Bolts from the blue

7 June 2011
I’ve just returned from a trip to the US, where one of the hot topics floating around was the End of the World or more specifically, the Rapture. One of the things I found amusing, but admired as an example of spotting a market need, was the After Rapture pet care company. This was set up to care for your pets in the event of your heavenly ascent and charged a single non-refundable premium for 10 years’ cover. It started me thinking about the Act of God contract clauses I’d seen over the years and whether we needed to take the idea of unlikely but highly disruptive events (the ‘Black Swans’ as the finance world likes to call them) more seriously. Consider how many repercussions one Icelandic volcano caused, with travellers, airlines, hotels and insurers all rushing to determine how their various contracts covered such an event. It’s not that Acts of God seem to be happening more frequently, but that they’re having such an impact. We have seen with the Japanese earthquake and tsunami the perils of having key elements of a supply chain concentrated in a single geographic area. Scarce resources, limited space, economic and political factors may all lead to our choices of suppliers being limited to certain locations, the Japanese high-tech industry and Chinese heavy metals to name a couple. The implication of all this being it might be prudent to consider supply chain continuity alongside a review of possible contractual implications of Acts of God.   Where jurisdiction ends and the internet begins Staying with the theme of extreme legal measures and forces beyond their power, the other issue which I found myself warming to as a procurement topic was super-injunctions. The way a foreign internet service, Twitter, rendered a legal order irrelevant and the courts’ subsequent inability to do anything about it illustrates the complex issue of jurisdictions in contracts. Twitter is an extreme case, having no assets or presence within the UK and being hosted in a country whose legal system enshrines a free speech constitutional principle which directly opposes the goals of injunctions. However, when entering into multinational contracts with overseas firms, the question of which court has precedence and where disputes will be settled is a very important one. It’s worth considering whether some of the rights you may wish to assert in the event of a contractual skirmish would even be recognised in the other countries’ courts. We all try to ensure that when we negotiate a contract that will operate within more than one jurisdiction to reflect the appropriate amendments for local countries. What strikes me as significant about the super-injunction experience is that not only does it raise the issue of jurisdictions but also the impact of the internet, which was not understood or recognised in this instance. I guess the broader question is how many of us are sitting on contracts that could be similarly affected where no provision has been made?
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