In cross-border commercial contracts, jurisdiction clauses (which courts hear disputes) and choice-of-law clauses (which substantive law governs the contract) are often agreed at a very late stage. That is a common – and risky – approach. These clauses determine not only where a dispute will be fought, but also which conflict-of-law rules the deciding court will apply, whether mandatory provisions may override the parties’ choice, and – crucially – whether a judgment will be recognised and enforced where the counterparty has assets. Put simply: they set the playing field and can materially influence the commercial outcome, even if the underlying facts are unchanged.
The “infrastructure” that makes forum choices work
A practical starting point is to understand the legal framework that makes jurisdiction choices effective.
Within Europe, well-developed instruments align rules on jurisdiction and on the recognition and enforcement of judgments in civil and commercial matters. For disputes involving courts in EU member states, the key framework is Regulation (EU) No 1215/2012 (the Brussels Ia Regulation). For disputes connecting the European Union with Switzerland (and with Norway and Iceland), the Lugano Convention of 2007, which is based on, and to a large extent substantially identical to, the predecessor of the Brussels Ia Regulation, plays a similar role and is designed to reduce parallel proceedings and enhance predictability.
In addition, the Hague Choice of Court Convention of 2005 focuses on exclusive choice-of-court agreements and facilitates recognition and enforcement of judgments among its contracting states; Switzerland has joined this convention with effect from January 2025.
Where no treaty applies, Swiss courts fall back on the Swiss Private International Law Act. Separately, enforceability abroad must then also be assessed under the foreign state’s domestic rules – which typically increases uncertainty and transactional risk.
Validity and enforceability: two core “filters”
Whether a jurisdiction clause is valid and enforceable depends, in practice, on two core filters:
International element: Most systems require some international nexus before party autonomy on jurisdiction is accepted. Under recent EU case law (C‑566/22, Inkreal), this threshold can be met in a relatively liberal way: even if both parties are established in the same country, they may still validly agree on the courts of another EU member state for disputes arising from their contract. The same should also apply under the Lugano Convention.
The Hague Choice of Court Convention contains its own test of “internationality” for jurisdiction purposes and, importantly, looks at whether the situation is otherwise purely domestic, while disregarding the mere location of the chosen court. Swiss law also relies on the concept of an “international nexus”, and borderline scenarios can raise questions as to whether the foreign element is sufficiently strong when the only cross-border feature is the parties’ contractual choice.
Subject matter limitations: In principle, ordinary business-to-business trade relationships – such as distribution or commercial agency agreements – are generally open to a jurisdiction agreement. Free choice of courts is often restricted where there is a need to protect a weaker party, e.g., consumers or employees.
Form: “evidence of consent” is not optional
Even where the subject matter is eligible, form matters. A jurisdiction agreement must be recorded in a way that reliably evidences consent. In principle, the various frameworks accept a written agreement (including electronic form where a durable record is possible). They also recognise established practices between the parties and trade usage as alternative ways to satisfy the form requirement.
Forum selection affects applicable law
An important consequence of choosing a forum is its impact on applicable law. A court will typically apply its own private international law rules – often summarised by the term lex fori (the law of the forum) – to determine the governing law of the contract and to assess the effectiveness and limits of the parties’ choice.
In the EU, courts commonly apply Regulation (EC) No 593/2008 on the law applicable to contractual obligations (the Rome I Regulation). Swiss courts apply the Swiss Private International Law Act. This can produce materially different outcomes even where both forums accept jurisdiction under the same jurisdiction treaty (e.g., the Lugano Convention), because the conflict-of-law rules and their treatment of mandatory provisions are not identical.
Choice of law: respected, but not absolute
Choice of law is broadly respected in business-to-business contracts, but it is not absolute. Under the Rome I Regulation, party autonomy is the starting point, yet it can be constrained where all other elements of the situation are connected to another state whose non-derogable rules should still apply.
The Rome I Regulation also recognises overriding mandatory provisions, defined as rules considered crucial by a state for safeguarding its public interests, and it provides for the application of such rules of the forum and potentially of the place of performance.
Swiss law similarly embraces party autonomy but contains safeguards, including public policy control, mandatory Swiss rules that apply irrespective of the chosen law, and a mechanism allowing consideration of mandatory foreign rules in narrowly defined circumstances where overriding interests so require.
Why this matters financially: commercial agency as a concrete example
Commercial agency agreements illustrate how these issues translate into financial exposure. Many legal systems grant a commercial agent a mandatory goodwill indemnity if the agent has significantly expanded the principal’s customer base and the principal continues to benefit from that customer base after termination.
In the EU, minimum protections derive from Directive 86/653/EEC on self-employed commercial agents and are implemented in national laws. Switzerland provides an independent mandatory regime in Article 418u of the Swiss Code of Obligations. Although the structures are comparable, differences in prerequisites, in how compensation is calculated, and in the circumstances in which the claim can be reduced or excluded can be decisive – meaning that the governing law may substantially change the economic outcome.
Enforcement: the commercial endpoint
Drafting should not stop at selecting a forum and law “in the abstract”. The commercial question is whether a future judgment will be enforceable where it matters.
Where a robust treaty framework (e.g., the Lugano Convention) exists, predictability and enforceability increase significantly. Where no such framework exists, parties should weigh alternatives, including arbitration, which benefits from a widely adopted global enforcement regime under the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.
Conclusion
Jurisdiction and choice-of-law clauses should be treated as a core risk allocation tool: align them with enforcement realities, anticipate the forum’s conflict-of-law approach, and test the arrangement against mandatory claims that may survive contractual choices.
Article published by MLL
