Arbitration And Jurisdiction Clauses In International Commercial Contracts: Differences, Certainty And Enforcement

Nadine Meintjes – Associate

Contracts involving parties located in different countries include provisions relating to the choice of a particular forum for dispute resolution and identify the law to be applied. The choice of law clause is intended as a means of achieving certainty on the legal niceties applicable to the performance of the parties’ respective obligations and this is clearly a goal which all contracting parties share. This provision singles out the so-called “proper law” of the contract. Much has been written about the desirability, in some instances, of arbitration over formal court proceedings, and some parties view arbitration as a preferable forum for the adjudication of all potential disputes arising from their contract. It is accordingly not uncommon for parties to select arbitration as their agreed forum, in the event of a dispute arising. The dispute resolution clause often goes further than the selection of arbitration over ordinary court process, since these clauses often confer jurisdiction on the courts of a named country, foreign to at least one of the contracting parties, or provide for arbitration in a specified jurisdiction. Such a provision is commonly referred to as an exclusive jurisdiction clause.

Contracts where parties have chosen a jurisdiction clause in order to resolve a dispute will have to consider certain linking factors in order to establish which countries the parties can select to resolve the dispute. This specific countries’ laws will then apply to resolve the dispute.

Contracts where parties choose an arbitration clause would be able to have two option with regards to a an arbitration clause. The first being to choose an arbitration clause that is giving in institutional arbitration which can be found in international instruments such as the International Chamber of Commerce or the United Nations Commission on international Trade Law. Secondly the parties can create their own ad hoc arbitration clause which the parties themselves establish the tribunal and the procedure.

In 2017 South Africa promulgated its International Arbitration Act. The objectives of the Act was to incorporate the Model Law on International Commercial Arbitration, as adopted by the United Nations Commission on International Trade Law, into South African law and to provide for the recognition and enforcement of foreign arbitral awards. The International Arbitration Act also applies to any international commercial disputes to which public bodies (state departments, institutions exercising public power or performing public function in terms of the Constitution or any legislation) are parties – if the parties have agreed to submit such disputes to international arbitration. That is, the International Arbitration Act can be applied to commercial disputes between state (national, provincial or municipal) departments and international businesses.

In conclusion, with the world marketplace becoming more international and more cross-border contracts being concluded international, arbitration is coming into its own. With businessmen distrusting courts in general and in particular foreign courts, there has been a grow in the inclusion of arbitration clauses within international commercial contracts.

With properly negotiated and drafted arbitration and jurisdiction clauses in international commercial law agreements, court proceedings could be effective and efficient in order to resolve a dispute that arose between the parties of this agreement in the specified manner in which the parties intended it to be resolved. With the necessary skill and knowledge, a properly negotiated and drafted agreement could give proper effect to all the parties’ needs if the above-mentioned differences, certainties and pitfalls are thoroughly addressed and avoided from the onset of the agreement.

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Kindly note this article is intended for general information purposes only and does not constitute legal advice. Should you need legal advice, please contact one of our legal practitioners.

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