Be aware of ‘choice of law’ clauses from other jurisdictions

When faced with a contract from another jurisdiction, lawyers should check for a “choice of law” clause that could alter their involvement in the matter, Toronto business lawyer Anton Katz tells AdvocateDaily.com.

If lawyers miss — or ignore — such clauses, they may find themselves without insurance coverage if things ultimately go awry, says Katz, principal of Anton M. Katz Barrister and Solicitor.

“Because of how interconnected the world is these days, it’s inevitable that a lawyer will be faced with a contract crafted in another jurisdiction,” he says.

“The first thing you must do is see if it has a ‘choice of law’ clause which stipulates that it’s governed by the laws of that other jurisdiction,” explains Katz.

This is an example of such a clause from an agreement that Katz recently reviewed:

“This Agreement shall be governed by and construed in accordance with the laws of the State of Florida, USA without reference to its provisions regarding choice of law. The parties agree to submit to the jurisdiction and venue of the state and federal courts situated within the county of Broward, State of Florida, USA as the exclusive forum for the resolution of all disputes between the parties.”

It essentially means that if disputes arise, they are to be resolved in the specified jurisdiction according to the laws that apply there.

“If faced with such a clause, my first response needs to be that I’m not insured to advise you on that system of law,” says Katz.

“If they still want me to proceed, I need them to acknowledge that and then I can proceed to offer them some guidance — as long as that caveat is clearly stated.”

He says he can either continue or offer to put them in touch with a lawyer in the other jurisdiction.

“Given the option between choosing a stranger who practises in that system of law every day and your own lawyer who doesn’t, but who is a trusted confident, you may choose your own lawyer — especially if the systems of law are fairly close,” says Katz.

He says clients may also try to have the legal jurisdiction changed in the contract. For example, if his client lives in Ontario and is a service provider to an online company based in the United States, his client could propose that any future disputes are sorted out according to the laws and legal system of Ontario.

“Like any contract, there’s negotiation and leverage,” says Katz. “If they want you badly enough, then they may well agree to let Ontario law govern.”