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01 September 2009
The EU Brussels I Regulation (44/2001) lays down the rules governing the allocation of jurisdiction in civil and commercial matters in the EU member states. The general jurisdictional rule is that where a defendant is domiciled in a member state, it shall be sued in that member state. However, one exception to this rule occurs where the parties have agreed otherwise (see Article 23, "Prorogation of Jurisdiction"). A recent Supreme Court decision highlights the importance of the regulation in the context of commercial transactions. The case also demonstrates that parties must ensure that they understand the nature of the individual contractual relationships into which they enter, notwithstanding the fact that there may be other related agreements between some or all of the parties.
In O'Connor v Masterwood (UK) Ltd(1) the plaintiffs brought an appeal based on Article 23. The central issue was whether an agreement between the plaintiffs and the second named defendant (a company associated with the first named defendant and incorporated in Italy) conferred exclusive jurisdiction on the courts of Italy. The agreement in question provided for the exclusive jurisdiction of the "Court of Rimini" and the High Court had found in favour of that Italian jurisdiction, being satisfied that the plaintiffs had agreed to that clause as clearly set out in the body of the agreement. Notwithstanding that the clause involved appeared immediately above the signature of the first named plaintiff on the printed conditions, a complaint was made that the clause was not drawn to the first named plaintiff's attention. As such, it was suggested that a prior agreement with the first named defendant (which contained no jurisdiction clause) should govern the arrangement.
The Supreme Court ruled that the second named defendant's reliance on Article 23(1)(a) with regard to the agreement conferring jurisdiction either being in writing or evidenced in writing was justified because the clause was in a written document which was signed. Nothing more was required. Justice Fennelly further noted that Article 23 does not expressly require the signature of the party to be bound, but in any event, the contract containing the clause was signed in this instance. The court was also satisfied that Article 23(1)(c) applied in this case and commented that, although the plaintiff may have paid little attention to the terms of the printed conditions (as is commonplace), people in trade (especially international trade) must be taken to be aware that printed conditions contain clauses that affect their rights and ignore them at their peril. This, stated the judge, is why Article 23(1)(c) refers to practices of which parties "ought to have been aware". Accordingly, it was inescapable that the jurisdiction clause was part of any agreement between the plaintiffs and the second named defendant. The order of the High Court was therefore affirmed.
This case highlights the far-reaching effects of Article 23 as it requires traders, from small businesses to multinationals, to be aware of the terms and conditions set out in contractual documentation. It furthermore demonstrates the particular need for traders to read and understand fully any contractual documents they sign (especially if they contain jurisdiction clauses), and that it is dangerous to make assumptions in that regard.
For further information on this topic please contact Gearoid Carey at Matheson Ormsby Prentice by telephone (+353 1 232 2000), fax (+353 1 232 3333) or email (email@example.com).
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