…jurisdiction in commercial litigation

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Commercial litigation

(continued from introductory page; references to Articles are to Council Regulation 44/2001 and to the Act are to the Civil Jurisdiction and Judgments Act 1982)

Scotland is an attractive location for international commercial litigation, offering a speedy and efficient commercial court in Edinburgh at a fraction of the price of London. Note that a revised Practice Note on the conduct of commercial actions was issued in December 2004 (pdf); one significant change is that a letter before action is now normally necessary.

The purpose of this page is to provide no more than a brief checklist of the likely grounds of jurisdiction; there is no shortage of Scottish legal advisers in this field.

  • The territory of Scotland for jurisdictional purposes includes the Scottish sector of the continental shelf: Weber v Universal Ogden Services.
  • The primary basis of jurisdiction is that one defender at least is domiciled in Scotland: Article 2. In the context of commercial entities, that is normally regulated by Article 60 for Brussels Regulation states, or by section 42 of the Act for the United Kingdom and the rest of the world. These have the general effect that a commercial entity is domiciled in Scotland if it has its registered office, or its central management and control, in Scotland.
  • If the dispute arises out of the operations of a branch or agency, there is jurisdiction under Article 5 (5).
  • Jurisdiction may also be conferred by agreement: Article 23.
  • In actions based on contract, including breach of contract, there is jurisdiction in the court for the place of performance of the obligation in question. Article 5(1) now provides that in the case of sale of goods, this is the place where, under the contract, the goods were delivered or should have been delivered; in the case of the provision of services, it is the place where, under the contract, the services were provided or should have been provided (this was probably implicit before). If the obligation being sued on is simply the obligation to make payment, it may be difficult to show that this had to be made at any particular place; Scots law (like English and Irish) generally provides that payment is to be made at the creditor's place of business, but this may not be obvious (see for example Universal Steels v Skanska Construction, 31 October 2003) and if the proper law of the contract is not Scots the obligation may be to make payment at the debtor's place of business (see this Pace Law School commentary for a European survey).
  • In actions based on delict (known in England as tort) there is jurisdiction in the court for the place where the harmful event occurred or is threatened: Article 5(3). This may include any place where damage is suffered in direct consequence: Shevill v Presse Alliance 1995 2 AC 18 (ECJ); but see Marinari v Lloyds Bank 1986 QB 217 and Kronhofer v Maier.
  • Actions based on unjust enrichment, and thus quantum meruit claims unless based on contract, have no special jurisdictional rules: Kleinwort Benson Ltd v. City of Glasgow District Council 1999 AC 153 ; so jurisdiction will normally depend on domicile.
  • There may accordingly be jurisdiction in different courts for different obligations under one general nexus. Article 6 provides for counterclaims and third party procedure; articles 27 and 28 for a rule of lis alibi pendens.

In a commercial, as opposed to consumer, contract the parties are usually free to agree what system of law applies; if they do not agree, Scotland follows the Rome Convention rule that the contract is governed by the law of the country with which it is most closely connected; Contracts (Applicable Law) Act 1990. If the applicable law is not Scots, it can be proved by any appropriate evidence (in practice, usually affidavit expert evidence).

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