In an investment contract, a share transfer agreement or more broadly in any commercial agreement, the jurisdiction clause is often relegated to the background. Yet, in the event of a dispute, it can profoundly influence legal strategy and the outcome of the dispute.
As the founder of B2 Transmission says so well: “A good agreement is better than a bad trial”.
Why is this clause important?
The jurisdiction clause determines the competent court in case of conflict between the parties. It determines the place of the procedure, its language, its costs, its deadlines and even the interpretation of the contract according to the applicable law. A poorly drafted or imprecise clause can considerably lengthen deadlines, complicate the execution of a decision, and even open the door to disputes, especially in an international context.
Having handled disputes for subsidiaries all over the world, the founder of B2 Transmission can claim that it is already painful to have a trial in Belgium, but it is a nightmare to have one abroad. Lawyers are often more expensive there, and it is complex to quickly learn local law. By choosing the right jurisdiction from the drafting of the contract, you avoid a lot of trouble.
Do not confuse court and justice in the broad sense
Opting for a state court is not the only solution. Today, many contracts favor alternative conflicts resolution methods, such as arbitration or mediation.
- Arbitration allows for a private, confidential procedure, often faster and specialized, especially in international relations.
- Mediation, for its part, favors dialogue between the parties in a logic of conciliation and appeasement, without mandatory passage before a judge.
These options can offer better control of deadlines, costs, and sometimes a more favorable outcome to preserve business relationships.
The example of Enfoil illustrates this logic well: for this startup, arbitration in London was finally chosen, after discussions where we had proposed CEPANI in Brussels, while Toyo preferred Singapore. This choice reflects the strategic importance of this clause in international agreements.
How to choose the right dispute resolution mechanism?
The selection of the tribunal, the arbitrator or the mediator must be made with rigor and consistency, considering several key elements:
- Compatibility with the other clauses of the contract, particularly those relating to applicable law.
- The legal environment, especially if a foreign law is chosen.
- The budgetary implications (court fees, arbitration fees, etc.) and foreseeable deadlines depending on the jurisdiction envisaged.
- The ease of recognition and enforcement of decisions or awards, particularly in the event of enforcement in another country.
Experience allows us to affirm that a precise and well-documented negotiation in a well-written contract is worth a thousand lawsuits. It is necessary to find a balance between legal security and contractual fluidity: everything depends on the size of the deal, the parties involved, and the appetite for risk.
Lawyers should not be given free rein: their demands, although legitimate, can sometimes break deals.
Finally, one should not fear long contracts, but rather those that are difficult to understand and interpret.
What to remember
In the drafting of your contracts – whether it is fundraising, share transfers or international partnerships – do not let the jurisdiction clause be a simple copy and paste. It deserves a personalized analysis, consistent with the objectives of the parties and the identified risks.
Need advice to structure or review your contracts? Our legal team supports you at every step.