Unilateral jurisdiction clauses (frequently referred to as 'option clauses', 'hybrid clauses' or 'asymmetrical clauses') are dispute resolution clauses granting one party the possibility to choose from several jurisdictional options while the other party is bound to bring an action or claim before a single jurisdiction. Such clauses are widely used and normally found in contracts where there is an imbalance of negotiating power between the parties, with one party in a more favourable position and able to 'cherry-pick' the preferred jurisdiction. Asymmetrical clauses are generally considered valid, although in a few jurisdictions their validity has been questioned on the grounds that they lack mutuality or are completely unilateral.
The issue was recently considered by the Supreme Court1 in a matter arising out of a contract in which the jurisdiction clause provided that one party was bound to refer contractual disputes to the English courts while the other had the liberty to bring an action "before Italian courts or any other judge having jurisdiction pursuant to the international conventions".
The Supreme Court had no hesitation in upholding the validity of the clause, pointing out that the parties' asymmetrical position with respect to jurisdiction was consistent with Article 23 of EU Regulation 44/2001, which provides that a choice of jurisdiction will be exclusive "unless the parties have agreed otherwise", thus admitting that the parties may opt for non-exclusive jurisdiction clauses.
The same position was recently expressed by the Milan Court of Appeal2 in a case where the contract entered into by the parties contained a law and jurisdiction clause subjecting the contract to the laws of the state of Washington and specifying that while the Italian company consented to the exclusive jurisdiction and venue of the courts in Washington (with an additional provision that the "company waives all defenses of lack of personal jurisdiction and forum non-conveniens"), the other party - Microsoft - was free to make use of the Italian courts.
The Milan Court of Appeal noted that such clauses have long existed and been permitted in the Italian legal system (the court found an example of an asymmetrical clause in the bilateral convention of June 3 1930 between Italy and France). Furthermore, the possibility for the parties to agree on such a hybrid clause was permitted before the adoption of EU Regulation 44/2001 by Article 17 of the Brussels Convention 1968, which states that:
"if an agreement conferring jurisdiction was concluded for the benefit of only one of the parties, that party shall retain the right to bring proceedings in any other court which has jurisdiction by virtue of this Convention."
The Milan court added that the Italian defendant could not object to the jurisdiction of its 'natural' judge, and that the alleged imbalance existing between the parties had not taken place in the case at hand, since Microsoft had preferred to make use of Italian courts instead of filing the lawsuit in Washington.
It is interesting to compare the Supreme Court's conclusions with the reasoning behind a recent decision of the French Court of Cassation,3 which held that a unilateral hybrid jurisdiction clause was null and void on the ground that it was potestative and contrary to the purpose of EU Regulation 44/2001. The Paris Court of Appeal had previously held that the jurisdiction clause was null and void on the ground that although the regulation permits a clause giving one party the option to choose between jurisdictions, such a clause cannot give one party the absolute "discretion to select whatever jurisdiction it wishes". The Court of Cassation confirmed the decision on the ground that the clause was "potestative in nature".
An obligation that is conditional upon a purely potestative condition - that is, entirely within the power of only one party of the contract - is deemed null and void under French law. The same principle applies in Italian law (pursuant to Article 1355 of the Civil Code), but the Italian Supreme Court found nothing wrong with the possibility for one of the contracting parties to choose among various jurisdictions, despite the fact that such a choice depends on the mere will of that party.
1. Case 5705, April 11 2012, Grinka in liquidazione v Intesa San Paolo, Simest, HSBC.
2. September 22 2011, Sportal Italia v Microsoft Corporation.
3. First Chamber, September 26 2012, Case 11-26.022.
This article first appeared on the International Law Office - www.internationallawoffice.com.
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