​In a helpful decision for financial institutions, the High Court has held in Commerzbank Aktiengesellschaft v Liquimar Tankers Management Inc [2017] EWHC 161 (Comm) that an asymmetric (or ‘hybrid’) jurisdiction clause is valid under the Brussels Regulation (Recast) (the Brussels Recast) and qualifies as an exclusive jurisdiction clause for the purposes of the Brussels Recast’s ‘anti-torpedo’ protections.

Asymmetric jurisdiction clauses typically require one party to an agreement to sue in the courts of a specified jurisdiction only whilst allowing the other party (often a bank or financial institution) to sue in any court with jurisdiction. Whilst asymmetric jurisdiction clauses feature widely in international finance agreements, the refusal of the courts in certain EU Member States, including France, Bulgaria and Poland, to uphold them has left a question mark hanging over their validity.

In this jurisdictional dispute, Liquimar applied under the Brussels Recast to stay proceedings brought in England by Commerzbank pending the determination of parallel proceedings commenced by Liquimar, in breach of an asymmetric jurisdiction clause, in Greece. The asymmetric jurisdiction clause restricted Liquimar to commencing proceedings in England only.

Under the old Brussels Regulation the second court seised always had to stay proceedings in accordance with the related actions (or lis pendens) rules. Article 31(2) of the Brussels Recast introduced a carve-out to the related actions rules to restrict the use of the ‘Italian torpedo’ in disputes where the parties had agreed an exclusive jurisdiction clause. The changes allow an EU Member State court specified in an exclusive jurisdiction clause to determine a dispute, even if proceedings had first been commenced (in breach of contract) before another Member State court.

Liquimar made a number of arguments in support of a stay, in particular that the asymmetric jurisdiction clause was not an exclusive jurisdiction clause and therefore the English court as the second-seised court was required to apply the ordinary related actions rules in Article 29(1) of the Brussels Recast to stay the English proceedings until the Greek courts determined jurisdiction. The Bank argued that the jurisdiction clause was an exclusive jurisdiction clause and therefore the Article 31(2) carve-out applied.

Are asymmetric jurisdiction clauses valid?

Cranston J found that asymmetric jurisdiction clauses are compatible with the Brussels Recast, notwithstanding certain French cases to the contrary, including Mme X v Société Banque Privé Edmond de Rothschild 13 (Case No. 11-26022), which the judge considered was decided on the basis of the French concept of potestativité, not an autonomous concept in EU law.

Is an asymmetric jurisdiction clause an exclusive jurisdiction clause under the Brussels Recast?

Cranston J held that an asymmetric jurisdiction clause is an exclusive jurisdiction clause for the purposes of the Brussels Recast. Cranston took the view that the issue was not a question of English law, but instead the autonomous interpretation of the Brussels Recast.

The natural meaning of the words in Article 31(2) “an agreement [which] confers exclusive jurisdiction” includes asymmetric jurisdiction clauses. An asymmetric jurisdiction clause confers exclusive jurisdiction on a Member State, in this case England, and the fact that it applies in respect of a claim by one party only does not change the analysis. The judge found support for this proposition in Nikolaus Meeth v Glacetal Sarl [1979] CMLR 520 in which the European Court of Justice held that a jurisdiction clause requiring a French party to sue in Germany and a German party to sue in France conferred exclusive jurisdiction on Germany in proceeding brought by the French party and exclusive jurisdiction on France in proceedings brought by the German party.

In addition, the judge took the view that the aims of the Brussels Recast, in particular, party autonomy, enhancing the effectiveness of exclusive choice of court agreements and avoiding abuse tactics could only be achieved if asymmetric jurisdiction clauses were treated as exclusive for the purposes of Article 31(2).

Cranston J did not consider that the Hague Convention on Choice of Court Agreements (the Hague Convention), which only applies to exclusive jurisdiction agreements, assisted with the characterisation of asymmetric jurisdiction clauses under the Brussels Recast. Although the Hague Convention was negotiated in parallel with the Brussels Recast and the Counsel Decision adopting the Convention referred to ensuring coherence between them, there were significant differences between the two, for example the Hague Convention defines exclusive jurisdiction clauses whereas the Brussels Recast does not. Although the Explanatory Report to the Hague Convention suggests that asymmetric jurisdiction clauses fell outside the scope of the Hague Convention, Cranston J found obiter that there were “good arguments,” in his view, that the definition of exclusive jurisdiction clauses in the Hague Convention could cover asymmetric jurisdiction clauses. The judge also took the view that, even if the Hague Convention was to be read as excluding asymmetric jurisdiction clauses, this was “of no assistance to the quite separate issue of their characterisation under Article 31(2) of the Brussels Recast.”

Comment

This is a helpful decision for financial institutions. Whilst there have been obiter decisions to suggest that asymmetric jurisdiction clauses benefited from the Brussels Recast anti-torpedo rules, such as Perella Weinberg Partners UK LLP & anr v Codere SA [2016] EWHC 1182 (Comm), this is the first EU decision to address the point directly.

The decision indicates that in the English courts it will be difficult for a commercial borrower/guarantor to breach an asymmetric jurisdiction clause to escape the Brussels Recast’s anti-torpedo rules. However, it is unclear if the courts of other Member States, or the Court of Justice of the European Union, will take the same approach as the English courts.

Asymmetric jurisdiction clauses are used widely in international financial agreements and this decision means they are likely to continue to be a popular option, but parties to finance agreements should be aware that a certain level of risk to the validity of asymmetric jurisdiction clauses remains.