Two recent judgments of the European Court of Justice ("ECJ") raise issues regarding the effectiveness of exclusive jurisdiction clauses in relation to parties within the European Union ("EU").

In Gasser v. MISAT (Case C-116/02), an Austrian party and an Italian party had contracts which appeared to contain exclusive jurisdiction clauses in favor of the Austrian courts. In contravention of the clauses, the Italian party brought suit in the Italian courts. The Austrian party subsequently initiated proceedings in the Austrian courts, seeking to enforce the exclusive jurisdiction clauses, even thought the Italian courts had been "first seized" of jurisdiction.

The ECJ interpreted Article 21 of the Brussels Convention (now, Article 27 of the Brussels Regulation) and determined that where causes of action are brought in two separate courts in the EU, in proceedings involving the same parties and facts, the "second seized" court must stay proceedings pending a decision on jurisdiction by the "first seized" court. The ECJ specifically found this rule to apply even in circumstances where the parties had signed contracts with exclusive jurisdiction clauses.

The issue has special resonance in England, where the courts have traditionally enforced English exclusive jurisdiction clauses by issuing "anti-suit injunctions" - i.e., injunctions which seize assets/issue fines against a party's property or assets in the UK in circumstances where a party has brought suit in a foreign country, in breach of an English exclusive jurisdiction clause. In Turner v. Grovit (Case C-159/02), the ECJ decided that courts of one member state may not issue anti-suit injunctions against parties seeking to bring or maintain proceedings in another EU state.

It is important to keep in mind that these decisions most likely do not apply to cases between purely US litigants, or cases involving a single US party and a single EU-based party, and/or to proceedings in the US Courts. However, they would apply to the subsidiaries of US companies domiciled in countries within the EU. They could also cause procedural headaches in situations where there are multiple parties - some in the EU, and some outside of it.

Therefore, when drafting commercial contracts where some/all parties may be domiciled/incorporated in the EU, parties may wish to include arbitration clauses rather than exclusive jurisdiction clauses, as they appear (at this stage) to afford better protection against potentially costly and time-consuming procedural battles.