Jurisdictional certainty is essential in international contracts

  • 2 April 2003

An unexpectedly large proportion of companies are dissuaded from going ahead with international contracts because of doubts about which national courts would resolve any dispute, an ICC survey disclosed today.

Of 100 leading companies that took part in an ICC world survey, 40 said there had been occasions when a significant business decision had been determined by jurisdictional uncertainty. Companies participating in the survey together have more than three million employees.

The International Chamber of Commerce presented the survey’s results to government officials drafting a proposed Hague Convention on Jurisdiction and Recognition and Enforcement of Foreign Judgments in Civil and Commercial Matters.

Andrea Schulz, a senior official of the Hague Conference on Private International Private Law said: “We have certainly taken on board business concerns about the need for certainty and predictability in jurisdictional matters”. The Hague Conference is the intergovernmental organization responsible for drafting the Convention.

Michael Hancock, the International business lawyer who represented ICC at the meeting with the Informal Hague Working Group, said: “This is far from an academic issue for business. The survey’s results show that millions of jobs could be affected. Business needs predictability and certainty in international contracts.

“When two companies make a choice of a national court in a contract they have a good reason for doing so, and their choice must be respected. The commercial importance of confidence on this score is underlined by the exceptionally large proportion of respondents to the ICC survey who said their contractual decisions depend on it.”

An ICC statement addressed to the negotiators in The Hague said: “Business’ principal expectations are that the Convention will respect choice of national court and enforceability of judgments.
ICC assumes that the Convention will only address choice of court provisions between businesses (B2B), an approach strongly supported by ICC as a means of achieving more predictability and certainty in international contracts within a reasonable time frame. ”

ICC said the right of the court of choice to dismiss proceedings should be limited in order to improve the predictability of judgments.

Of more than 100 companies that took part in the ICC survey, 71 were large companies with more than 500 employees and many were major multinationals. One had as many as 400.000 employees on its payroll.

Among a series of questions on business practices on jurisdictional issues, the companies were asked: “Has any significant business decision of your company ever been determined by uncertainty regarding the court that would resolve disputes or the law that would apply to the contract?” While 60 respondents ticked the “no” box, the remaining 40 replied: “yes”.