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Are you involved in a contractual dispute and the other party is located overseas? If so, it will be critical to know which country’s law will apply, how it applies to your contract and what issues will be enforced.

The Australian Position

If your contract states that a law other than Australia’s will apply, you will need to know your options in having that clause disregarded. Arguably, it is more convenient for both parties if the controversial issues and the supporting evidence were heard in an Australian court.

You could further argue that you would be denied a legitimate advantage if you are forced to bring an action in another country. This is because it is uncertain whether you could enforce peculiar rights existing only under Australian law in another country.

In Global Partners Fund Ltd v Babcock & Brown, the Court said that the law should reflect important policy considerations including:

  • that parties should be held to their contractual promises, and
  • that resolving disputes should occur in a coherent and consistent manner and as efficiently as possible.

In summary, the fewest different jurisdictions should be involved in resolving the dispute.

The Court’s Approach

In Nicola v Ideal Image Development Corporation,  the plaintiffs were doctors and ran a company. They sued a US Company in New South Wales for breaching s 52 of the Trade Practices Act (now the Consumer and Competition Act). The US Company sought a stay of proceedings based on a Floridian exclusive jurisdiction clause.

The doctors argued that it was uncertain whether a Florida court would apply the Australian Trade Practices Act. They further went on to say that the US Company could only obtain a stay if they could persuade the Australian Court that the Florida Court could hear their claims under this Act.

This Court rejected this argument. They said that it was up to the doctors to establish that the Floridian Court would not recognise their claim. The doctors had failed to do this.

Applying a Foreign Jurisdiction Clause

By way of illustration, we will use the US to understand how international courts interact with one another.

As of 2013, the US and Australia don’t have any bilateral arrangements to enforce judgments under the Commonwealth Foreign Judgments Act. Some of the requirements parties will need to satisfy to enforce a judgment in an Australian Court include:

  • that the US decision is final and conclusive;
  • there are identical parties to the proceedings, and
  • the claim is for a calculable sum or a fixed debt;

This example demonstrates that Australian courts will permit contracting out of applying Australian law and replace it with that of a foreign court.

Conclusion

When entering into a contract, it is very important that you understand the implications of this and what rights you might be giving up in relation to Australian law.

Parties often overlook this clause and understate its importance. But, it can have huge implications if a dispute was to arise. A specialist business lawyer can provide you with advice as to the recommended jurisdiction for your contractual needs and how it will affect the course of a dispute.

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