My Place or Yours?

In the modern, global marketplace many British businesses deal on a regular basis with customers or suppliers based in other parts of the world.

It is essential, when dealing with foreign companies, that the contract specifies the law to which the contract is subject and the country in which any dispute arising from the contract will be decided.

In the absence of a clear indication in the contract, questions of law and jurisdiction are open to debate. This may have expensive consequences.

One would imagine that multinational corporations such as Apple Corps, the record label famously started by the Beatles, and IT giant Apple Computers, would ensure that such matters would not be left to chance.

However, a commercial agreement between the two in 1991 was silent as to law and jurisdiction. When a dispute arose, it was left to the High Court to decide whether the dispute would be heard in London or California, and whether under English or US law.

The Court decided that English law and jurisdiction should prevail.

There is likely to be an appeal; parallel litigation has already commenced in California, where Apple Computers contend that the dispute should be litigated.

Imagine that your UK business contracts with a company in China, and a dispute as to law and jurisdiction arises.

As the contract is silent on the point, an English court decides, having regard to where the contract was formed and where it was performed, that Chinese law and jurisdiction are appropriate.

Not only must you now fund and manage court proceedings in China, but the dispute will be decided under Chinese law, maybe less favourably to you than in England and upon the basis of different legal reasoning.

The international nature of modern business is such that either or both of these issues may prove to be paramount. A well-constructed and professionally drafted contract should avoid problems.