not sure how to make a good provision of jurisdiction and applicable laws.
Case Study:
A steel trading company which is located in the middle east of Asia reached an agreement with a supplier who is located in Jinan city, Shandong Province, China. Parties agreed to that the supplier sold silicon steel coils to the buyer, they made all clauses in aspect of price, delivery, inspection, and liability for loss and damage. There is also a clause regarding the jurisdiction saying that: If a dispute arises, the parties will attempt to resovle it by discussion and negotiation before commencing legal proceedings. The Buyer’s courts will have exclusive jurisdiciton over any dispute.
The seller breached contract after he received the first deposit from the buyer. The buyer tried to negotiate with the seller, but finally failed. The buyer has to lodge a complaint against the seller to the court which should be the buyer’s court as per agreement beforehand. The jurisdictional court is in the country of the buyer, it’s convenient for the buyer to file the case. However, the seller has no asset in the buyer’s country. Even though the buyer prevailed in the lawsuit, it’s very hard for the court to enforce the judgement, because of no availabe asset. Then the buyer was compelled to go to China to apply for the court to admit and execute the judgement, but due to different legal system, the judgement in the buyer’s country was refuted to be admitted. The buyer has to file another lawsuit to the juridictional court of the seller’s place. This causes a very long time to do it.
So do mind to make a better clauses regarding the jurisdiction and application laws. If you’re not confident about how to draft it, consult a lawyer to help.