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On 26 September 2012, the French Supreme Court in civil and
commercial matters decided that a jurisdiction clause in a contract
providing for a competent forum, but which allowed one of the
parties to elect to bring proceedings in another forum, was
void.
THE CASE
A Luxembourg bank faced a claim brought by one of its French
customers in the French courts. The bank challenged jurisdiction
based on a governing law and jurisdiction clause in the following
terms (in translation):
"The relationship between the bank and the customer is
subject to Luxembourg law. Any disputes between the customer and
the bank will be submitted to the exclusive jurisdiction of the
courts of Luxembourg. The bank nevertheless reserves the right to
bring proceedings in the customer's home or any other court of
competent jurisdiction in the absence of an election for the
above-stated jurisdiction."
The Supreme Court held that the jurisdiction clause effectively
imposed no obligation on the bank, which was not restricted to
bringing proceedings in Luxembourg. For this reason, the clause was
"potestative" vis- à- vis the bank. Under
general French law, a clause which operates solely based on the
choice of one party may be considered
"potestative" and in consequence void. While the
agreement in question was governed by Luxembourg law, the Supreme
Court nevertheless applied the "potestative"
principle and refused to apply the jurisdiction clause. The Court
further held that the clause in question infringed article 23 of
the Brussels I Regulation in that it was contrary to the purposes
of finality engendered in article 23.
COMMENT
In many areas of commerce, it is not uncommon for the stronger
party to insist on retaining the option to bring claims other than
in the primary agreed forum. The reasons for this are many. Often,
a party wishes to be able to bring proceedings in a forum where
enforcement is most likely to succeed and structures its
jurisdiction clause accordingly.
However, where the other party is in a position to invoke French
jurisdiction, in apparent breach of such a jurisdiction clause, the
defendant may be unable to mount a successful jurisdictional
challenge in France and will be required to defend the claim in the
French courts.
In light of the Supreme Court's decision, parties should
give consideration to whether contractually granting themselves an
option in matters of jurisdiction is a sensible course to adopt,
particularly where the co-contracting party is French or,
generally, where it can be envisaged that the other party may be in
a position to invoke the jurisdiction of the French courts.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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