PROPER LAW OF A CONTRACT AND THE EXCLUSIVE JURISDICTIONAL CLAUSE AS DISTINGUISHED BY THE INDIAN COURTS
At the prelude it is stated that this paper focus upon the explicit choice of proper law governing the contract and the explicit choice of jurisdiction in that contract. The issues and tests of implied choice is a discussion which is not forming a part of this paper. Therefore, it is pertinent to first establish what is the term governing law of a contract is and what is an exclusive jurisdictional clause.
The law governing the contract is also known as the proper law of the contract. Dicey & Morris in the Conflict of Laws formulate the following rule on proper law of contract as Rule 180: "The term "Proper law of a contract" means the system of law by which the parties intended the contract to be governed, or, where their intention is neither expressed nor to be inferred from the circumstances, the system of law with which the transaction has its closest and most real connection.” In contrast a jurisdiction clause limits disputes to courts of one jurisdiction, creating an exclusivity. Both the above clauses could be an effect to improve convince, accessibility, neutrality and foreseeability.
The debate herein is if there exists a law governing the contract which is not Indian law, and the dispute lies upon the validity of jurisdiction in the Indian Court, the question is how are the courts to decide upon the issue of jurisdiction, which law is applicable and how.
As per Section 9 of the Code of Civil Procedure 1908 (‘CPC’), all Courts have jurisdiction to try all suits of civil nature unless the jurisdiction is either expressly or impliedly barred. Section 20 of the CPC further lays down that a suit may be instituted either at the place where the defendant ordinarily resides or carries on business or where any part of the cause of action arises. Section 20 makes it clear that more than one Court can have the jurisdiction to try a suit (For example: When any part of the cause of action arises in a place other than where the defendant ordinarily resides or carries on business). There may also be situations where the cause of action arises in multiple places over which different courts have jurisdiction. Therefore if the cause of action has arisen in India and/or the respondent is residing or primarily doing business in India, the Indian courts then will have a jurisdiction to hear the suit.
However, the approach towards the issue of jurisdiction completely changes when the there is a change in the law governing the contract, in effect also governing the jurisdictional clause. Therefore, as the jurisdictional clause can only be read and interpreted in the light of the law that is governing it, the effect it may have may vary depending upon the applicable law.
Therefore to de