1. In the drafting of Commercial Contracts and often in anticipation of possible future disputes, parties insert clauses conferring exclusive jurisdiction to foreign courts. At times this is done inadvertently when parties use the so-called off-the-shelf templates from Google or other online sources. Worse still, this happens when foreign investors come to our shores and literally dictate terms of engagements and use their own lawyers to draft the contracts.
2. That approach is often wrong and often does not suit the particular circumstances of the contracting parties and often leads to unforeseen costs and complications. It is then often undesirable to enforce the said clause which will lead to local disputes being argued in foreign courts or arbitration forums.
3. The Supreme Court of Appeal in Foize Africa (Pty) Ltd –v- Foize Beheer BV and Others [2012] 4 All SA (387 (SCA), 2013 (3) SA 91 (SCA) (20 September 2012) had an opportunity to deal with the effect of exclusive foreign jurisdiction clauses in contracts and had the following to say:

   “[21] In doing so, the court a quo erred. It can now be regarded as well settled that a foreign jurisdiction or arbitration clause does not exclude the court’s jurisdiction. Parties to a contract cannot exclude the jurisdiction of a court by their own agreement.”

4. The court went on to state that:

   “Where a party wishes to invoke the protection of a foreign jurisdiction or arbitration clause, it should do so by way of a special plea or a dilatory plea seeking a stay of proceedings. That having been done, the court will then be called on to exercise its discretion whether or not to enforce the clause in question.”

5. The effect of this ruling is that even assuming that the defence of exclusive jurisdiction is properly raised as a special plea, it will still be up to the court to first exercise its discretion on the question of whether or not to uphold the clause. And traditionally, therefore, the court has to be persuaded to exercise that discretion.
6. Where the special plea of jurisdiction is raised, a smart-nosed attorney can thus still urge the court to exercise its inherent discretion and refuse to enforce the foreign jurisdiction clause and in fact proceed to hear and decide on the matter on merits.
7. The Supreme Court of Appeal in the Foize Africa decision held that there are no hard and fast rules as to the stage at which the court should exercise its discretion (see paragraph 26 of the Foize judgment).
8. In the English decision in The Eleftheria [1969] 2 All ER 641 (PDA), [1969] 2 WLR 1073, [1969] 1 L Loyd’s Rep237 (H.L) the English court considered the broad terms of the factors to be taken into account in the exercise of the discretion and had the following to write:

   “In particular, the following matters where they arise may properly be regarded;

   (a) in what country the evidence on the issues of fact is situated, or more readily available, and the effect of that on the relative convenience and expense of trial as between the local and foreign court.

   (b) whether the law of the foreign court applies and if so whether it differs from the local law in any material respects.

   (c) with what country either party is connected and how closely.

   (d) whether the defendant genuinely desires trial in the foreign court or are only seeking procedural advantages.

   (e) whether the plaintiff will be prejudiced by having to sue in a foreign court because they would: (i) be deprived of security for that claim, (ii) be unable to enforce any judgment obtained, (iii) be faced with a time bar not applicable locally, or (iv) for political, racial, religious, or other reasons, be unlikely to get a fair trial."

9. The factors stated above are by no means a numerous clausus and it is urged that further factors can be considered taking into account the particular circumstances of each case. Often it is possible to move the court to exercise its discretion in favor of hearing the matter and refusing to enforce the exclusive jurisdiction clause, where among others, the following TEN CHECK POINTS are shown:

1. 1. That the entirety of the evidence necessary to deal with the matter is readily available in the local court.
   2. That performance and non-performance of the agreement or whatever cause of action is relied on were all within the local court’s area of jurisdiction.
   3. That more importantly the defendant and all their witnesses are resident in the local court’s area of jurisdiction.
   4. That it is otherwise convenient for the court to hear the matter, for whatever reason.
   5. That the cost of litigation in the foreign court would demonstrably be excessive for both parties. NB: In Foize Africa, the court had already pointed to the cost of litigation outside South Africa with the following words:

      “When considering the issue of costs, it should also be remembered, certainly if the cost of litigation in England is any barometer, that the cost of litigation in Europe may well be astronomical when compared to the costs of litigation in this country.” (see paragraph 28(d) of the Supreme Court of Appeal decision in Foize Africa)

   6. Whether or not in the determination of this dispute there are difficult points of law standing to be decided. Where it is simply a matter of breach of contract and the law on this point in both the local court and the foreign court remains the same, there is no point in going abroad to litigate.
   7. Whether or not the Defendant raising the special pleas has any real genuine desire to litigate in the foreign court. More specifically whether or not the defendant is simply seeking technical and/or procedural advantages or to frustrate the plaintiff’s claim.
   8. Any prejudice as may be suffered by the Plaintiff, most specifically whether or not the successful Plaintiff will be able to enforce any judgment as may be obtained in the foreign country. Relevant questions being whether or not the defendant has any assets in the foreign jurisdiction with which it can satisfy any judgment as may be obtained.
   9. Whether or not the Plaintiff will be a foreign entity and will be required to provide security if it were to sue in the foreign jurisdiction.
   10. Whether or not the Plaintiff will then be faced with a time bar which it will not be facing were it to proceed with the matter in the local jurisdiction.

10. For reasons of the complexity of the law and the ever-changing approaches to the law, lawyers are advised to continuously read on developing approaches on points of law.
11. Further, lawyers and the general public are urged to avoid the so-called “off the shelf” agreements where clients’ business and money are involved. Pay attention to the draft, and clients are urged to review drafts made by lawyers before affixing their signatures to them.

Even if this seems straightforward, please seek competent legal advice and guidance to protect your interest.

By Counsel: Adv I Mureriwa.
Advocate of the Superior Courts of South Africa
Attorney of the Superior Courts of Zimbabwe
+27 71 151 9000
advmureriwa@yahoo.com
PRETORIA.