On 25 March 2015, France’s highest court, the Cour de cassation1, once again ruled against the validity of a contractual asymmetrical jurisdiction clause, this time on the basis that it was contrary to Article 23 of the 2007 Lugano Convention2. Asymmetrical jurisdiction clauses, also known as “one-sided”, “one-way” or unilateral option clauses, are clauses in which one party can bring proceedings in one jurisdiction only, whilst one or more other contracting parties have the option to bring proceedings in other jurisdictions. Given their common use in certain industries, such as the banking and finance sectors, this decision, as well as the Cour de cassation’s earlier Rothschild3 decision, which found a similar clause, in the context of the Brussels Convention, to be invalid, merits significant attention. It is also worth looking at the position in a more global context in which case one sees how uncertain the situation is.
Recent case of the Cour de cassation
This decision relates to the application of asymmetrical jurisdiction clauses within the scope of Article 23 of the 2007 Lugano Convention4.
In this case, the forum selection clause contained in the contracts concluded between a French company and a Swiss bank provided that potential disputes between the company and the bank shall be subject to the exclusive jurisdiction of the Courts of Zurich or the Court having jurisdiction over the branch of the bank where the business relationship was established, with the bank reserving the right to commence proceedings before “any other court of competent jurisdiction”. In other terms, the clause required disputes to be submitted to the exclusive jurisdiction of the Courts of Zurich, but reserved the bank alone the right to bring proceedings elsewhere. In spite of this clause, the French company initiated proceedings before a French court against both the Swiss bank and a British company that participated in the business funding. The Swiss bank argued that the French Court did not have jurisdiction and the Paris Court of Appeal agreed.
The Cour de cassation, however, reversed the decision of the Paris Court of Appeal5, holding that a clause allowing only one party to file a claim before any other court of competent jurisdiction than the designated court does not respect the objective of Article 23 of the 2007 Lugano Convention – that is of predictability and legal certainty – since it does not justify the other court’s jurisdiction by means of “objective elements”.
The decision applies earlier cases of the European Court of Justice6 which deal with “objective elements” and the necessity for predictability and legal certainty under Article 17 of the 1968 Brussels Convention7 and Article 23 of the 2000 Brussels I Regulation8. Both Articles are similar to Article 23 of the 2007 Lugano Convention.
Regarding the notion of “objective elements”, the European Court of Justice9 considers that it is sufficient that the clause state the objective factors on the basis of which the parties have agreed to choose a court or the courts to which they wish to submit disputes which have arisen or which may arise between them. Those factors, which must be sufficiently precise to enable the court seized to ascertain whether it has jurisdiction, may, where appropriate, be determined by the particular circumstances of the case. Hence, this implies an in concreto analysis of the clause.
It is also worth noting that the new Article 25 of the recast Brussels I Regulation does not depart from Article 23 of the 2000 Brussels I Regulation in that regard10. Thus, the principles that the Cour de cassation has laid down for the application of asymmetrical jurisdiction will likely also apply within the scope of new Article 25 of the recast Brussels I Regulation.
The decision also supports the Rothschild case11. The Cour de cassation, unlike the Rothschild case however, did not need to refer to the French theory of potestative clauses as it based its reasoning on the necessity of “objective elements” for allowing another court’s jurisdiction12. Hence, this latest decision will likely find greater acceptance among commentators (whether academics or practitioners) than the Rothschild decision13 which, as seen below, has been subject to much criticism.
The Rothschild decision
The Paris Cour de cassation decision of September 2012 (Rothschild) was the forerunner to the recent March Cour de cassation decision by striking down an asymmetrical jurisdiction clause which was governed by Article 23 of the Brussels I Regulation, going against earlier case law.
The case involved a French national and resident of Spain (Mrs X), who deposited a significant sum of money with a bank of the Rothschild group in Luxembourg under an agreement. The relevant jurisdiction clause provided that: “The relations between the bank and the client are subject to the laws of Luxembourg. Any dispute between the client and the bank will be subject to the exclusive jurisdiction of the courts of Luxembourg. Notwithstanding the above, the bank reserves the right to start proceedings in the client’s place of domicile or before any other competent court.”14 Mrs X commenced proceedings against the bank in France on the basis that having joined a third party who was domiciled in France to the proceedings, she was entitled to do so. The bank objected to the French courts hearing the case in breach of the jurisdiction clause. The clause was found to be invalid by the French courts both at first instance and on appeal.
The Cour de cassation dismissed the appeal, ruling that the clause was invalid. It applied the following two-step reasoning:
- First, the Cour de cassation held that the bank was not effectively bound by the clause as it had the right to disregard it. It was thus void for being “potestative”, i.e. discretionary. This was an implicit reference to the French law of obligations which provides that obligations conditional upon an event that one party totally controls is void15.
- The Cour de cassation also found that such “potestative” clauses contradict the rationale and purpose of Article 23 of the Brussels 1 Regulation, that being of finality.
This decision has been heavily criticised, essentially for there not having been a referral to the European Court of Justice, for going against the principle of freedom of contract, for ignoring the fact that the Brussels I Regulation allows such clauses and the implicit application of French law which was not the governing law. The Paris Court of Appeal had declared that this type of clause is in general terms valid but considered this clause too broad since it allowed the bank to discretionary select whatever jurisdiction it wishes. The Cour de cassation, however, focused on the “potestative” nature of the clause, thereby ruling that the clause was invalid16. This was notwithstanding the fact that such French law concept was neither raised by the Court of Appeal nor the parties themselves. The finding also goes against an earlier French Cour de cassation decision in which it was held that where the parties’ common intention was to provide only one of them with the right to choose whether to litigate or arbitrate, such a clause was not objectionable17.
The doubt cast by these two decisions of France’s highest court on asymmetrical jurisdiction clauses stands in contrast to the steady position in common law countries to accept such clauses, such as the United Kingdom,18 the United States19 and Australia,20 as well as in some civil law countries like Spain21 and Italy22. It does though follow the trend set by national court decisions in Bulgaria,23 Russia,24 Poland25 and China26 that have struck down asymmetrical clauses on grounds of unconscionability.
Given the current position not only in France but in other jurisdictions, parties need to carefully consider whether to use asymmetrical jurisdiction clauses in their contracts and, if so, to pay particular attention to their drafting. Parties with existing asymmetrical jurisdiction clauses should be aware of the risk of enforcement challenges in some jurisdictions to judgments and arbitral awards. A referral to the European Court of Justice would be a welcome way of obtaining clarification on this issue.