Applicable Law and Jurisdiction (Competence /Jurisdiction of Courts)

If the contracting parties have their registered offices or residences in different countries, it is important to agree on the applicable law, i.e. which country’s legislation will apply to the agreement. This requirement helps avoid possible subsequent doubts regarding the application of the particular country’s legislation in construing the contract. For example, if it was agreed that the contract would be subject to Czech law, the provisions of Czech Act No. 89/2012 Sb., the Civil Code, effective from 1 January 2014, will be applied to the conclusion of the contract, the rights and obligations of the contracting parties, provisions on a breach of the contract, liability, etc.

The same applies to the jurisdiction, i.e. to establishing the competence/jurisdiction of judicial bodies in a particular country when a dispute needs to be resolved. As a general rule, a contracting party is sued at the place of its registered office (or place of business or place of residence), which means abroad. There are, however, a lot of exceptions from this general rule, so it is useful to lay down the competence/jurisdiction of ordinary courts (not a specific court) in a particular country in the written contract. We recommend that the competence/jurisdiction of courts be stipulated in the text of the (main) contract itself (preferably in its final provisions), if possible, rather than, for example, in the attached general terms and other conditions. European regulation Brussels I bis allows the competence/jurisdiction of courts of a particular country to be negotiated by both individuals or legal entities having their place of residence or place of business in the territory of an EU Member State. Under the Czech Act on International Private and Procedural Law, the competence/jurisdiction of courts of a particular country can even be negotiated by individuals and/or legal entities having their place of residence/registered office outside the European Economic Area.