Governing Law and Jurisdiction - ISDA Provision
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2002 ISDA Master Agreement
Section 13 in a Nutshell™ Use at your own risk, campers!
Full text of Section 13
Related agreements and comparisons
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Content and comparisons
Largely the same, in practical effect, between the two versions: the clause grants the non-exclusive jurisdiction of the courts of the governing law you have chosen: you can launch proceedings wherever you like, but you can’t complain if they are launched in a home court, which leaves open that you might complain if they are launched in some other, inconvenient, court.
No doubt a litigation lawyer would be outraged at this suggestion that the versions mean different things, but life’s too short.
Summary
Section 13(a)
There are parts of the ISDA Master Agreement with which you will spend weeks, months, or even years of your life grappling, pushing and pulling the embedded and nested intellectual concepts around in your mind, scrabbling desperately for a handhold, trying with all your might to get some purchase on the forensic Play-Doh that these clauses represent. We are fairly confident, without even knowing you, that section 13(a) will not be one of them.
If it is, it may be time to get your coat.
Section 13(b)
On the disapplication of Section 13(b)(iii)
Where you wish to elect the exclusive jurisdiction of (say) English courts in your Schedule, you may wish to explicitly disapply the proviso to 13(b) which provides that nothing in this clause precludes the bringing of Proceedings in another jurisdiction (in the flush language of the 1992 ISDA version; in 13(b)(iii) of the 2002 ISDA version).
Strictly speaking, you shouldn’t need to do this: Section 1(b) provides that the inconsistency created by the use of the expression “exclusive jurisdiction” in the Schedule will prevail over the text the Master Agreement. But that won’t stop officious attorneys the world over trying.
But, counselor, be warned: if you do try to explicitly override it — you know, for good measure and everything — and your counterparty pushes back, having deliberately taken the clarifying language out of a draft, you may be in a worse position when interpreting the meaning of “exclusive jurisdiction”, precisely because the counterparty refused to rule out the use of other jurisdictions. A cracking example of the anal paradox at work.
Don’t be too clever by half, in other words.
“Convention Court”
The 1968 Brussels Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters is this fellow. Be my guest. Let me know what you find.
The 1988 Lugano Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters is this puppy. Knock yourself out, and let us know how you get on.
Section 13(c)
English law
Process agent
/ˈprəʊsɛs ˈeɪʤᵊnt/ (n.)
An agent located in a jurisdiction who is appointed by a contracting counterparty outside that jurisdiction to accept service of legal proceedings filed against it in the courts of that jurisdiction, to discharge the procedural requirement that they are physically served within the jurisdiction.
For English law contracts the jurisdiction in question is that of “the courts of England and Wales” — there is no such thing as United Kingdom law — the rules of English civil court procedure[1] require process physically to be served within England or Wales (or, in theory, their adjacent territorial waters[2]). Service in Scotland — or its territorial waters — will not do. This means you can serve process on someone rowing a boat in the Bristol Channel, but not in Inverness, much less on someone escaping in rowing a boat to, for example, the Isle of Skye.
A contracting counterparty whom you cannot rely on being in England or Wales should you have to sue it — one who has no permanent place of business there — you might ask to appoint as its agent a company who reliably will be there, and who is prepared to receive process served upon the counterparty and pass it on to head office. That person is a “process agent”.
The best kind of process agent is an English-domiciled affiliate of the contracting entity who is happy to perform that role, as it generally will do it for free. But if you don’t have one, there are dedicated process agency businesses who will act as your process agent for, naturally enough, a suitably outrageous fee.
New York law
The New York rules of civil procedure are here. As you might expect, they seem complicated. CT Corporation seems to charge a lot for serving process — so we assume there is a reason for that.
Section 13(d)
Don’t confuse sovereign immunity with ultra vires — cue thunder crack at the mention of Orange County or Hammersmith and Fulham council and a dramatic look from our house gopher — for they are quite different things.
- Ultra vires: If a contract is beyond your powers or capacity to enter into a contract in the first place then it is void ab initio; any payments you have made under that contract are also void and you may reclaim them[3], and you can appeal to the court system to do that. That is to say, ultra vires is an “intra-legal” measure, recognised, defended and enforced by the courts.
- Sovereign immunity: Sovereign immunity is a different, “extra-legal” thing: it is to say “I am, quite literally, above the law: I am the law, and I do not have to subject myself to the judicial branch of my law — or anyone else’s law — unless I choose to.” This extends to being free from judicial intervention if I decide not to perform my contractual obligations, but it also means I cannot myself resort to the court process to make my counterparty perform its obligations. If I choose to go to court, then I subject myself fully to the courts as regards actions my counterparty wishes to bring against me.
General discussion
See also
References
13 Governing Law and Jurisdiction
13(a) Governing Law
13(b) Jurisdiction
13(c) Service of Process
13(d) Waiver of immunities
- ↑ Rule 6.11 of Part 6, details freaks.
- ↑ I find the idea of serving in territorial waters strangely fascinating. In the rules of English civil court procedure “jurisdiction” is defined as “unless the context requires otherwise, England and Wales and any part of the territorial waters of the United Kingdom adjoining England and Wales” so, therefore, those of the Her Majesty’s territorial waters which adjoin Scotland or Northern Ireland are out of bounds.
- ↑ But — quid pro quo, Clarice — any profits you have made you must also disgorge.