The jurisdiction clause contained in the terms and conditions on the date of execution of the contract stated that in the case of a dispute, it would be settled by way of arbitration in accordance with the rules of the London Court of Arbitration (LCIA). These terms and conditions were later varied (in 2023), vesting exclusive jurisdiction for dispute settlement with the courts in London. This variation occurred after the contract between the parties had been terminated. Based on this new jurisdiction clause, Opera instituted a claim at the courts in London for recovery of a debt owed by Keraco.

The Kenyan court declined to enforce the foreign judgment on the basis that Keraco did not voluntarily consent to the foreign choice of law and therefore the English court lacked jurisdiction over the matter. The Kenyan court also stated that jurisdiction clauses are onerous and must be brought to the attention of the party.

For a foreign judgment to be enforceable in Kenya, (i) the foreign court must have had jurisdiction over the Kenyan/local party, and (ii) they must have voluntarily submitted to the foreign court’s jurisdiction. In this case, the court held that the jurisdiction clause was not brought to Keraco’s attention; it was hidden away in a thicket of text in the terms and conditions and was varied after the contract had been terminated. Section 10 of the Foreign Judgments (Reciprocal Enforcement) Act CAP 43 provides that where a foreign court has no jurisdiction to adjudicate a matter, it is a ground for setting aside a registered judgment.

Best practices for drafting jurisdiction and governing law clauses in cross-border contracts

In light of this, it’s essential for parties to take a more proactive approach when drafting or reviewing contracts, particularly those containing foreign jurisdiction clauses. Parties should ensure that jurisdiction and governing law clauses are included in the main body of the agreement and not in schedules, terms and conditions or inconspicuous sections of the agreement.

Parties wishing to rely on foreign jurisdiction and governing law clauses may need to weigh the benefit of explicitly bringing these provisions to the other party’s attention during negotiations versus the risk of not doing so. This is due to the Kenyan court’s finding that foreign jurisdiction clauses are onerous, hence having evidence that the counterparty understood the implications of such a clause will be helpful in defending a claim of lack of jurisdiction later on.

To the extent that any change in jurisdiction or governing law is required following entry into a contract, such change must be agreed upon by both parties and documented in writing. Parties who rely heavily on terms and conditions that are separate from the substantive agreement must exercise care in implementing the tips mentioned above. Furthermore, as a general rule, parties should always bring any amendments to the terms and conditions to the attention of the other party and obtain and document their consent. For specific advice on the implications of this case on existing contracts, please reach out to us.