Jurisdiction, law & statutory rights

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Currently, you can seriously prejudice your statutory rights if you agree to a contract under the laws of another jurisdiction, for a contract carried out in the UK.

Legal contracts

Fern Computer Consultancy Ltd v Intergraph Cadworx & Analysis Solutions Inc questions if an entity carrying out a contract in England has mandatory statutory protection under English/EU law where the:

  • Other party is based in a country not within the jurisdiction of the English courts;
  • Contract provides that it is governed by the laws of that other country and is,
    • Subject to the jurisdiction of its courts.

Traditional principle

The generally accepted principle is that if a contract is performed in the UK then UK law applies, notwithstanding:

  • The terms of the governing law;
  • The terms of the jurisdiction clause;
  • Mandatory statutory provisions;
  • EU law.

Party outside English Court’s jurisdiction

However, the Fern Computer case shows this issue is more complex. The contracting party is based outside the English Court’s jurisdiction. You first need permission, to issue proceedings to enforce statutory rights against the contracting party. This permission may not be granted.

Fern, the Claimant, wanted compensation under the Commercial Agents Regulations. This English statute implements EU regulations. The Defendant is based in Texas, and the contract was:

  • Governed by Texas law;
  • Subject to the Texas courts’ jurisdiction.

Here the relevant rules allow for service outside of jurisdiction for breach of contract claims or in tort. However, the rules don’t allow for service outside the jurisdiction for statutory claims.

The Texas Court stated the Claimant wasn’t entitled to serve proceedings outside the jurisdiction. The Claimant argued the claim was not for breach of contract. The court ruled the claim was:

  • In respect of a stand-alone statutory right.
  • Separate from, and did not override, the contract terms.

Mandatory provisions of law should apply

This decision cuts across the principal that mandatory provisions of law should apply. The provisions should apply no matter the choice of law and jurisdiction in the contract. This decision has serious implications for the enforceability of all “stand alone” statutory rights. Such statutory rights might otherwise protect businesses performing contracts with overseas entities.

The judge was uncomfortable with this. Hence the judge suggested the Claimant could argue that the Defendant had acted in breach of statutory duty. This would not be a statutory claim but  a tort claim. If so, an order for service outside of jurisdiction can be granted.

Using the rules to your favour

Parties entering into a contract should carefully consider and negotiate the choice of law and jurisdiction clause. That will operate to govern circumstances which result in a litigious dispute.

Alex Kleanthous is the partner running the commercial team at Gannons. Alex acts for corporate entities both in the UK and overseas. Alex’s service extends to drafting commercial contracts, and interpreting their terms in the event of a dispute.