ENFORCEABILITY OF EXCLUSIVE JURISDICTION CLAUSES IN PRIVATE AGREEMENTS
Authors: Lamisa Fahima Alam & Rabeya Akter Nayna || Published On: 16 June, 2025
In this era of globalized commerce, it is increasingly common for parties to enter into cross-border agreements including joint venture agreements, service contracts, investment agreements and complex tripartite agreements where one or more parties are subject to the laws and jurisdictions of different countries. These agreements often contain clauses conferring exclusive jurisdiction to the courts of a particular foreign country. While such provisions aim to ensure legal certainty and consistency in dispute resolution, it remains a matter of legal consideration and debate whether such clauses pose jurisdictional challenges when a party seeks recourse before a domestic court.
This article explores the enforceability of exclusive jurisdiction contractual clauses/terms in commercial agreements before domestic courts, with particular reference to the legal framework and judicial precedents in Bangladesh.
Ordinarily, when a dispute arises under an agreement where all parties reside in Bangladesh, the matter is referred to arbitration pursuant to an arbitration clause governed by the Arbitration Act, 2001. However, in the context of cross-border or tripartite agreements where parties are based in different jurisdictions, it is frequently observed that disputes are referred exclusively to arbitration in a designated foreign country, such as Singapore. These provisions reflect mutually agreed terms between the parties, and in most cases, the courts in Bangladesh are inclined to uphold and respect such arbitration clauses, recognising party autonomy in choosing dispute resolution mechanisms. As observed in M.A. Chowdhury vs. M/s. Mitsui, 22 DLR (SC) (1970) 334, the Supreme Court of Bangladesh, in order to uphold the sanctity of contracts expressed its discretion to stay the proceedings before it, allowing the dispute to be resolved through arbitration, as mutually agreed by the parties.
A relevant question arises when such clauses confer exclusive jurisdiction to a foreign court for trial, thereby excluding the jurisdiction of the courts of Bangladesh. Can such a clause validly oust the jurisdiction of the courts of Bangladesh and prevent a party from seeking legal remedies/proceedings in Bangladesh? To explore this question, reference may be made to Bangladesh Air Service (Pvt.) Ltd. vs. British Airways PLC, 17 BLD (AD)(1997) 249, where the Appellate Division upheld the jurisdiction of the local courts and affirmed the right of any party to file a suit for damages in the local courts, notwithstanding any exclusivity clause. The court also recognised the right of any party to pray for stay of any suit before the local court, pending arbitration which reflects a balanced approach towards recognizing contractual autonomy while preserving access to local remedies under domestic laws.
In both the above-mentioned cases, Section 28 of The Contract Act, 1872 played a pivotal role in determining the enforceability of foreign-seated arbitration clauses as well as exclusive foreign-court jurisdiction clauses. The section states that any agreement that completely restricts a party from enforcing their rights through usual legal proceedings in ordinary courts is void. An exception, however, exists where the agreement includes a mutually agreed arbitration clause for resolving disputes. Nonetheless, in the case of Bangladesh Air Service (Pvt.) Ltd. vs. British Airways PLC, 17 BLD (AD)(1997)-249, as decided by the Appellate Division, it was established that the inclusion of an arbitration clause does not entirely exclude the jurisdiction of the local/ordinary courts to hear and try any suit/dispute. A suit filed before the court, despite the existence of an exclusive arbitration clause, will be stayed. However, the court retains the authority to resume or exercise jurisdiction over the dispute and grant any remedy if arbitration fails or if it becomes impossible for the parties to comply with the agreed mode of adjudication regardless of any exclusive foreign-court jurisdiction clauses. Therefore, it can be inferred from this case that Section 28 of The Contract Act, 1872 can act as an exception to the exclusivity of an arbitration clause.
Let us now examine whether an exclusive jurisdiction clause favoring foreign courts can restrict the courts of Bangladesh or any domestic courts from adjudicating criminal matters arising out of the same dispute. Generally, such clauses apply to commercial or civil matters and do not preclude the criminal jurisdiction of domestic courts. The criminal jurisdiction of courts of Bangladesh is territorial as well as extra-territorial as outlined in Sections 2, 3 and 4 of The Penal Code, 1860 respectively. Any criminal liability is a matter of public interest and is governed by the sovereign authority. Therefore, it cannot be waived by any private contractual provision. As such, either party to an agreement containing terms of exclusive jurisdiction is entitled to initiate criminal proceedings and such criminal liability arising out of any private contract shall be subject to the jurisdiction of the courts of Bangladesh.
In conclusion, while parties to a contract can agree to resolve disputes in a foreign court, such clauses are not always fully binding in Bangladesh. The law protects the right to access local courts, especially when arbitration fails or is not practical. More importantly, no private agreement can take away the authority of courts over criminal matters, which involve the public interest. So, while foreign jurisdiction clauses may guide civil or commercial disputes, they can’t completely shut the door on the courts of Bangladesh.
Disclaimer: This article is intended for informational purposes only and does not constitute legal advice. Neither the author(s) nor the firm accepts any liability for actions taken or not taken by readers based solely on the contents of this article. Readers are advised to seek professional legal advice before relying on any information contained herein.
