On 7 October 2015,1 the French Supreme Court (Cour de cassation) handed down a decision that significantly clarified its interpretation of the rules for jurisdiction clauses within the European Union. It thereby added to its case law on unilateral or asymmetric clauses2, i.e. clauses that do not give the same rights to each party to the contract.

In this case, a company incorporated in France and a company incorporated in Ireland had signed a contract with a jurisdiction clause whereby the parties agreed that disputes would come under the jurisdiction of the courts of the Republic of Ireland. However the same clause also reserved the right – to the Irish company alone – to apply to the courts with jurisdiction over the counterparty's registered office, or those in any country where it suffered a loss caused by the counterparty.

The French company complained that the Irish company was infringing competition law, and started proceedings before the Paris Commercial Court seeking compensation for the harm it had suffered.The Irish company successfully argued that the Commercial Court lacked jurisdiction, which belonged to the courts of Ireland. When the French company's appeal to the Paris Court of Appeal was equally unsuccessful, it filed a Supreme Court appeal. This gave rise to the 7 October 2015 decision.

The Cour de cassation took the opportunity of this decision to:

  • refine the case law from Rothschild-Crédit Suisse, upholding asymmetric jurisdiction clauses provided they objectively identify the courts that may have jurisdiction at the choosing of the party benefiting from the asymmetry;
  • incorporate case law from the Court of Justice of the European Union (CJEU) into its decision: under EU case law, jurisdiction clauses only apply to disputes over alleged infringements of EU competition law if the clause specifically so provides.

We will analyse these two aspects below.

  1. Validity of asymmetric jurisdiction clauses
  2. Scope of jurisdiction clauses and anti-competitive practices
  1. Validity of asymmetric jurisdiction clauses

In exclusive jurisdiction clauses, the parties to a contract agree in advance that any disputes between them will be submitted to a single court identified in the clause. However in practice, more complex arrangements have been developed, mainly under Anglo-American influence, aimed at expanding the array of possible jurisdictions, most often for the benefit of only one of the contracting parties (the party in the strongest position during contract egotiations).

This second type of clause, generally called "asymmetric" or "unilateral" clauses, "offer different solutions depending on which party is the claimant in legal proceedings" 3. Most often under these clauses:

  • one party is obliged to file its suit in a forum determined by the clause (generally the courts for its counterparty's place of domicile);
  • the counterparty, however, has greater freedom, within confines that may greatly vary with the wording of the clause. In practice, the clause may even allow the beneficiary to apply to any other court that would normally assume jurisdiction to hear the dispute if the jurisdiction clause did not exist.

The clause at issue in the 7 October 2015 decision was asymmetrical: while the French company had no choice but to apply to the courts of Ireland, the Irish company had greater flexibility. In addition to the courts of Ireland, the Irish company could apply to the courts for the place where the French company had its registered office, or those of any country where it had suffered a loss (attributable to the counterparty).

In the Court of Appeal, the French company contended that the jurisdiction clause was "void and ineffective because it is 'potestative' [at the discretion of a single party], and does not meet the predictability requirement".4 The company was attempting to take advantage of the now well-known case law from Rothschild.5 In a decision dated 26 September 2012, the French Supreme Court refused to uphold a jurisdiction clause that gave only one of the parties the option of submitting any disputes to either the court referred to in the clause or to "any other competent court". The Court's reason was that the clause "is at the discretion of a single party (...), and so runs counter to the subject and purpose of the option of expanded jurisdiction set out in Article 23" of Regulation No. 44/2001, which harmonised the rules for jurisdiction within the European Union.6

Despite the many criticisms of Rothschild, the French Supreme Court mostly upheld its decision in another ruling issued pursuant to the Lugano Convention7 (the counterpart to Regulation No. 44/2001), now referred to as the Crédit Suisse ruling. The Court did, however, remove all references to the concept of a potestative clause, and confined itself to citing predictability, which by the Court's hand thereby became a cardinal rule.

The Crédit Suisse ruling had not yet been issued when the appeal in the present case was filed, but the contours of the 7 October 2015 decision can be inferred from it. The Court had implied in Crédit Suisse that it was not opposed in principle to all types of asymmetry in jurisdiction clauses. It only invalidated the clause at issue (which was similar to the clause in Rothschild) after noting that the clause did not define the "objective factors" based on which the clause beneficiary would be able to apply to a different forum than the one imposed on its counterparty. In other words, the Court suggested that it would uphold an asymmetric clause as long as the party that was not free to choose jurisdiction under the clause could objectively anticipate the alternative forums available to their counterparty.

The 7 October 2015 decision has now confirmed this reading, which was implied in Crédit Suisse. The Court assumed the lower courts' reasoning as its own, to wit, that the jurisdiction clause did satisfy the "predictability requirement" in this case because it was possible "to identify which courts would potentially have jurisdiction over a dispute". It could not be said, therefore, "that the choice of court was left to the sole discretion of [the Irish company] since disputes could only be brought before the courts with territorial jurisdiction over the registered office [of the French company] or over the place where the loss was suffered by [the Irish company]; consequently, the clause was not 'potestative' in light on the specific criteria set out for determining the court with jurisdiction, even if there were more than one such court (…)".

In the view of the French Supreme Court then, even though the French and Irish companies did not enjoy the same freedom in choosing which court would hear their dispute, the jurisdiction clause did abide by the predictability requirement by making it possible to objectively identify which courts could conceivably have jurisdiction. Thus the choice was not under the beneficiary's complete control.

Three years after Rothschild, the case law from the French Supreme Court is now clear. Asymmetric clauses are still to be avoided if they allow a single party to apply to any court of its choosing, while they are valid if the other possible forums can be objectively determined (whether because explicitly stated or because specific rules for doing so are given).

Although the case law amassed by the Court on this topic is perfectly intelligible to practitioners, it is not without critics.

Because they still reject asymmetric clauses that allow complete freedom to one of the parties to apply to any competent court outside the jurisdiction specifically identified by the parties in the agreement, the rulings in Rothschild and Crédit Suisse are clearly out of tune with the Anglo-American tradition, in which this kind of clause is perfectly valid. Moreover, since such clauses were expressly allowed under the Brussels Convention (the forerunner to Regulation No. 44/2001), the Court implicitly found that Regulation No. 44/2001 had restricted the freedom of contract on this issue.

Regardless, the case law of the French Supreme Court only stands thanks to the silence of the CJEU. No cases concerning this type of clause have cropped up before the European court since the Brussels Convention was replaced by Regulation No. 44/2001. And yet other European courts – all applying the same EU law – continue to accept asymmetric clauses despite the situation in France, creating an unwelcome note of discord with the rest of the EU.

The goalposts were recently moved when Regulation No. 1215/20128 entered into force on 10 January 2015, replacing Regulation No. 44/2001. Unlike the earlier regulation, which did not address the validity of jurisdiction clauses, the new text provides that this issue must be assessed in accordance with the laws of the courts given jurisdiction by the clause in question.9 As the court appointed by the clause is unlikely to be a French court, could this mean the end – at least in practice – for the Rothschild-Crédit Suisse case law? Only time will tell.

For now, businesses involved in transactions with ties to France must continue to take every precaution when drafting jurisdiction clauses. Those who wish to keep their options open when it comes to jurisdiction would be wise to phrase those options carefully.

The decision of 7 October 2015 is also an opportunity for debate on whether asymmetric clauses are even useful within the EU at all. The circulation of court decisions within the zone has already been greatly facilitated – Regulation No. 1215/2012 is a continuation of the movement begun by the Brussels Convention and improved by Regulation No. 44/2001 – and so the practical benefits of this type of clause are not entirely clear. From a pragmatic point of view, in the majority of cases, parties should ensure that their choices of court and applicable law are aligned and then have the decision, once obtained, enforced in the relevant jurisdictions.

  1. Scope of jurisdiction clauses and anti-competitive practices

The French company also argued that the Court of Appeal should not have ruled the jurisdiction clause was applicable to its dispute with the Irish company. In its view, in so far as the dispute centred on alleged anti-competitive practices by the Irish company, it escaped the jurisdiction clause.

The Court of Appeal dismissed this argument, concluding that the dispute was governed by the jurisdiction clause, which provided no particular limits to its scope. Accordingly, it "applied to any dispute arising" out of the performance of the contract, including any anti-competitive practices. The Court of Appeal thus followed well-established French case law whereby a tort action (such as an action for damages for an infringement of competition law) is not inherently outside the scope of a jurisdiction clause, which depends on the wording of that clause.10

The French Supreme Court reversed this determination based on a recent CJEU judgment. In CDC Hydrogen Peroxide SA, the European court concluded that Article 23 of Regulation No. 44/2001 "must be interpreted as allowing, in the case of actions for damages for an infringement of [European competition law], account to be taken of jurisdiction clauses (…) provided that those clauses refer to disputes concerning liability incurred as a result of an infringement of competition law."11

The CJEU requires an express reference to anti-competitive practices in the jurisdiction clause if that clause is to apply to disputes over infringements of EU competition law. In the case at hand, the clause did not meet this requirement and the claims of the French company did rely, at least in part, on EU competition law. From this point of view then, the appellate decision was to be reversed.

From a practical perspective, the (mandatory) application of EU case law within the Union means that parties drafting jurisdiction clauses need to account for the CJEU's requirement for specific wording.

From a legal perspective, one question remains: does the determination in CDC Hydrogen Peroxide SA apply to infringements of EU competition law alone, or should it also cover all other infringements of competition law, including those derived from a Member State's own laws? In so far as the French company relied on both EU and French law before the Court of Appeal, there is no doubt that the court of remand will need to consider this issue. Either it will decide that the clause simply cannot apply in a situation potentially involving infringements of EU and French competition rules, or it will conclude that only the claims based on EU law must be excluded from the scope of the clause. In the first case, French courts would then have jurisdiction to hear the whole dispute but this would also constitute a partial reversal of French case law.12 In the second, the dispute would be divided: one part to be heard by the Irish courts and the other in France.