As international commerce expands in scale and complexity, so too have cross‑border commercial disputes. Jurisdiction clauses in cross border contracts can shape litigation risk, cost, timelines, the enforceability of judgments and remedies, and even regulatory exposure. But this deceptively simple yet powerful tool is often overlooked, causing dilemmas and disputes over where to commence proceedings or how to otherwise enforce contractual rights. Sometimes even well drafted jurisdiction clauses can be voided by local legislation and Court discretion.
Understanding how courts approach jurisdiction clauses generally and how they interact with arbitration clauses can help parties better assess and manage jurisdictional risk in their cross-border dealings. This article explains broadly how Australian courts approach jurisdiction clauses to help inform jurisdiction clauses in cross-border contracts.
Jurisdiction Clause vs Arbitration Clause
A jurisdiction clause in a contract typically commits the parties to litigating in a nominated or preferred court. Choosing an agreed jurisdiction can be preferable where public, precedent-setting decisions and appeal rights matter, as courts deliver reasoned judgments that guide future dealings and allow correction of legal error. Courts also have stronger coercive powers than tribunals, such as third-party joinder, subpoenas and broader disclosure, and are typically better equipped to grant urgent injunctions on short notice. For cross-border commercial arrangements, a clear jurisdiction clause offers predictable procedures and timetables to mitigate risk and uncertainty.
Parties to cross-border relationships can also address their geographic differences through a well-crafted arbitration clause. This differs from a jurisdiction clause because it provides an out-of-court mechanism to determine disputes that avoids the need to commence formal legal proceedings in a Court.
Although arbitration can be the preferred mechanism (and Australia’s courts strongly support arbitration when the arbitration clause is valid and clearly drafted), this does not negate the need for a separate and considered jurisdiction clause. For example, if a claim sits outside the arbitration clause, or if the clause is void or cannot be performed, legal proceedings may be required.
Jurisdiction clauses in the Australian legal landscape
Parties engaged in cross border contracts who have sufficient Australian connections can usually choose where disputes will be decided, including choosing to commence in Australian courts. However, the legal consequences of such a choice depend on the wording of the jurisdiction clause.
Australian courts will generally enforce a clearly worded exclusive jurisdiction clause electing a foreign court as forum and respect party autonomy. A party seeking to litigate in Australia despite such a clause must establish “strong reasons” why Australian proceedings should not be stayed. Nevertheless, mandatory statutes such as consumer protections and public policy considerations may justify the court declining to stay proceedings in particular circumstances, as demonstrated in Epic Games, Inc v Apple Inc [2021] FCAFC 122 below.
By contrast, where no exclusive jurisdiction clause exists and legal proceedings is commenced in Australia, Australian courts use a strict test for staying local proceedings, meaning they will decline jurisdiction only if Australia is a “clearly inappropriate forum”, which is comparatively plaintiff‑friendly.
CSR Ltd v Cigna Insurance Australia Ltd (1997) 146 ALR 402 illustrates the Australian “clearly inappropriate forum” test in operation in the anti-suit context. Over 40,000 asbestos-related insurance claims were made against CSR Ltd (CSR) and CSR America, Inc (CSR America) in the United States, and against CSR in Australia. CSR and CSR America commenced proceedings against the insurers, including Cigna Insurance Australia Ltd (Cigna Australia) and its related corporation, in the United States District Court for the District of New Jersey.
In response, Cigna Australia and other insurers commenced proceedings against CSR, CSR America and other insurance companies in the Supreme Court of New South Wales, under the agreement that the insurers “submit any claims under the policies to the decision of a competent court in Australia”. Among other relief, they sought anti-suit injunctions to restrain CSR and CSR America from pursuing aspects of the US proceedings, including their statutory claims under the US Sherman Act. CSR in turn applied for a stay of the Australian proceedings on forum non conveniens grounds.
The High Court of Australia held that anti-suit injunctions may only be granted in exceptional circumstances where the foreign proceedings are “vexatious or oppressive”, and that the local court itself not be a clearly inappropriate forum. The Court set aside injunctions and granted stay of the NSW proceedings, holding that the US proceedings were not shown to be vexatious or oppressive, and that New South Wales was oppressive and a clearly inappropriate forum for the Sherman Act claims.
Consumer and small-business protections can override forum clauses
The Australian Consumer Law under the Competition and Consumer Act 2010 (Cth) can change how forum clauses operate for international business who include foreign jurisdictions in contracts with Australian-based consumers and small‑businesses. For example, under the ACL, the unfair contract terms regime can render specific terms in standard‑form consumer or small‑business contracts void. If a term is void or mandatory rights would be undermined, those factors can provide strong reasons for an Australian court not to stay local proceedings despite an exclusive foreign jurisdiction clause.
In Epic Games, Inc v Apple Inc [2021] FCAFC 122, the appellant Epic Games, Inc (Epic) opposed the stay granted by the Federal Court of Australia based on exclusive jurisdiction clause in the Apple Developer Program License Agreement, which requires litigation or dispute resolution in the Northern District of California. Epic contended its claims under Part IV of the Competition and Consumer Act 2010 (Cth) and section 21 of the Australian Consumer Law for unconscionable conduct. The Full Court held that there were “strong reasons” to refuse the stay and enforcement of the exclusive jurisdiction clause would offend Australian public policy, including the juridical disadvantages of a US forum which deprive Epic and the public of the benefits of Australian competition law.
More recently in Karpik v Carnival plc [2023] HCA 39 (“the Ruby Princess case”) the High Court confirmed the ACL’s broad extraterritorial reach for corporations carrying on business in Australia and held a class action waiver void. Although the exclusive jurisdiction clause was not inherently unfair, the Court declined a stay on discretionary grounds. Such grounds included the advantage of the representative proceeding under Pt IVA of the Federal Court of Australia Act 1976 (Cth), which provided a more efficient mechanism for resolving class actions compared to individual proceedings in the United States, and the risk of fragmented and inefficient litigation including the possibility of conflicting outcomes in different courts.
Practical Considerations
Whether to enforce an exclusive jurisdiction clause remains a case‑by‑case discretionary decision anchored in the facts and the applicable statutes.
For commercial parties, a practical way to avoid enforcement issues is to give jurisdiction clauses proper consideration when forming cross-border contracts. There are some practical considerations:
- Give due consideration to where and how to resolve disputes in the contract including whether arbitration is appropriate
- Nominate a clear and preferably exclusive jurisdiction to enhance predictability and support enforcement
- Seek advice from local lawyers on any mandatory statutes or overriding public policy considerations that may apply
- Pressure-test the jurisdiction chosen by considering enforcement pathways and availability of relief (such as where key assets are located)
In an increasingly global commercial landscape, jurisdiction clauses are more than a procedural formality. They are a key strategic tool that shape dispute resolution outcomes. By crafting clear, enforceable clauses and understanding the limits imposed by Australian law, parties can better navigate cross-border risks and protect their legal interests.
This memo presents an overview and commentary of the subject matter. It is not provided in the context of a solicitor-client relationship and no duty of care is assumed or accepted. It does not constitute legal advice.
