Contracting With Foreigners

A choice of South African law as the proper law of the agreement is enough evidence of an intention to consent to South African jurisdiction.

Contracting With Foreigners
Article by Dawie Malan

Cliffe Dekker Inc

The court found that a choice of South African law as the proper law of the agreement was enough evidence of an intention to consent to South African jurisdiction. In addition, the court confirmed that such consent to jurisdiction was sufficient to found jurisdiction, and that no attachment of the defendant’s property was necessary.

In a decision handed down by the Supreme Court of Appeal on 30 November 2004 (Hay Management Consultants Ltd vs P3 Management Consultants (Pty) Limited), the court considered whether a consent to the jurisdiction of a court in a contract can be relied upon in an action not directly arising from that contract, and whether the domicilium and choice of law clauses in a contract are sufficient to found jurisdiction.

The plaintiff conducted business in the area of theWitwatersrand court. The defendant was a UK company, having no connection with or presence in South Africa, save for its relationship with the plaintiff. In the contract which the defendant had concluded with the plaintiff, it selected an address in South Africa as its domiciliumfor service of process and writs of execution. Its ongoing relationship with the plaintiff encompassed business in countries with varying legal systems (inter aliaAngola, Malawi and South Africa). In terms of the contract, the defendant chose South African law to govern its relationship with the plaintiff.

The defendant submitted that it had not expressly or tacitly consented to the jurisdiction of the South African courts by concluding the agreement containing the said clauses. The court confirmed that in determining this question it is necessary to look at the cumulative effect of the proved facts, and whether they established submission to jurisdiction on a balance of probabilities. The court found that a choice of South African law as the proper law of the agreement was enough evidence of an intention to consent to South African jurisdiction. In addition, the court confirmed that such consent to jurisdiction was sufficient to found jurisdiction, and that no attachment of the defendant’s property was necessary.

Another significant point made by this judgment was that, despite the claim not having arisen from the contract between the parties, the court held that the consent to jurisdiction in the contract extended to the dispute at hand. It was held that the situation would be both “anomalous and unsatisfactory if only disputes strictly within the terms of the agreement could be decided in that forum according to the selected legal regime, while all other disputes, no matter how cardinal to their business, had to be determined by another court, according to a different system of law“.

Despite the benefit of this decision to South African entities and persons who contract with foreigners, it is suggested that parties contracting with foreign entities ensure that the “choice of law” clause in their contracts state specifically that the parties agree that any disputes arising from or connected with the agreement are to be adjudicated by the South African courts.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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