Clauses of the contract mention governing law, jurisdiction governing the procedural laws. While reading these clauses, it is important to understand the difference between governing laws and jurisdiction clauses. Let us look at an example and then answer questions with respect to the same-
Company A is incorporated in India and hence follows the laws of India. Company B is incorporated in Ontario, Canada and is subject to the laws of Ontario and the central law of Canada.
The following is the clause in the contract:
“THE VALIDITY OF THIS CONTRACT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER IT SHALL BE GOVERNED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF ENGLAND AND WALES.
ANY DISPUTE ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT SHALL BE SUBJECT TO THE JURISDICTION OF THE COURTS OF ONTARIO, CANADA.
THE PARTIES HAVE A DISPUTE AND THEY APPROACH THE COURTS OF ONTARIO, CANADA."
Which law would govern the merits of the dispute?
The merits of the contract and dispute shall be governed by the Laws of England and Wales. This means that while interpretation of the contract is done, laws of England & Wales shall be the substantial law. Governing laws are selected on the basis of how applicable and beneficial they shall be for the contact. English law and is most widely used in cases of international commercial contract because they provide wide contractual freedom and are fairly regulated. They are more relevant and used in commercial contact and they provide for easy access.
English laws are internationally recognised because of the freedom of financial and commercial transactions. Further, English laws are considered to have a larger sense of proportionate while determining damages.
Which procedural law should be applicable to the dispute?
In case of disputes, the procedural laws of Canada shall be applicable. While a lot of contracts do not mention exclusive jurisdiction for dispute resolving, it is always preferred that the same should be mentioned in the contract so that there is clarity on both the sides and both the parties would know about the legalities and where and what action they can take.
Not mentioning Jurisdiction clauses makes the process of dispute resolution extremely lengthy and an exhaustive process. When the jurisdiction clause is mentioned the parties in dispute will not have to go through costlier and longer processes rather they can work according to the jurisdiction.
Jurisdiction clauses and the place should be decided by taking into consideration the convenience and the laws and judicial system of a particular country with the remedies that the country provides also it should take into consideration how easily and enforcement of judgement or decree can be done.
Can party A enforce the judgment of the Canadian court in India?
Foreign Judgment is defined under section 2(6) of the code of civil procedure which talks about ‘judgement of a foreign court’. Foreign Court is defined under section 2(5) of the CPC which means the court that is situated outside India and is not established under authority of the central government of India.
Section 13 of the Code of Civil Procedure says that the foreign judgments can be enforced in the Indian courts however they need to be conclusive.
As per section 13 of the code, a foreign judgement shall be conclusive unless-
1. It has been pronounced by a
court of competent jurisdiction
2. It has
not decided on the merits of the case
3. It
finds to be an incorrect view of international law or refusal to recognise the
law of India
4. The
proceedings of the judgement or opposed to natural justice
5. It has
been obtained by fraud
6. It
sustains a claim founded on a breach of any law in force in India.
Section 13 provides for criteria under which a foreign judgement shall be recognised and it should be seen as a precondition to enforce the judgement. Section 44-A of the code deals with execution of foreign judgements.
Decrees passed by courts in reciprocating territories can be directly executed under section 44-A of the CPC. However, there are various countries that or not reciprocate territories and in order to pass a judgement by such territory certain other procedures are to be followed.
Reciprocating territories are United Kingdom England Bangladesh Malaysia Trinidad & Tobago, New Zealand, Hong Kong, Papua New Guinea, and Fiji. In India, Canada is not part of a reciprocating territory as provided in the Official Gazette of the Central Government and therefore the rules of non-reciprocating territory ought to be followed.
For enforcing judgments for decrees obtained by non-reciprocating territories, the decree holder needs to first file a suit in Indian courts based on either the foreign decree or on the same cause of action/dispute. This shall be done in the appropriate Indian Courts having the jurisdiction.[1] This means that the decree of a foreign judgment passed in Canada cannot be enforced right away.
The Indian Courts then check whether the judgement that was passed by the foreign judgement was legal or not. It is mainly done to check that the foreign courts have applied its mind to the facts of the case and took consideration of the substantial law governing the contract.[2]
The limitation period for filing an application for execution of a foreign decree shall be 12 years, counting from the date on which the decree was passed under Article 137 of the Limitation Act, 1963.[3] The concepts of ‘cause country’[4] and ‘forum country’[5] are also looked into while calculating the period.
[1] Marine Geotechnics LLC v. Costal Marine Construction and Engineering Ltd.
[2] Alcon Electronics Pvt. Ltd. v. Celem S.A.
[3] Baroda v. Kotak Mahindra Bank
[4] Country in which decree was issued.
[5] Country is which decree is sought to be enforced.
1 Comments
This article is really informative for us to give an idea about Governing Law and Jurisdiction Clauses . Thanks for sharing!
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