Court of Appeal finds exclusive jurisdiction clause in settlement agreement with employee ineffective, as it was not entered into after the particular dispute had arisen

The Court of Appeal has held that an exclusive jurisdiction clause in a settlement agreement between an employer and employee was not effective to give jurisdiction to the chosen court. The dispute related to an individual contract of employment and the jurisdiction agreement had not been entered into after the particular dispute had arisen, as there had been no prior communication between the parties concerning the issue: Merinson v Yukos International UK BV [2019] EWCA Civ 830.

Article 22 of the recast Brussels Regulation provides that, in matters relating to individual contracts of employment, an employee may only be sued in the courts of their domicile. A jurisdiction clause cannot therefore be relied on by the employer, unless (under article 23(1)) it was entered into after the dispute had arisen.

In this case the Court of Appeal found that, for a jurisdiction clause to be effective under article 23(1), at the time it is concluded the parties must disagree on a specific point and proceedings between them must be imminent or contemplated. It is not enough that there is merely a potential, rather than an actual, dispute between the parties.

This decision is significant as it means that a jurisdiction clause in a settlement agreement entered into with certain categories of defendants (such as employees, consumers and insurance policy holders) will only be effective in respect of matters actively in dispute at the time the settlement is reached. It will not extend to the release of potential future disputes under wide releases in the agreement, even if those disputes are within the separate contemplation of the parties, if they are matters relating to the employment contract, or consumer contract, or insurance policy.