Why are they needed?

A jurisdiction clause is inserted into a contract so the contracting parties agree which particular national legal system will have governance over the contract and which courts the parties agree to be bound by.

Contracting parties who have expressly submitted to the courts of a particular jurisdiction will find it difficult to revisit the issue after the contract has been agreed. A very persuasive argument will have to be put to the courts as to the inappropriateness for the trial of disputes between those contracting parties in the nominated jurisdiction.

If the Jurisdiction is mute and parties are unable to agree, the matter will be decided by reference to EU Regulation 44/2001 (commonly referred to as the Brussels Regulation) regulates jurisdiction for all EU member states and the Lugano Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters (the Lugano Convention) regulates jurisdiction between the EFTA states on the one hand (Switzerland, Iceland and Norway (Liechtenstein did not ratify The Lugano Convention)) and EU member states on the other.

Not to have the jurisdictional issue settled at the point the parties draft the contract, leaves the position open for argument. Such arguments can be very costly to the disputing parties so on balance it is wise to visit the issue when drafting a contract

What to consider when considering jurisdiction

The country which the contract will operate in, the domicile of the parties, which courts are more accessible, what rights and advantages will you have, the costs of any actions, the accessibility to good and well versed lawyers (Mainly which system is best for you),the efficiency of the management of civil action, the remedies available and the enforcements available, the location of the parties’ assets, reciprocal enforcement issues.

All the aforementioned will be considerations if a timeshare dispute occurs and the issues have efficacy / the ability to produce the desired result.

The difference between exclusive and non-exclusive

There are essentially 3 verities of jurisdiction clause:

Both parties submit to the exclusive jurisdiction of a particular court;

Both parties submit to the non-exclusive jurisdiction of a particular court; or

By virtue of the Brussels Regulation and the Lugano Convention. (If business to business the Hague Convention).

Certainty of jurisdiction affords each party the knowledge where they can sue and be sued. Furthermore they offer substantial protection as it is less likely another court will accept jurisdiction when faced with a pre visited exclusive jurisdiction clause.

Non-exclusive jurisdiction clauses

Non-exclusive jurisdiction clauses expressly provide for disputes to be a particular jurisdiction, however, without prejudice to a party the other party may take an “issue” in dispute to other jurisdiction if appropriate and if they choose.

This might be bizarre, however, should a dispute occur, you have certainty as to the jurisdiction, however, if your circumstances change and you live outside the jurisdiction of the one nominated you have an avenue to move the action. In timeshare constitutions we have not seen such “a non exclusive clause”.

Hybrid clause for the benefit of one party

There are Hybrid clause are contained in some loan agreements, as  borrowers are restricted to a particular jurisdiction however the lender retains the option to pursue an issue with the borrow in another jurisdiction. These events occur if the assets (which they have security on) are located elsewhere. Such clauses are negotiated to prevent an imbalance between the parties

Tactical advantage in jurisdictional issues

If a developer sells a timeshare to consumers that developer is the party which is likely to be sued and as such the developer will want the contract jurisdiction in a place which will favour him. On the other hand the buyer will want the contract in a jurisdiction where he has good cheap access to help in bring the developer to book.

This is the reason why you sometimes get the developer residing in one country, the consumer in another country, the timeshare in another country and the jurisdiction is elsewhere. You have to admit for a consumer it’s quite difficult to get you head round.

What is interesting and a bit of an abnormality is that when a developer and/or a resort nominates a jurisdiction you would expect that they have done this with great care and to get an advantage.

This is there overriding objective so why do they commence proceeding in a different jurisdiction i.e. if the contract is domiciled in say the Virgin Islands why are summons being issued in the UK? They are different jurisdictions! The developers are not trying to assist the consumer! Has something happened in the jurisdiction which they assigned to the contract which would prejudice there case? Or should we “the consumers” just trust them as they have our best interests at heart (I can’t even believe I just said that) trust a timeshare developer!

Jurisdiction is an important one and not an issue which should be discarded without good reason.

In the event that jurisdiction is moot (in the contract) then this lets in the argument of jurisdiction and where you and your issues will be best served. On the part of the developer they had their opportunity at the time when they authored the contract, considered what terms where to be put in ,and proffered it up to the consumer. As the issue is moot you will have the right to advance a case that the jurisdiction should be place in an arena where the defendant is best protected and which affords the defendant the best opportunity in defeating the claimants claim.

The claimant has had his opportunity to do this in his own contract and choice not to. Therefore jurisdiction (at present) can be domiciled in the following countries: Austria Belgium Bulgaria Croatia Croatia Cyprus Czech Republic Estonia Denmark Estonia Estonia Finland France Germany Greece Hungary Ireland Italy Latvia Lithuania Luxembourg Malta Netherlands Poland Portugal Romania Slovakia Spain Sweden and UK.

Council Regulation (EC) No 44/2001 (13)

In relation to insurance, consumer contracts and employment, the weaker party should be protected by rules of jurisdiction more favourable to his interests than the general rules provide for.”

 Council Regulation (EC) No 44/2001 (Article 16.1)

 “A consumer may bring proceedings against the other party to a contract either in the courts of the Member Statein which that party is domiciled or in the courts for the place where the consumer is domiciled.”

The 2001 Regulations were subject to an amendment applicable in January 2015 by the introduction of Regulation (EC) 1215/2012 – national rules of jurisdiction may no longer be applied by Member States in relation to consumers and employees domiciled outside an EU Member State.

Regulation (EC) 1215/2012 (Article 14)

“A defendant not domiciled in a Member State should in general be subject to the national rules of jurisdiction applicable in the territory of the Member State of the court seised.

However, in order to ensure the protection of consumers and employees, to safeguard the jurisdiction of the courts of the Member States in situations where they have exclusive jurisdiction and to respect the autonomy of the parties, certain rules of jurisdiction in this Regulation should apply regardless of the defendant’s domicile.”

 and

Regulation (EC) 1215/2012 (Article 18.1)

“A consumer may bring proceedings against the other party to a contract either in the courts of the Member State in which that party is domiciled or, regardless of the domicile of the other party, in the courts for the place where the consumer is domiciled.”

Airing on the ridiculous you could site the jurisdiction in North Korea and see if they dare go there or see if a judgement in their courts could be subject to a payment warrant in the UK. We don’t think so but the issue might be arguable.

It is therefore advantageous to consider the 26 member countries and principality to see what protections are on offer for consumers so that they are fully protected.


Last modified: August 27, 2015