When litigation is brought in relation to a contract between an English company and a Scottish company, the general rule regarding jurisdiction is that the litigation should be brought in the country in which the defendant is domiciled. However, there are various exceptions to this rule. One of the most important is that where contracting parties agree that the courts of a particular country will have jurisdiction, that choice of forum will be given effect. Another is that a contracting party may be sued in the courts of the place of performance of the contractual obligation in question.
In the recent Scottish case of J S Swan (Printing) Limited v Kall Kwik UK Limited, J S Swan (a Scottish company) sought to bring proceedings in Scotland against Kall Kwik (an English company) in relation to alleged breaches of certain obligations under a franchise agreement.
The obligations in question related to the provision of support and assistance under a franchise granted by Kall Kwik to J S Swan. The contract did not specify where the obligations in question were to be performed. J S Swan argued that a term should be implied into the contract that the obligations should be performed in Scotland, which is where they had their place of business, on the basis that this term was necessary as a matter of business efficacy. Alternatively, they argued that it was intended by the parties that the obligations should be performed in Scotland and this was demonstrated by previous performance under the contract.
The Court of Session held that for it to have jurisdiction on the basis of place of performance there must be a contractual requirement to perform the relevant obligation in Scotland. It would not be sufficient to demonstrate that Scotland was a place in which the obligations could be performed and were likely to be performed if the creditor in the relevant obligations could not insist as of right on them being performed there. In the present case, the contractual obligations in question could competently be performed in Scotland or elsewhere and there were no relevant averments to support implying a term into the contract requiring performance to be carried out in Scotland. Accordingly, the Scottish courts did not have jurisdiction.
This case illustrates the general importance of pinning down assumptions into express contractual obligations; although there was arguably an assumption that performance would be in Scotland that assumption was not an adequate substitute for an express contractual requirement. Alternatively, a boilerplate governing law and jurisdiction clause could have put beyond doubt the parties’ intention as to which courts should have jurisdiction rather than leaving it to be disputed under the general legal rules of jurisdiction.
The rules considered in the above case are applicable both in courts within the UK and throughout the EU, given that they derive from the Brussels Convention.