Buying French lingerie from Hong Kong would clearly have its own unique problems and not just problems associated with shape and size! As an example, one such problem would be a dispute over the exclusive jurisdiction clause and the place where such a dispute is to be resolved. This issue was examined in the recent Steadmark Pty Ltd v Bogart Lingerie Limited [2013] VSC 402 (9 August 2013) decision.

The Facts

This case arose from three contracts made between Steadmark Pty Ltd (Steadmark) and Bogart Lingerie Ltd (Bogart). Bogart, which was operating in France, was to deliver lingerie to Steadmark in Melbourne, Australia. 

When the lingerie arrived, Steadmark deemed the goods to be of poor quality and refused to pay for them.

All three contracts between Steadmark and Bogart had an exclusive jurisdiction clause. This clause stated that the applicable law for a dispute arising from these contracts was French law, and the applicable court for the resolution of the dispute was the District Court of Nanterre (being a city west of Paris).  Despite this exclusive jurisdiction clause, Bogart commenced proceedings to recover payment from Steadmark in the Supreme Court of Victoria.

In this unique case, Steadmark, the defendant, an Australian company, sought to argue that the appropriate jurisdiction for the resolution of the dispute was in France, rather than in the Supreme Court of Victoria.

What is an exclusive jurisdiction clause?

An “exclusive jurisdiction” clause in a contract addresses where disputes arising under the contract are dealt with, and in which court.  Other similar clauses include the governing law for such a dispute, and the dispute resolution mechanism that you prefer (such as mediation, arbitration, or court proceedings). A “non-exclusive” jurisdiction clause would permit initiating a dispute resolution mechanism in other jurisdictions as deemed appropriate.

When you agree to a particular exclusive jurisdiction clause to resolve any disputes arising from an international contract, this:

  • helps avoid arguments over where a dispute should be heard;
  • helps avoid litigation in multiple jurisdictions;
  • allows parties to choose a jurisdiction before tensions emerge; and
  • allows parties to choose a jurisdiction which has effective mechanisms for enforcing any arbitral award or court judgment.

In drafting an exclusive jurisdiction clause, you should consider amongst other things:

  • convenience, cost, appropriateness of local laws, and experiences within that jurisdiction for similar disputes;
  • what dispute mechanisms you have agreed to in the contract; and
  • the relevance of the jurisdiction with the transaction, as the less relevant it is, the greater the chance the clause could be considered invalid. For example, if an Australian company and a German company are transacting in Australia, a clause applying French law could be found to be invalid.

The Decision

Steadmark took a positive step in the proceedings by filing a cross-claim in the proceedings, rather than challenging the court’s jurisdiction at the start of the proceedings.

The court held that the filing of the cross-claim meant that Steadmark had accepted the court’s jurisdiction.

Had Steadmark only challenged the court’s jurisdiction and not filed a cross-claim, then it appears it would’ve succeeded in the application, as the court found Steadmark had waived its right to rely on the clause by way of its conduct.

Takeaways

If you're entering into an international contract, it's important to draft an exclusive jurisdiction clause into the contract.

Having a litigation taking place outside of your own or a familiar jurisdiction can result in uncertainty of outcome and also have significant cost implications.

As can be seen, in addition to having drafted in an appropriate exclusive jurisdiction clause, to ensure a dispute is resolved in the jurisdiction of choice, parties should not act contrary to it. If you do, you may well lose your rights to appeal under this clause.