Asymmetric jurisdiction clauses are well-known especially in cross-border finance contracts. They provide one of the parties of a contract with the choice between several courts (or any competent court) while restricting the other party's right to instigate legal proceedings to a specific court.
As a starting point, commercial parties within the EU have under Article 25 of Regulation (EU) No 1215/2012 of the European Parliament and of the Council of 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters ("Brussels Recast") a wide freedom to confer jurisdiction to courts of their choice and agreement.
Recently, the ECJ had to decide, on the request of the French Court of Cassation, whether a jurisdiction clause requiring one party to pursue claims in the courts of Brescia, Italy and the other party the right to instigate proceedings "before another competent court in Italy or elsewhere" was sufficiently precise to be valid under the Brussels Recast.
The preliminary ruling affects the drafting and choice of jurisdiction clauses in commercial contracts.
The ECJ ruling provided guidance on the interpretation and validity of asymmetric jurisdiction clauses
The case concerned a dispute regarding a contract for the supplying of panels by and between the supplier, an Italian entity and the buyer, a French entity. Eventually, the project owner sued both the supplier and the buyer in a French court for defects in the execution of the project. Consequently, also the French buyer brought an action based on a guarantee of the supply contract against the Italian seller in the French court. The Italian supplier disputed the jurisdiction of the French court by referring to the asymmetric jurisdiction clause requiring the French buyer to instigate proceedings in Brescia, Italy.
The French Court of Cassation referred the case to ECJ for a preliminary ruling. Most importantly, the ECJ shed light on the interpretation and validity of asymmetric jurisdiction clauses:
- The ECJ guided that the validity of an asymmetric jurisdiction clause is to be autonomously decided under article 25 of the Brussels Recast, not under the national laws of the member states. The clarification is a welcomed stance unifying the assessment of jurisdiction clauses within the EU.
- The ECJ ruled that the jurisdiction clause must be precise enough to enable the courts to ascertain its jurisdiction. Importantly, the court found that a jurisdiction clause conferring jurisdiction to any competent court of EU member states or parties to the Convention on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters, signed on 30 October 2007 ("Lugano Convention") would suffice as precise enough.
- The ECJ found that the jurisdiction clause can only designate jurisdiction to courts in the EU or states that are members of the Lugano Convention. According to the ECJ, from the Brussels Recast's objectives of foreseeability, transparency and legal certainty follow that a broader designation of jurisdiction requiring application of the rules of private international law of third countries would be contrary to the Brussels Recast.
Impacts on the usage of jurisdiction clauses in the EU and United Kingdom
The ECJ ruling limits the scope of asymmetric jurisdiction clauses to only courts within the EU and the Lugano Convention (Switzerland, Iceland, Norway). Therefore, asymmetric jurisdiction clauses may need to be drafted more narrowly in the future to limit the scope of competent courts to the EU and Lugano Convention jurisdictions.
Nevertheless, the ECJ left to the French Court of Cassation to decide whether the term "before another competent court in Italy or elsewhere" is sufficiently precise to restrict the jurisdiction to courts of EU member states and signatories of the Lugano Convention and thus be compliant with the Brussels Recast. As many asymmetric jurisdiction clauses are drafted broadly to enable jurisdiction of any competent court, the French judgment will give further implications on how such jurisdiction clauses may be interpreted in the future.
Moreover, the preliminary ruling may in practice have implications on the usage of asymmetric jurisdiction clauses conferring jurisdiction to the courts of United Kingdom.
Currently, English judgments based on exclusive jurisdiction clauses are enforceable in the EU pursuant to the Hague Convention of 30 June 2005 on Choice of Court Agreements which both the EU and United Kingdom have ratified.
However, English judgments based on non-exclusive jurisdiction clauses (as e.g. asymmetric jurisdiction clauses) are not enforceable in the EU as the Brussels Recast does not apply between the EU and United Kingdom after Brexit. Both EU and United Kingdom have ratified the Convention of 2 July 2019 on the Recognition and Enforcement of Foreign Judgments in Civil or Commercial Matters ("Hague Convention 2019") which will apply to the enforcement and recognition of non-exclusive jurisdiction clauses between the EU and United Kingdom in legal proceedings initiated after 1.7.2025.
The implications of the ECJ preliminary ruling on asymmetric jurisdiction clauses referring to English courts are unclear:
- As a starting point, the Hague Convention 2019 and its definition of non-exclusive jurisdictions clauses in its Article 5(m) should be interpreted autonomously and thus the ECJ judgment should formally not have any implications for the interpretation of the convention. Nevertheless, it cannot be ruled out that some national courts within the EU would interpret the convention's definition of non-exclusive jurisdiction clauses similarly as the ECJ in its judgment C-537/23 interpreted the Brussels Recast, i.e. does not accept asymmetric jurisdiction clauses that do not precisely enough restrict the scope of the designated jurisdictions.
- The Brussels Recast Articles 33 and 34 enable courts of EU member states to stay proceedings under certain circumstances where proceedings or an action is pending in a third country. It remains unclear how courts of EU member states would act if proceedings based on asymmetric jurisdiction clauses are pending in the United Kingdom.
We also note that as the Brussels Recast does not apply to arbitration clauses, the usage of pure arbitration clauses should not be affected by the ruling although its implications on hybrid clauses designating jurisdiction to both arbitral tribunals and civil courts is unsettled.
Conclusively, in the light of the new ECJ ruling C-537/23, it is important for businesses to assess the risks and opportunities of each dispute resolution option to avoid any losses of rights and on an in casu basis tailor the jurisdiction clauses for the needs of the business.
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.
