The complexity of international disputes can be illustrated by a single contractual clause — a clause found in almost every contract with a foreign business partner and one that rarely worries anyone when the contract is signed.

Many supply contracts contain a clause like this:

“For all disputes arising out of or in connection with this contract, the courts in Hamburg shall have jurisdiction. German law shall apply.”

Two sentences, accepted by the contractual partner. When the contract is signed, no one pays much attention to them — the focus is on price, specification and delivery date.

Then the foreign contractual partner fails to pay the final invoice. It alleges defects, asserts damages claims based on alleged delay, and unilaterally reduces the invoice amount. You intend to sue in Hamburg — that is what the contract says. Before the claim is filed, however, a statement of claim arrives — not from Hamburg, but from a court in the partner’s home state. The partner has filed suit there for damages and has simply ignored the jurisdiction clause.

The first question is not the obvious one — whether it is allowed to do that — but one you may not even have had on your radar: where is the contractual partner based? The same clause can have entirely different effects depending on whether the partner is based in an EU Member State, in Switzerland, in Norway, in the United Kingdom after Brexit, or in a state to which none of these frameworks applies. Within the EU, the Brussels Ia Regulation applies. Article 25(1) recognises the clause, and the second sentence of Article 25(1) presumes its exclusivity. Vis-à-vis Switzerland, Norway and Iceland, the Lugano Convention applies — similar, but not identical. For many states in the Middle East, South-East Asia and South America, there is no comparable regime. The 2005 Hague Convention on Choice of Court Agreements obliges its contracting states to respect exclusive jurisdiction clauses. But a number of economically important trading partners of Germany have not acceded to it. In those states, there is no treaty basis requiring the local court to respect the Hamburg clause. Which regime applies to your contractual partner is a question that must be answered when the contract is concluded — not only once a dispute has already arisen.

The intuitive reaction — ignoring the foreign proceedings because Hamburg has been agreed — is in almost every scenario the worst possible response. In most legal systems, failure to appear results in a default judgment. Whether that judgment can be recognised in Germany depends, among other things, on whether the foreign court had jurisdiction under German standards (section 328(1) no. 1 of the German Code of Civil Procedure) and whether the statement of claim was duly served — under the Hague Service Convention, if the state of origin is a contracting state. Whether the default judgment can be enforced in third countries in which you hold assets or business relationships is a different question altogether and depends on the law of the state of enforcement. Anyone who assumes that a judgment which cannot be recognised in Germany cannot cause damage elsewhere is mistaken.

But defending the claim abroad also carries a distinct risk: anyone who appears before the foreign court and argues the merits without first contesting jurisdiction may thereby establish the very jurisdiction of that court. Submission without objection is a principle found not only in Article 26 of the Brussels Ia Regulation, but in one form or another in almost every procedural system in the world. How the jurisdictional objection must be raised — within what time limit, in what form, and under what authority — is determined exclusively by the law of that state. A procedural error at that stage can destroy the jurisdiction argument before the actual dispute has even begun.

Within the EU, there is an instrument for this situation that many are unfamiliar with: Article 31(2) of the Brussels Ia Regulation breaks the usual lis pendens priority rule — the court first seised must stay its proceedings if you subsequently sue before the court designated in the jurisdiction clause. There is nothing comparable vis-à-vis courts in third states. There, parallel proceedings in two jurisdictions may run simultaneously, with all associated costs and the risk of inconsistent decisions.

But even within the EU, where you may think you are protected, matters can take a different course than expected. What if the contractual partner — or its lawyers — pleads the claim not as a contractual claim, but as a tort claim? In Wikingerhof v Booking.com (judgment of 24 November 2020, case C-59/19), the Court of Justice of the European Union held that claims based on the breach of statutory duties do not fall under contractual jurisdiction — even if they are brought between contractual partners. The tort forum under Article 7(2) lies at the place where the harmful event occurred, not in Hamburg. Product liability claims, competition-law injunction claims, claims based on breaches of safety regulations — a carefully pleaded claim can circumvent the agreed forum. What if the contractual partner becomes involved in proceedings in another EU state and there gives you notice of dispute, or if there is an intervention claim or counterclaim? In that case, the jurisdiction of the foreign court may arise from Article 8(2) or (3) of the Regulation — and the Hamburg clause may never even be addressed as a jurisdictional issue.

All of this presupposes that the clause is valid in the first place. Article 25(1), third sentence, of the Brussels Ia Regulation imposes its own formal requirements — and the CJEU interprets them strictly. What if the clause appears in general terms and conditions sent by email but never expressly confirmed? What if it is contained in a framework agreement to which the individual orders make no reference? What if the contractual partner never read the clause in its own language? A defect in form renders the clause invalid — and without a valid clause, the statutory rules on jurisdiction apply, potentially leading to a completely different court.

Assume you ultimately prevail in Hamburg. A final judgment, enforceable in Germany. But the contractual partner’s assets are abroad. Within the EU, since 2015, judgments are enforceable without exequatur proceedings. As against Switzerland and Norway, the Lugano Convention applies. As against the United Kingdom after Brexit, at best the Hague Convention may apply — provided the clause meets its requirements. As against a large number of other states, there is no enforcement regime at all. A German judgment is simply not enforceable there — unless the law of the debtor’s state provides for recognition on the basis of reciprocity, which is often uncertain. If the contract had contained an arbitration clause rather than a jurisdiction clause, an arbitral award would be enforceable in more than 170 states under the 1958 New York Convention. Whether to choose a jurisdiction clause or an arbitration clause is a decision that must be taken when the contract is concluded, based on the partner’s seat, the location of its assets, and the type of dispute one can expect. It cannot be corrected later.

And what about the second sentence of the clause? “German law shall apply.” Binding on the Hamburg court within the framework of the Rome I Regulation. But that Regulation has limits not visible in the contract text. Article 9 permits the application of overriding mandatory provisions — mandatory rules of the forum state or the place of performance — irrespective of the parties’ choice of law. Safety regulations at the place of installation, export control law, employment-law rules of the country where the work is performed. If the contractual partner bases its claim on non-contractual grounds, the applicable law is governed by the Rome II Regulation, which points to the place where the damage occurs — not to the contractual choice-of-law clause. A court outside the EU applies its own conflict rules; the Rome Regulations apply only before EU courts. In that context, the contractual choice-of-law clause is, at best, one factor among many.

What does the clause capture at all? “All disputes arising out of or in connection with this contract” — the German Federal Court of Justice has made clear that the substantive scope of a jurisdiction clause must be determined by interpretation (judgment of 6 December 2018, case IX ZR 22/18). Does it cover pre-contractual claims? Does it include claims based on the breach of protective statutes? Does it bind third parties brought within the protective scope of the contract? Does it extend to claims arising after termination? Does it exclude the assertion of set-off or rights of retention in other proceedings? These are all questions that can turn on two short sentences and may be answered differently depending on the court, the applicable law and the way the claim is pleaded.

Two sentences in a contract. And behind them lies a field that cannot be mastered without specialised knowledge of international civil procedure.