The section of the ISDA Master Agreement dealing with choice of court (jurisdiction) and choice of court (governing law) has been reassessed for the first time in over 15 years. The changes follow a 2017 consultation in which there was almost universal agreement that revisions to the jurisdiction clause, in particular, were necessary due to developments in various regional and global conflict of law rules and to provide members with a greater degree of legal certainty and clarity going forward.
ISDA's 2018 Choice of Court and Governing Law Guide provides new model clauses, with accompanying non-binding guidance, with which members may choose to replace the current provisions in the 1992 and 2002 Master Agreements for future transactions. The model clauses include:
- for the first time, an exclusive jurisdiction clause; two separate model clauses are provided, the first in favour of the English courts for English law transactions and the second in favour of the courts of New York for New York law transactions; or
- alternatively, a simplified non-exclusive jurisdiction clause.
These options were thought to represent the two choices most relevant to most parties in most circumstances and to allow a greater degree of flexibility. ISDA recognised that while, historically, the overarching principle for choice of court was that of non-exclusivity, the market now appears to have moved in favour of exclusivity. However, ISDA was of the view that it would be premature to do away with the option of non-exclusivity altogether at this stage.
The exclusive jurisdiction clauses were also drafted to fall within the ambit of the Hague Convention on Choice of Court Agreements 2005 so that members could take the benefit of that regime, where applicable.
The Guide also contains:
- an expanded definition of "Proceedings" to include, for example, any non-contractual or pre-contractual claims; and
- an expanded governing law clause expressly covering the choice of law for non-contractual obligations, which corresponds to the expanded governing law clause seen in the 2013 ISDA Arbitration Guide.
ISDA makes clear that these drafting changes are for the purposes of clarification only and should not be taken to mean that the current language in the Master Agreements is intended to be (or should be) construed narrowly.
While the review of the choice of court and choice of law provisions was not prompted by Brexit, reducing the "potential risk of uncertainty" and "unnecessary complexity" of these provisions is a very welcome development. ISDA is also working on a project to add EU Member State (French and Irish) governing law and jurisdiction options to its documentation offerings, as a direct result of Brexit.
For more information on Brexit, the Hague Convention and dispute resolution clauses, please see our client briefing.
