Governing Law and Jurisdiction Clauses in Ghanaian Contract Law By Seth Doe Esq

Introduction

In commercial agreements, especially those involving parties from different jurisdictions, governing law and jurisdiction clauses are crucial tools for managing legal risk and ensuring predictability in dispute resolution. These clauses determine which legal system governs the interpretation of the contract (the governing law) and which forum will hear disputes (the jurisdiction). In Ghana, as in many other common law jurisdictions, such clauses are recognised and generally enforced by the courts, provided that certain conditions are met. This article examines the legal framework, practical considerations, and enforceability of governing law and jurisdiction clauses in Ghanaian contract law, while providing illustrative examples to highlight key principles.

1. Governing Law Clauses

1.1 Definition and Purpose
A governing law clause specifies the substantive law that will apply to the interpretation, performance, and enforcement of a contract. This provision is particularly significant in cross-border transactions where the parties may be subject to different legal systems. The choice of governing law affects the interpretation of contractual terms, the parties’ performance obligations, the consequences of breach, and the remedies available. In Ghana, courts generally uphold the parties’ freedom to select the applicable law, subject to limitations based on public policy.

1.2 Legal Basis in Ghana
Ghanaian law recognises the principle of party autonomy, allowing parties to determine the law that governs their contract, even when that law is foreign. This principle is grounded in both common law and statutory authority. Although the Contracts Act, 1960 (Act 25) is silent on the issue of governing law, it affirms the freedom of contract, which implicitly supports the parties’ right to choose. Ghanaian conflict of law rules, inherited from English jurisprudence, further reinforce this principle.

In international transactions, Ghanaian courts also consider persuasive international instruments such as the United Nations Convention on Contracts for the International Sale of Goods (CISG), though Ghana has not yet ratified it. However, if a contract has a substantial connection to Ghana  for example, if its subject matter is located in Ghana or if performance occurs within the country the courts may apply Ghanaian law, notwithstanding the parties’ choice, where public policy so requires.

1.3 Practical Illustration
Consider a supply agreement between a Ghanaian construction company and an Italian manufacturer, in which the parties stipulate that Italian law shall govern the contract. Should a dispute arise over defective machinery, a Ghanaian court, if seized of the matter, would ordinarily uphold the parties’ choice of Italian law, unless doing so would contravene Ghanaian public policy  for instance, if Italian law permitted enforcement of a penalty clause inconsistent with Ghanaian contract principles.

2. Jurisdiction Clauses

2.1 Definition and Purpose
A jurisdiction clause determines which court or tribunal has authority to hear and decide disputes arising under the contract. Such clauses may be either exclusive or non-exclusive. An exclusive jurisdiction clause confers authority on one specific forum to the exclusion of all others, while a non-exclusive clause permits parties to bring proceedings in a designated forum without excluding other competent jurisdictions. The inclusion of a jurisdiction clause helps avoid uncertainty, forum shopping, and parallel proceedings, thereby providing predictability and procedural efficiency.

2.2 Enforceability in Ghana
Ghanaian courts generally uphold jurisdiction clauses that are clear and unambiguous. Their enforcement, however, depends on certain factors, including the existence of a real and substantial connection between the dispute and the chosen forum, as well as public policy considerations such as access to justice or the competence of the chosen court.

The Courts Act, 1993 (Act 459) sets out the jurisdictional powers of Ghanaian courts and grants them discretion to stay proceedings when another forum is more appropriate. Where a contract contains an exclusive foreign jurisdiction clause, Ghanaian courts will typically stay local proceedings unless there is a strong reason to the contrary.

2.3 Practical Illustration
Suppose a Nigerian software company enters into a licensing agreement with a Ghanaian fintech firm, stipulating that disputes shall be resolved exclusively by the courts of Lagos, Nigeria. If the Ghanaian company commences proceedings in Accra, the Ghanaian court may decline jurisdiction, upholding the exclusive jurisdiction clause unless the Ghanaian party can demonstrate that litigation in Nigeria would be unjust, oppressive, or contrary to Ghanaian public policy.

3. Interplay Between Governing Law and Jurisdiction Clauses

Although governing law and jurisdiction clauses can operate independently, they usually complement each other. A contract may, for instance, be governed by one country’s law while assigning jurisdiction to the courts of another. However, such arrangements can complicate proceedings by requiring courts to apply foreign law, often necessitating expert testimony.

In practice, inconsistency or ambiguity between these clauses can create significant challenges. For example, if a contract provides that English law governs the agreement but designates Ghanaian courts as the dispute resolution forum, the Ghanaian court will have to apply English law, possibly relying on expert evidence from English practitioners. This approach can increase costs and complexity and may influence the outcome depending on the nuances of the foreign law.

4. Drafting Considerations for Ghanaian Contracts

When drafting governing law and jurisdiction clauses in contracts involving Ghanaian parties or interests, several factors must be considered. First, clarity is paramount. Lawyers should use precise language that eliminates ambiguity. Suitable formulations include: “This Agreement shall be governed by and construed in accordance with the laws of Ghana,” or “The parties agree that the courts of Ghana shall have exclusive jurisdiction to settle any disputes arising out of or in connection with this Agreement.”

Second, consistency between the chosen governing law and jurisdiction is essential. It is advisable to avoid selecting a governing law unfamiliar to the chosen court unless there is a compelling reason. Third, enforceability should be considered, particularly where the foreign court’s decisions must be recognised and enforced in Ghana. Fourth, parties should evaluate whether alternative mechanisms such as arbitration would be more appropriate, especially for high-value or technical contracts. In such cases, specifying an arbitral institution and a clear seat of arbitration such as under the rules of the LCIA, ICC, or UNCITRAL may offer greater flexibility and neutrality than litigation.

5. Ghanaian Courts and Foreign Judgments

Where a jurisdiction clause results in litigation in a foreign court, parties may later seek to enforce the foreign judgment in Ghana. Such enforcement depends on several factors. The foreign court must have had jurisdiction in accordance with Ghanaian conflict of law principles, the judgment must be final and conclusive, and it must not contravene Ghanaian public policy or natural justice. Additionally, where applicable, there must be reciprocity between Ghana and the foreign country in question.

Ghana’s current regime for the enforcement of foreign judgments is grounded in common law principles rather than a comprehensive statutory framework comparable to the United Kingdom’s Foreign Judgments (Reciprocal Enforcement) Act. Nonetheless, Ghanaian courts have demonstrated a willingness to recognise and enforce foreign judgments that meet these criteria.

Conclusion

Governing law and jurisdiction clauses are indispensable elements of modern contract drafting, providing certainty and predictability in legal relationships. Under Ghanaian law, such clauses are generally upheld, reflecting the courts’ respect for party autonomy, provided they do not conflict with public policy or statutory requirements. Legal practitioners advising on contracts involving Ghanaian parties or interests must pay careful attention to the formulation of these clauses to prevent unintended jurisdictional complications. Early consideration of the governing law and jurisdiction can be decisive in determining how disputes are resolved and where they will be heard. By ensuring clarity, consistency, and enforceability, lawyers can safeguard both their clients’ interests and the integrity of the contracting process in Ghana’s evolving commercial landscape.