Jurisdiction Clauses: The Need to be Clear
A common clause in most international contracts is the
jurisdiction clause in which the parties to a contract agree at
the outset of their contractual relationship which country's or
countries' courts are to have legal authority ('jurisdiction') to
hear disputes arising from that contract.
Share with a
colleague
May 2012
Singapore
Contact
A jurisdiction clause may take one of three forms:
non-exclusive jurisdiction clause – this type of clause allows the parties to
submit a dispute arising from an agreement to a particular country's courts,
while leaving the parties free to commence proceedings in another country's
courts.
 exclusive jurisdiction clause – this type of clause provides a more restrictive
framework by stipulating that any dispute can only be submitted to an agreed
country's courts.
 one-way jurisdiction clause – a less commonly used clause, this type of
clause stipulates that one of the parties must always bring any claim in the
courts of one particular country, whereas the other party retains flexibility to
bring a claim in any courts it may choose (such a clause is predominantly
seen in finance agreements in which the borrower is required to bring a claim
in a particular forum whilst the bank retains the right to bring a claim in any
forum, most likely where the borrower's assets are located.)
Although often considered a "boilerplate" provision and sometimes not given
much attention during the negotiation of an agreement, the recent Singapore
Court of Appeal case Orchard Capital I Ltd v Ravindra Kumar Jhunjhunwala
[2012] SGCA 16 highlights the importance of ensuring jurisdiction clauses
accurately reflect the parties' intentions.

Maurice Burke
Singapore
+65 6868 8009
Alastair Henderson
Singapore
+65 6868 8058
Facts of Orchard Capital I Ltd v Ravindra Kumar Jhunjhunwala
The parties in this case entered into a Settlement Agreement in relation to
Ravinda Kumar Jhunjhunwala's ("Ravinda") breach of various contracts with
Orchard Capital I Ltd ("Orchard"). The Settlement Agreement provided that the
parties submit any disputes to the non-exclusive jurisdiction of the courts of Hong
Kong, SAR.
Ravinda subsequently breached the Settlement Agreement and Orchard brought
proceedings in the Singapore courts in relation to this breach. Ravinda applied to
stay the proceedings in Singapore on the grounds that, although the jurisdiction
clause in the Settlement Agreement was non-exclusive, nevertheless the
presence of that clause in the Agreement indicated the parties' primary intention
that the courts of Hong Kong, not Singapore, were the most suitable to hear the
claim.
The Singapore Court of Appeal overturned the decision of the High Court (which
had stayed the Singapore proceedings) and decided instead to allow the claim to
continue in the Singapore courts. The Court cited two main arguments for its
decision:
Charles Ball
Jakarta
+62 21 5790 5846
Sean Izor
Bangkok
+66 2657 3832
Related links
Herbert Smith website
Contractual Interpretation
The Court noted that the jurisdiction clause, which was labeled as non-exclusive,
could nonetheless be given the effect of an exclusive jurisdiction clause if that
was determined to be the true intention of the parties, applying legal rules of
contract interpretation.
However, in this case the Court decided that the parties' intention was clearly not
to enter into an exclusive jurisdiction clause. As evidence of this, the Court
considered the Settlement Agreement as a whole and decided that its main
purpose was to ensure that Ravinda (and not Orchard) discharged its obligations.
The jurisdiction clause was interpreted in a manner consistent with such an
approach: it was understood to have been intended to give Orchard the benefit of
flexibility in enforcing the terms of the Settlement Agreement in various
jurisdictions. The Court also noted that Ravinda had provided no evidence to
suggest that the parties intended for the jurisdiction clause to operate like an
exclusive jurisdiction agreement.
Forum Non Conveniens Test
Having first concluded that the jurisdiction clause was intended to be nonexclusive (as reflected in the express words of the clause), so that the parties
were not required by contract to litigate any disputes in the Hong Kong courts, the
Court then undertook a forum non conveniens analysis in order to determine
whether Hong Kong was nevertheless clearly or distinctly a more appropriate
forum to hear the dispute. This involved considering all relevant factors in order to
decide which courts were the most appropriate or convenient in this particular
case.
Whilst the presence of a non-exclusive jurisdiction clause was a relevant factor, in
that it might indicate the parties' acceptance of Hong Kong as the appropriate
forum to resolve their disputes, the Court decided that, in determining this issue,
the weight to be attributed to the non-exclusive jurisdiction clause depended on
the precise facts and circumstances. While a non-exclusive jurisdiction clause
would make it difficult for one party to argue that the courts of the jurisdiction(s)
listed in a non-exclusive jurisdiction clause should not have jurisdiction over a
claim, this does not mean that the courts of other jurisdictions not listed in the
clause would not have jurisdiction to hear such a claim. In this case there was no
evidence to suggest that the jurisdiction clause was a strong indicator that Hong
Kong was clearly or distinctly a more appropriate forum than Singapore. Other
factors relevant to the case suggested that Singapore was an appropriate
alternative forum.
Practical Effects on Contracting Parties
This case highlights that the parties' choice of jurisdiction clause should be
carefully considered before entering into an agreement, in order to ensure that
disputes will be decided in the courts which the parties prefer. Simply designating
the courts of one jurisdiction in a non-exclusive jurisdiction clause does not
necessarily mean that that jurisdiction's courts will be deemed to be the most
appropriate to hear a dispute. As the clause is non-exclusive, claims may also be
heard elsewhere.
Whilst an exclusive jurisdiction clause provides the most contractual certainty,
many parties to commercial contracts will nevertheless want to opt for a nonexclusive jurisdiction clause which provides parties with the freedom to bring
proceedings in various jurisdictions, for example, one in which the counterparty
has assets.
When bringing a claim subject to a non-exclusive jurisdiction clause, the presence
and terms of that jurisdiction clause will be only one factor which the courts will
take into account when considering which country's courts are the most suitable
to hear a claim. Therefore, even if a non-exclusive jurisdiction clause specifies a
forum other than Singapore, proceedings brought in Singapore will not be stayed
if other factors do not prove that the other forum is "clearly or distinctly" more
appropriate.
The key message for businesses is that clarity is critical when entering into
contracts. As was shown in this case, 'non-exclusive' choice of jurisdiction leaves
open the possibility that claims will be heard in some other courts. If a party wants
to ensure that only one jurisdiction's courts can take jurisdiction over a claim, then
this must be stated clearly in the contract, leaving no room to interpret the clause
Herbert Smith South
and South East Asia
region homepage
Herbert Smith
publications
Herbert Smith news
differently.
Subscribe to other publications | update my details
To unsubscribe from this e-bulletin, please click here.
The contents of this publication, current at the date of publication set out above, are for reference purposes only. They do
not constitute legal advice and should not be relied upon as such. Specific legal advice about your specific circumstances
should always be sought separately before taking any action based on this publication.
© Herbert Smith LLP 2012
This message is sent by Herbert Smith, 50 Raffles Place, #24-01 Singapore Land Tower, Singapore, 048623. Email:
asia@herbertsmith.com.
本信息由史密夫律师事务所新加坡分所发出。新加坡分所地址：新加坡莱佛士坊50号新置地大厦#24-01 (邮编
048623200002) 。电邮：asia@herbertsmith.com.
不希望接收本电子报
如阁下不希望接收本电子报，请点击此处。