CONTRACTUAL OUSTER OF JURISDICTION: A COMPARATIVE

STUDY OF JUDICIAL ATTITUDE

INTRODUCTION
In order to effectively discuss the subject matter of contractual ouster
of Jurisdiction which is the exclusion of jurisdiction of courts by
agreement of contracting parties, it is necessary to first appreciate the
meaning of the word ‘jurisdiction’

‘Jurisdiction’, is a word which bears diverse meanings, depending on

the purpose and nature under consideration. It is a word with too
many meanings and all that can be done is to try to conjure the sense
in its contextual meaning or essence.

Under Conflict of Laws ‘Jurisdiction has been defined as the power of

a state to create of effect legal interests which will be recognized as
valid in other states’. This definition judgements through valid for
interstate situations is inadequate for international problems since
there exists no supranational authority, outside the treaty areas,
which can compel one state to recognize or enforce rights created by
the court of another state through the exercise of its Legitimate
Power, as the jurisdiction of he Courts of each country is, in practice
determined by the forum legislature of Courts with indifference to
extra territorial recognition. What is so significant however is that the
same term has always been employed, under the received English
law and Common Law to describe extra territorial as well as intra-
territorial competence of the Courts it may therefore be proper to
define ‘judicial jurisdiction for conflict of law purposes as the authority
of a court to hear and determines an issue upon which its decision is
sought.

The significance of the question of jurisdiction lies in the extra-

territorial enforcement of judgements under the common law systems
generally the enforcement of foreign judgements depends almost
exclusively on whether the judgement has been pronounced by a
court of competent jurisdiction. Under the common law, the
judgement of a court lacking jurisdiction is null and void and of no
legal effect.

CHOICE OF FORUM AGREEMENT

It often happens that parties include in the terms of their contract, the
particular tribunal, Court or foreign courts which should adjudicate
over any dispute arising from the performance of the contract. This
act of contacting parties has been described by various
terminologies namely forum agreement, prorogation agreement the
consequence of which can be further described as exclusive
jurisdiction agreement, exclusive forum agreement and derogation
agreement, conferring or ousting of jurisdiction etc. jurisdiction is
exercised or withheld only by force of the law which gives effect to the
terminologies should not mislead into thinking that parties can
undermine or augment the powers of states or courts when they
bargain away merely their own legal privileges.
Under the common law, the courts pay much regard to the parties
stipulation conferring jurisdiction on foreign courts but they do not
regard such stipulation as absolutely binding on them. As Lord
Denning L.J puts it, “it is subject to the overriding principle that no one
by his private stipulation can oust the courts of the jurisdiction in the
matter that properly belongs to them.

In considering the issue of forum agreement or exclusive jurisdiction

agreement two types of problems must be distinguished first whether
according to the law of the court, its jurisdiction can be excluded at
all. Second what are the procedural consequences of such exclusion
and in particular whether it compels or merely enables the court in its
discretion to refuse a decision on the merits. This is against the
background that the foreign jurisdiction agreement (prorogation fori
alieni) or put the other way, the agreement not to litigate in the forum
(derogation fori proprii) has overshadowed the agreement for
litigation in the forum (prorogation fori proprii)

A similar distinction must be made in relation to jurisdiction clauses.

No matter whether, from the point of view of the law of a given
country, such clause is a porogative fori proprill or prorogation fori
alieni,, it must be valid by its proper law, by the lex causae which will
most frequently mean the lex contractus. The capacity of each party
to submit to a given jurisdiction must be judged by that law e.g. the
question whether, by doing so, a corporation acts intra vires. So
must the consequences of a disparity of bargaining power on the
effectiveness of a submission clause and generally all question of
essential validity.

ENGLISH & COMMONWEALTH COURTS

English and Commonwealth Courts have considered on occasion the
question whether proceedings otherwise properly instituted should be
stayed by reason of a previous agreement of the parties to refer
disputes to a foreign forum. The problem has arisen in various
contexts; in partnership agreements, insurance contracts, contracts
for service and for supply of goods, bills of lading contracts for
commission as an agent, suits by seamen for wages under the
articles of a foreign ship, claims for negligence for personal injuries
and agreements appointing the plaintiff distributor of the defendant’s
products in a specified area. It has ‘long been settled” that parties
may agree to designate a forum of their choice. A choice forum
clause first came before an English court in 1796 in the case of
Grieenernar V. Meyer. It was a seaman’s action for his wages. The
seaman’s ship had been stopped by an English warship and sold
before completing its voyage. The defense was that the seaman had
agreed to be bound by the adjudication of the courts of Holland. Both
parties were dutch and the agreement had been made in Holland.
The court upheld the defense. The Lord Chief justice considered the
circumstances of the case and decided that it was “more reasonable
to send the parties to their own country, there to pursue their
remedy”. Further in 1811 in the case of Johnson V Machielsne,
another seaman’s suit for wages, the plaintiff argued that “ the parties
by their private agreement could not oust the jurisdiction of our
Courts” But Lord Eltenborough opined that it was impossible to say
that the stipulation was void, and he refused to entertain the action.
These two cases showed that the courts were prepared to
compromise their jurisdiction in favour of a foreign court, at least
where the parties foreigners and the agreement way made outside
the jurisdiction

A different approach had been taken to arbitration agreements and

they had been held ineffective to displace the jurisdiction of the courts
until i854 when the Common Law Procedure Act gave the courts
power to stay an action brought in defiance of an arbitration clause.
The cases immediately after the 1854 Act were less willing to grant a
stay not until much later when the courts held that after the Act there
was a prima facie duty to act upon and enforce an arbitration
agreement.

In 1856 in Scott V Avery it was held that quite apart from statute by
the operation of the old common law doctrine an arbitration clause
could be drafted so as to displace the jurisdiction of the courts, if the
parties framed their agreement to arbitrate as a condition precedent
to court proceedings. In such a circumstance it was held that the
courts would not entertain any action until after the arbitrator had
made his award.

The courts continued to incant the time-honoured formula that their

jurisdiction could not be ousted by agreement. But it was no longer a
rule of substantive policy but now merely a warning to conveyancers
to use the Scott V Avery Clause to achieve their goal.

When the question of clauses stipulating exclusive jurisdiction in a

foreign court arose again, the earlier cases of Griener V Meyer and
Johnson V Machielsue were forgotten. Instead choice of forum
clauses were assimilated to arbitration clauses and held to be
submissions within the arbitration legislation . according to Mackinnon
L.J these decisions remain perfectly good authorities through need is
no longer felt to justify the decisions by reference to arbitration
legislation. This is law V Garrett the English Court declined its
adjudicate in the winding up of a Russian Partnership. In Australian
Lloyd Steamship Co V Gresham Life Assurance Society Limited
the English Court refused its entertain proceedings on an Insurance
policy issued in Budapast. In Kirchner V Gruban. The English court
refused to hear a case arising out of a contract of confidential agency.
The principle underlining the judicial deference to the contractual
agreement of parties was fairly chearly stated by Eve J. in the case of
Limerick Corporation V Crompton thus:

“As a general rule these agreements to refer are often

entered into without a full appreciation by the parties of
the difficulties which may arise in the contractual
relationship brought about by the very contract in which is
incorporated the agreement to refer and without full
consideration of the circumstances or the possible
circumstances which may arise and render the reference
 necessary. But at the same time it is part of the
agreement of the parties and prima facie it is an
agreement by which the parties are bound and upon
which the court must act unless for some good cause
there is reason to think that matter ought to be
determined otherwise then by the tribunal to which the
parties have deliberately agreed to submit their
differences”

These principles were applied in the maritime cases that followed in

the Cap Blanco Case, a bill of lading provided for the settling of the
disputes in Hamburg according to common law. The plaintiff arrested
the ship at Southampton and sued in respect of a shipment of goods
from Hamburg to Mantle Video. The president, Sir Samuel Evans in
ordering a stay said

“It is right to hold the plaintiffs to their part of the

agreement. It is probably more convenient and much
more inexpensive, as the disputes have to be decided
according to German Court”

The first Plaintiff appealed to the Court of Appeal but withdrew the
appeal on an undertaking from the respondents to waive the limitation
period provided in the bill of lading.

The first instance in which a stay was refused appears to be The

Arthenee
Which concerned the carriage of goods from Alexandria to Hull. The
bill of lading provided that any disputes arising under it should be
brought to the Tribunal of Commerce of Marseives and should be
settled according to French Law. The plaintiff sued for damage to the
goods. The trial judge refused to order a stay and the Court of Appeal
was not disposed to disturb his decision. Bankers L.J. said that the
judge was entitled to take all the circumstances into account including
the fact that the vessel was under arrest, that the dispute concerned
the condition of the goods on arrival and the fitness of the ship to
carry them.

In The Fehmarn, which was a calm in respect of goods, 500 tons of

turpentine carried on a German ship (The Fehman) from Russia to
London. The bill of lading provided that disputes should be judged in
the USSR according to the Merchant Shipping code of the USSR.
The claim was brought in England through it was not a case within
the British COGSA which only applies to outward voyages in any
case, Wilmer J. refused to exercise his discretion to stay the action
on the basis that he suspected that the defendants did not seek bona
fide trial in Russia and that convenience was in favour of allowing the
English action to continue; But this was after he had made the
following pronouncement.

“Where there is an express agreement to a foreign

tribunal, clearly it requires a strong case to satisfy this
court that agreement should be overridden and that
proceedings in this country should be allowed to continue.
 But in the end it is, and must necessarily, a matter for the
discretion of the court, having regard to all the
circumstances of the particular case”

On appeal, Willmer J’s decision was upheld by the Court of appeal.

Lord Denning went on to state that English Courts are in charge of
their own proceedings and that one of the rules they apply is that a
stipulation that all disputes should be judged by the tribunals of a
particular country is not absolutely binding. Through at is a matter to
which the English Courts will pay much regard and to which they
normally give effect but it is subject to the overriding principle that “
no one by his private stipulation can oust these courts of their
jurisdiction in a matter that properly belongs to them. Lord Denning
went further to conclude as follows:

“I do not regard the choice of law in the contract as

decisive. I prefer to look to see with what country is the
dispute most closely concerned. Here the Russian
element in the dispute seems to me to be comparatively
small. The dispute is between the German owners of the
ship and the English importers. It depends on evidence
here as to the condition of the goods when they arrived
here in London. The correspondence leaves in my mind,
just as it did in the judge’s mind, the impression that the
German owners did not object to the dispute being
decided in this country but wished to avoid the giving
security. I think the dispute is more closely connected with
 England than Russia, and I agree with the judge that
sufficient reason has been shown why the proceedings
should continue in these Courts and should not stayed”

Whatever the basis of the jurisdiction it is clear, as a matter of

common law, that the courts have a discretion to grant or refuse a
stay. But specific statutory provisions may control, for example
Section 9(2) of the Australian Sea carriage of Goods Act 1924
provides that a stipulation or agreement purporting to oust or lessen
the jurisdiction of the courts of Australian in respect of any bill of
lading relating to the carriage of goods from a place outside to place
in Australian shall be illegal, null and void and of no effect, In
compagnie des Messageries Maritimes V Wilson the high court of
Astralia affirmed the decision of the trial court in refusing a stay
where the case fell within the terms of the state As Dixon C.J. said “ it
can hardly be doubted that its object was to insure that Australian
consignees of goods imported might enforce in Australian courts the
contracts of sea-carriage evidenced by bills of lading which they held”

In Quebec in the case of Gordon and Gortch (Australasia) Ltd V.

Montreat Australia-Newzealand Line Ltd where an action was
brought in the Quebec Courts in face of a stipulation which selected
an Australian jurisdiction as the exclusive forum. It was held that by
reasons of the terms of Article 94 of the Code of Civil Procedure,
an action might be instituted in the Quebec courts further in
exercising its discretion, the courts will weigh the competing interests
of the parties. The conclusion reached by the court in the Fehmern
has been criticized as going on said that unless the courts discretion
is exercised sparingly there is “a danger that foreign merchants will
lose faith in the efficiency of arbitration clauses’.
However the general rule is that prima facie, be respected; the
burden of proof lies upon that party resisting the application for a stay
and he must convince the court that a stay should not be granted.

USA COURTS
In the United States the effect of a choice of forum clause dealing
with future controversies is uncertain in the great majority of cases,
the state courts have entertained suits brought in violation of such a
clause. A number of recent federal court decisions, on the other hand,
have enforced choice of forum clauses by refusing to hear the suit in
situations where the clause was deemed to be fair and reasonable.

The reasons stated by the courts for denying effect to choice of forum
clauses are unconvincing. By and large, the courts have contented
themselves with saying either 1. that the parties cannot by their
agreement oust a court of jurisdiction or 2. that to allow the parties to
change the rules relating to the place where suit may be brought
would ‘disturb the symmetry of the law” and lead to convenience or 3.
simply that choice of forum provisions are against public policy.

The main question however, is whether the state courts are likely to
follow the lead of certain federal court decisions which evince a more
sympathetic attitude toward choice of forum clauses. Unfortunately,
the federal decisions are in conflict and their meaning is not entirely
clear. In Wim. H. Muller & Co V Swedish American Lines Ltd a suit
was brought in a federal court in New York to recover the value of a
cargo of cocoa beans that was lost in transit between Sweden and
Philadelphia on a vessel owned by the defendant, a Swedish
corporation. Despite the fact that the Plaintiff consignee was a New
York Corporation suit was dismissed in the District court by reason of
a clause in the bill of lading which stipulated that any claims against
the defendant should be decided according to Swedish law and in
Swedish Courts. The decision was affirmed by the Court of appeals.
It held first that the choice of forum clause was not contrary to the
United States carriage of Goods by Sea Act, since its application
would not result in a “lessening” of the “liability” imposed upon the
defendant by the Act. The court then went on to say that, except
when prohibited by statue, a choice of forum clause should be given
effect unless unreasonable. The clause in question was held not to
be unreasonable for the reason, interalia, that “most of the evidence
as to unsea-worthiness will be more readily available in a Swedish
court” since all members of the crew resided in Sweden and the
vessel had been constructed in that country. Also “for aught that
appears” the consent of the parties to the inclusion of the choice of
forum clause in the bill of lading had been “freely given. This decision
is very significant and appropriate. Dismissal of the suit had to based
on the choice of forum clause since in view of Plaintiff’s incorporaton
in New York and of other facts as well, reliance upon the doctrine of
forum non convenience would not have been justified. Also the
opinion can be read to support the view that a choice of forum clause
will be enforced unless the party who wishes to escape from its
provision can convince the court that its application would be
unreasonable in the circumstances of the case. Further there is some
language which would support the view that the decision holds only,
that a choice of forum clause will be enforced if the selected state is
the most convenient place for the trial of an action. The Muller
approach was generally welcomed by academic writers and was
adopted in the Second Restatement of the Law; Conflict of Laws
Section 80 provides
“The parties agreement as to the place of action cannot
oust a state of judicial jurisdiction, but such an agreement
will be given effect unless it is unfair or unreasonable”

The other cases in the second circuit may be described as conclusive

in Takeinura V the S.S Tsuneshima Maru the District court holds
squarely that choice of forum clauses are prima facie enforceable and
that the burden is upon him who wishes to bring suit in violation of the
clause to demonstrate that enforcement of the clause would be
unreasonable.

Other District Court decisions, on the other hand, seem to hold, that a
choice of forum clause will only be enforceable if a selected state is a
more convenient place for the trial of the action than the one in which
the plaintiff has brought the suit, one other by the Court of Appeal in
Cerro De Pasco Copper Corp. V. Knut Knutsan contains helpful
language but involved a transaction that had little or no connection
with the United States; hence dismissal of the action had been based
solely on forum non convenience grounds.
Not all federal followed the Muller lead In Carbon Black Export V.
The S.S. Monrosa by the Court of Appeals of the fifth circuit, the
plaintiff, an American exporter, sued to recover for damages for non-
delivery of a cargo of carbon black, which had been placed on board
the S.S. MONROSA in the United States for shipment to Italy suit was
instituted both in rem and in personam against the vessel and the
vessel’s owner, an Italian corporation. The defendant sought to have
the action dismissed because of provision in the contract that any
action for loss or damage to the goods should be brought only in
Genoa. A dismissal was granted by the trial court, but the Court of
Appeals reversed and held that the in rem action against the vessel
did not come within the language of the choice of forum clause. With
respect to the action against the vessel’s owner, the Court stated that
“the universally accepted rule is that agreements in advance of
controversy to oust the jurisdiction of the courts are contrary to public
policy and will not be enforced” The court went on to say, however,
that it was not necessary on the facts of the case to “espouse or
reject” the position taken by the Courts of Appeals of the Second
Circuit in the Muller case. With respect to the dismissal of the action
in personam the Court of Appeal said that the case did not afford” an
appropriate instance to pass upon the extent to which effect can be
given to… stipulations in ocean bills of lading not to resort to the
courts of this country.

However in 1972 the 5th circuit’s attitude to forum agreements was

reviewed by the United States Supreme Courts in M/S Brewmen V.
Zapata off-shore Company. The Respondent, Zapata off-shore
Company, a Houston based American Corporation, contracted with
the petitioner, Unterweser, a German corporation, to tow Zapata’s
ocean-going oil drilling rig, the “Chaparral” from Louisiana to the
Adriatic sea. Among other terms, the contract provided that any
dispute arising must be treated before the London Court of Justice.
While Unterweser’s deep-sea tug, then “Bremen” was towing the
“Chaparral” a storm arose in international waters in the Gulf of
Mexico and the “Chaparral” was damaged. Consequently Zapata
instituted proceedings in a Federal District court seeking damages
against Unterweser in personam and the “Bremen” in rem alleging
negligent towage and breach of contract. Unterweser, relying on the
prorogation agreement, sought to dismiss the action for lack of
jurisdiction on forum non conveniens grounds or alternatively to stay
action pending submission of the dispute to the “London Court of
justice”. The District Court, following the decision of its circuit court of
appeals in Carbon Black Export Inc. V The S.S Monrosa declined
to give the forum agreement effect and considered the motion to
discuss purely on the general ground of forum non conveniens, and
the court considered that Florida was a convenient forum on appeal a
divided panel of the Court of Appeals (Fifth Circuit affirmed the
decision of the District Court, concluding that Florida was a more
convenient forum than England; because the place of the damage
and the residence of potential witnesses were nearby in the Gulf area
and the preparations for the voyage had also taken place in the Gulf
area.
On further appeal the Supreme Court granted certiorari to review the
judgement and vacated the judgement. The Supreme Court in a
judgement given by Chief Justice Burger, declared that the Court of
Appeals had given “far two little weight and effect” to the forum clause
“the language of the clause is clearly mandatory and all-
encompassing” The court, after noting the traditional hostility of
American Courts to forum agreements, summed up the more recent
development evinced in Muller and other cases that “such clauses
are prima facie valid and should be enforced unless enforcement is
shown by the resisting party to be unreasonable under the
circumstances in the court’s view this was “the correct doctrine to be
followed by federal District Courts silting in admiralty”

One question that has arisen is whether its principle is confined to

confined to admiralty cases. The decision in Copperweld Steel Co
V. Demag-Mannesman-Boehler suggests that it is so confined.
However it has actually been applied in Spartz V. Nascone a real
estate case to stay proceedings brought in a Federal Court in
Pennsylvania and to enable their trial in a Pennslavania State Court
in accordance with a forum agreement.

The status in the United States choice of forum clauses dealing with
future controversies is at best uncertain. As shown, hitherto, most
state courts decisions appear to hold choice of forum clauses
unenforceable. As the Federal Courts are concerned, there appears
to be conflict between the views of the Court of Appeals of the 2 nd and
5th Circuit. At best the Supreme Court intervention in the Zapata case
confines the principle of prorogation to admiralty cases, going by the
verdict of the court itself. It is however, hoped that State and Federal
courts alike will adopt a common rule that choice of forum clauses are
prima facie enforceable and should be denied effect only upon a
showing that their application in the given case would lead to
manifest injustice.

ARBITRATION AGREEMENTS
While the effect choice of forum or prorogation agreements may be
somewhat uncertain and in a state of flux in the United States, the
position of arbitration agreements is rather clearer. Whatever their
effect under American Common Law legislation exists in many
American jurisdictions notably the Federal Arbitration Act and the
Uniform Arbitration Act which has been enacted in a number of states
some other states have their own non-uniform legislation.

The American legislation is somewhat different to the provisions

found in the English and Australian Arbitration Acts. Whereas the
latter merely enable a stay of proceedings to be obtained, the
American provisions generally contemplate a court order compelling
arbitration Section 2(a) of the Uniform Act provides that “on
application of a party showing an agreement described in Section 1 [a
written arbitration agreement], and the opposing party’s refusal to
arbitrate, the court shall order the parties to proceed with
arbitration…” Similarly, Section 4 of the Federal Act provides that “A
party aggrieved by the alleged failure, neglect or refusal of another to
arbitrate under a written agreement for arbitration may petition any
United states District Court which save for such agreement, would
have jurisdiction….. for an order directing that such arbitration
proceed in the same manner provided for in the agreement. A stay
proceeding brought in breach of an arbitration agreement can be
obtained under most American acts.
Section 3 of the Federal act provides

“if any suit or proceeding be brought in any of the courts

of the United States upon any issue referable to
arbitration under an agreement in writing for such
arbitration, the court in which suit is pending, upon being
satisfied that the issue involved in such suit or proceeding
is referable to arbitration under such an agreement, shall
on application of one of the parties stay the trial of the
action until such arbitration has been hold in accordance
with the terms of the agreement, providing the applicant
for the stay is not in default in proceeding with such
arbitration”

it has been held in International Refuge Organisation V.Republic

S.S Corp that a stay can be granted under this provision where the
agreement provides for arbitration in another jurisdiction and
arbitration cannot be compelled. The wording of this provision
suggests a mandatory duty to stay and not, as in the Anglo-Australian
legislation, a judicial discretion to do so.
The terminology of the Uniform Arbitration Act suggests a duty to stay
only in connection with an order compelling arbitration Section 2(d) of
the Act states.

“Any action or proceeding involving an issue subject to

arbitration shall be stayed if an order for arbitration or an
application therefore has been made under this section
or, if the issue is severable, the stay may be with respect
thereto only. When the application is made in such action
or proceeding, the order for arbitration shall include such
stay.

NIGERIA
The Nigerian judicial approach to choice of forum clauses in
contractual agreements has to all intent and purposes followed the
English Common law doctrine after an initial US type hostile altitude

In Ventujoi V Compagnie Francaise De L’Afrique Occidental a

case before the Nigerian High Court, a breach of contract which
contained a stipulation conferring exclusive jurisdiction on the French
Courts, Ames J held that the stipulation was an agreement to oust
the jurisdiction of this court and so is of no effect. The learned justice
opined that through the contract was entered into France, if
performance was to be in Nigeria where the defendants had agenda
who have been served with the writ of summons.
However, the Court of Appeal in the case of Sonner (Nig.) Ltd &
Anor V. Patenreederi M.S Nordwind & Sons, to a different stance
when it held that

“Where parties have agreed to submit all their disputes

under a contract to the exclusive jurisdiction of a foreign
court, the court would require very strong reasons to
induce it to permit one of the parties to go back on his
words”

the guiding principle had earlier been clearly stated by the Supreme
Court in Adesanya V. Palm Line where it was held that the court has
a discretion to uphold or reject a foreign jurisdiction clause and that
the court will be rejected where the justice of the case so demands on
matters of arbitration agreement, the Nigerian courts have always
been guided by the Scott V Avery clause In Agbizounon V The
Northern Assurance Co Ltd Paul J held that an agreement to refer
dispute to arbitration before recourse to court did not amount to
ouster of the jurisdiction of the court and should be upheld.