The dispute-resolution clause is often the last to be negotiated and the first to be read when the relationship breaks down. In international contracts its wording decides where the parties will litigate, under which rules and, above all, whether the decision can be enforced where the counterparty holds its assets.
Choosing a State court
Within the EU, prorogation of jurisdiction is governed by article 25 of Regulation 1215/2012 (Brussels I recast). The clause is valid if concluded in writing or orally with written confirmation, in a form consistent with the practices between the parties or, in international trade, with a usage that is widely known and regularly observed. Unless otherwise agreed, the chosen jurisdiction is exclusive, and the substantive validity of the agreement is governed by the law of the chosen Member State, including its conflict-of-law rules.
According to the prevailing view, where article 25 applies the specific written approval required by article 1341 of the Italian Civil Code for clauses derogating from jurisdiction in standard terms is not needed, because the formal requirements are set autonomously by the Regulation.
In relationships with non-EU States, the 2007 Lugano Convention (Switzerland, Norway, Iceland) and the Hague Convention of 30 June 2005 on Choice of Court Agreements, which the United Kingdom has joined since Brexit, become relevant. Outside these instruments, the circulation of a judgment depends on the domestic law of the State of enforcement, and this is where arbitration shows its main advantage.
The arbitration clause
Thanks to the 1958 New York Convention, ratified by more than 170 States, an arbitral award is generally easier to enforce abroad than a court judgment. An effective arbitration clause should state at least:
- the institution and its rules (for example ICC, LCIA, Milan Chamber of Arbitration), preferably using the institution’s model clause;
- the seat, which determines the procedural law and the court competent to hear challenges to the award;
- the number of arbitrators and how they are appointed;
- the language of the proceedings;
- the law governing the merits, which remains distinct from the law of the arbitration clause.
So-called pathological clauses should be avoided: references to non-existent or ambiguously named institutions, provision for both arbitration and State courts with no rule to coordinate them, time limits too short to constitute the tribunal. Under Italian law, the reform introduced by Legislative Decree 149/2022 also allows arbitrators, if the parties so provide, to grant interim measures (art. 818 of the Code of Civil Procedure): an option worth addressing expressly in the clause.
Multi-tier and hybrid clauses
Multi-tier clauses (negotiation between senior management, mediation, then arbitration) can encourage quick solutions, but they must set firm time limits for each step so that they do not become an argument against the admissibility of the claim. Asymmetric clauses, which leave only one party the choice between courts and arbitration, call for particular care, because their validity is assessed differently across legal systems.
A practical rule
Before choosing a court or an arbitral seat, ask where the counterparty’s assets are and whether a decision issued in the chosen forum can be enforced there. The answer almost always points to the right choice.
This note is for information only and reflects the law at the date of publication; it is not legal advice.