Agreement on local court jurisdiction in GT&C

Schaffer News

Under the Code of Civil Procedure, the parties to proceedings in cases related to relationships between entrepreneurs arising from business activity can agree in writing on the local jurisdiction of another court of first instance, unless the law stipulates exclusive jurisdiction. This prorogation agreement is routinely included in the text of the contract, specifying that, for example, the District Court for Prague 1 has local jurisdiction to resolve disputes related to this particular contract in cases decided by the district court at first instance, and the Municipal Court in Prague for cases decided by the regional court at first instance.

However, if one of the parties wants to determine the court having local jurisdiction by reference to the general terms and conditions available on its website, it must meet the conditions laid down for such determination by the Supreme Court. According to this Court, entrepreneurs may also enter into a prorogation agreement in a relationship arising from their business activity by reference to the general terms and conditions available on the website if such a website is determined in a contract concluded by such entrepreneurs in writing, provided that the parties were acquainted with the general terms and conditions or they were enclosed to the contract proposal. However, these general terms and conditions are only applicable to relationships between entrepreneurs regulated by domestic legislation, i.e. without the existence of an international element.

Any relationships containing an international element, i.e. cross-border relationships, typically where each contracting party is based in a different EU Member State, are regulated by EU legislation, namely by the Brussels I bis regulation, governing court jurisdiction and the recognition and enforcement of judgments in another Member State.

The regulation lays down the governing law to be used to determine whether the prorogation clause is valid. This is the law of the Member State whose court has jurisdiction to hear a dispute under such an agreement. If, therefore, a Czech and a German entrepreneur agree that their potential disputes will be decided, for example, by the Munich District Court, the validity of such an agreement will be assessed under German law.

Above all, it is necessary to point out the case law laid down by the EU Court of Justice for the agreement on the determination of local jurisdiction under the Brussels I bis regulation. This Court has consistently determined in multiple decisions that if the arrangement on court jurisdiction is laid down in the general terms and conditions, such a provision is in accordance with the law if the text of the contract signed by both contracting parties refers to the general terms and conditions that contain such a provision (on court jurisdiction).

Therefore, it is clear that the EU Court of Justice lays down less stringent conditions for the prorogation agreement in its case law. Unlike the Supreme Court of the Czech Republic, it does not require for the conclusion of the prorogation agreement by reference to the general terms and conditions available on the website that such terms and conditions be provably known to the parties or enclosed to the proposal.

Thus, when entering into a prorogation agreement, it is necessary to unambiguously determine (in particular, by the existence of an international element) the legal regime in which the agreement will be entered into, bearing in mind the different assumptions laid down in its case law interpretation by the court having jurisdiction for the given legal regime.