Navigating exclusive jurisdiction clauses in overseas holiday contracts

7th Oct 2021

Locked out of a jurisdiction? The Federal Court has recently examined exclusive jurisdiction clauses in the case of Karpik v Carnival plc (The Ruby Princess) (Stay Application) [2021] FCA 1082 (Karpik).

What are exclusive jurisdiction clauses?

Exclusive jurisdiction clauses are commonplace in holiday contracts. They stipulate which jurisdiction’s courts a consumer should sue in if there is a dispute about the holiday.

This becomes an issue where a foreign travel company makes it a booking condition that any dispute should be litigated in a foreign jurisdiction rather than in Australia.

If the consumer booked the holiday in a local travel agency, any exclusive jurisdiction clause would most likely nominate an Australian court. However, if they booked with a foreign-based travel organiser or online travel agency (OTA), the exclusive jurisdiction clause would likely favour the court of a foreign country.

Therefore, depending on the company that an Australian books their holiday with, they might be faced with the obstacle of an exclusive jurisdiction clause if they wish to claim compensation for an injury sustained while on holiday.

Jurisdiction of an Australian court

Travel law experts in Australia can advise Australians injured in overseas holidays on whether they are entitled to invoke the jurisdiction of an Australian court to hear their claim against a travel company and serve an originating process on it overseas. There are rules in all Australian jurisdictions that govern this.

In the case of the Federal Court, s10.42 of the Federal Court Rules 2011 (Cth) applies. Some examples of when service is allowed outside of Australia include claims arising from a cause of action in Australia (such as a breach of the Australian Consumer Law (ACL)) or claims relating to a contract that was made in Australia.

However, if there is an exclusive jurisdiction clause in the contract, the defendant travel company is able to bring an application for the court to use its discretion not to exercise jurisdiction. This is when advice from an Australian travel law expert is vital.

Holiday contract exclusive jurisdiction clauses are not unfair

In Gonzalez v Agoda Co Pte Ltd [2017] NSWSC 1133 (Gonzalez)an Australian sued the OTA Agoda in the Supreme Court of NSW for injuries she suffered in a hotel in Paris. She claimed breach of contract and breach of the statutory guarantees under the ACL. Agoda filed a notice of motion claiming, among other points, that NSW was not an appropriate jurisdiction as the contract contained an exclusive jurisdiction clause in favour of Singapore.

The plaintiff argued that the exclusive jurisdiction clause was an unfair contract term under s24 and therefore void.

Justice Button heard the motion and found for Agoda. In respect of the plaintiff’s argument that the exclusive jurisdiction clause was unfair, His Honour found that the avoidance by an international corporation such as Agoda of litigation in multiple jurisdictions was a legitimate interest worthy of protection.

The proceedings in NSW were permanently stayed as the Court was not satisfied that there was strong reason for the Court not to exercise its discretion to decline jurisdiction.

The recent Karpik decision involved the class action arising from the Ruby Princess COVID-19 disaster. Carnival argued that passengers whose contracts were subject to foreign exclusive jurisdiction clauses should not be members of the Australian class action.

Justice Stewart found the exclusive jurisdiction clause in question had not been validly incorporated. However, he found that if it had been, it would have been valid and not an unfair contract term under s24 of the ACL.

In particular, Stewart J found that an exclusive jurisdiction clause does not cause a significant imbalance in the parties’ rights and obligations arising under the contract as required by s24(1). Rather, such a clause simply seeks to restrict the jurisdictions where a party can bring a dispute to enforce those rights.

The implication of the Gonzalez and Karpik decisions is that if there is an exclusive jurisdiction clause in a contract with a holiday provider in favour of a foreign court, it is unlikely that s24 of the ACL would render it unfair and void.

Australian travel law expert advice essential

In the face of a valid exclusive jurisdiction clause, it is therefore important for a traveller injured overseas to seek advice from one of the handful of plaintiff travel law experts in Australia.

As an Australian travel law expert myself, in my view the argument most likely to succeed in overcoming an application by a foreign travel company for an Australian court not to uphold an exclusive jurisdiction clause is that the public policy considerations in favour of ACL claims being heard in Australia constitute strong reasons for the court not to decline jurisdiction. This is pursuant to a line of case law recently examined in Epic Games, Inc v Apple Inc [2021] FCAFC 122 (Epic Games), Karpik and Urban Moto Imports Pty Ltd v KTM AG & Ors [2021] VSC 616 (Urban Moto Imports).

While each case naturally turns on its facts, the above argument would present as a strong case to an Australian court to allow proceedings to continue in Australia despite a foreign exclusive jurisdiction clause. This argument was accepted by the Federal Court in both Epic Games and Karpik, and the Supreme Court of Victoria in Urban Moto Imports.

Clearly inappropriate forum

If an Australian court refuses to decline jurisdiction of the claim pursuant to an exclusive jurisdiction clause, it is unlikely to decline jurisdiction on the basis that it is a clearly inappropriate forum.

In order to succeed in this argument, the burden is on the defendant travel company to show that proceedings in Australia are ‘oppressive’ or ‘vexatious’ pursuant to Voth v Manildra Flour Mills Pty Ltd (1990) 171 CLR 538. This is a difficult threshold for defendants to meet, and one that failed in Gonzalez and Karpik.

Welcome decisions for Australian travel lawyers

In the situation where an Australian court does not allow an injured Australian to continue a claim against a foreign travel company in Australia, as in Gonzalez, the Australian consumer is left to sue the travel company in a foreign court. The foreign court would be charged with the issue of determining an Australian consumer’s rights under the ACL. Stewart J confirmed in Karpik that there is no provision in the Competition and Consumer Act 2010 (Cth) to prevent a foreign court from hearing a claim under the ACL. However, there is a risk that the ACL would not be applied as a matter of foreign law and the plaintiff would lose their rights to bring an ACL claim in the foreign jurisdiction, as Connock J found in Urban Moto Imports.

In any event, the cost and complexity of suing a travel organiser for breaches of the ACL in a foreign court would prohibit many injured travellers from pursuing personal injury claims. 

The decisions of Epic Games and Karpik are therefore a welcome development in the Federal Court and enable travel law experts in Australia to provide access to justice for Australians injured on overseas holidays.

This is an edited version of an article first published here.

Victoria Roy is Principal Solicitor at Victory Travel & Cruise Lawyers, a boutique law firm specialising in bringing compensation claims for Australians injured overseas, in aircraft accidents and in cruise ship accidents. She is also Secretary of the NSW Branch of the ALA and Chair of the ALA’s Travel Law Special Interest Group.

The views and opinions expressed in these articles are the authors' and do not necessarily represent the views and opinions of the Australian Lawyers Alliance (ALA).

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Tags: travel law