Member Article

The Cour de cassation[1] re-focused its stance relating to asymmetrical jurisdiction clauses through two decisions rendered in 2015.

For the record, the Cour de cassation had handed down its controversial Rothschild decision in 2012 in which it ruled that an asymmetrical jurisdiction clause, that restricted the bank’s customer to the exclusive jurisdiction of the designated court only while the bank had the option to bring proceedings in any other competent jurisdiction, was subject to the French contract law concept of potestativity (potestativité), and then was null and void on the basis of Article 23 of the European Regulation no. 44/2001 (Brussels I Regulation) providing for prorogation of jurisdiction among parties of which at least one is situated in the European Union[2] . This decision was much criticized because the bank’s option was not a purely discretionary condition of the contract and the French concept of potestativity was improper to construe the Brussels I Regulation. In fact, the courts of Luxembourg and England have held asymmetrical clauses valid and enforceable on the basis of the same Article 23 of the Brussels Regulation[3]. Nevertheless, theRothschild decision changed the market practice. In particular, in a communiqué dated 24 January 2013, the Loan Market Association made recommendations to address invalid jurisdiction clauses in financing agreements involving parties domiciled in France.

In the first of the two decisions, Danne Holding v. Credit Suisse dated 25 March 2015, the Cour de cassationreviewed a jurisdiction clause stipulated among a French company and the Swiss bank Credit Suisse that provided for disputes to be heard in the courts of Zurich, but gave the bank only the option to commence proceedings in any other jurisdiction[4] . As regards a contract among French and Swiss parties designating a Swiss court, the issue was governed by Article 23 of the Lugano Convention on Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial Matters of 2007 that is drafted in the same way as Article 23 of the Brussels I Regulation. The appeal court of Angers denied jurisdiction on the basis of the clause, noting that imbalance is of the essence of a jurisdiction clause agreed among contractors located in different countries.

The Cour de Cassation cancelled the appeal court’s decision on the grounds that the jurisdiction clause was asymmetrical. In its ruling, the Supreme Court impliedly dismissed the concept of potestativity and founded its decision on the principles laid down by the Court of Justice of the European Union (CJEU) case law instead, in particular in the Coreck case[5]. The latter decision has required that the competent jurisdictions can be objectively determined through factors that must be sufficiently precise to enable the court seized to ascertain whether it has jurisdiction, whether those factors are referred to in the clause or, where appropriate, can be determined by the particular circumstances of the case. The Cour de Cassation has referred the case to another appeal court that will retry it on jurisdiction having regard to the above principles.

In the second decision rendered on 7 October 2015, the Cour de cassation cancelled a judgement of the appeal court of Paris that had endorsed an asymmetrical jurisdiction clause agreed upon among the French company eBizcuss (reseller) and Apple Sales International (supplier)[6]. The clause provided for a unilateral prorogation of jurisdiction but framed the choice of alternative courts by the supplier: whilst the reseller could only sue the supplier before the Irish courts, the supplier was entitled to bring proceedings before the Irish courts, or the courts of the State where the reseller is incorporated, or the courts of the States where the supplier has suffered a loss. The Cour de cassation ruled that the clause provided for the objective factors on the basis of which the supplier could chose other courts and hence “responded to the requirement of foreseeability that must be satisfied by choice of forum clauses”. However, it noted that the appeal court wrongly based itself on Article 5(3) of the Brussels I Regulation according to which Article 23 of the same Regulation does not apply as regards anticompetitive practices, although the jurisdiction clause failed to expressly refer to anti-competitive practices.

Several consequences may be drawn from the above two cases:

· French case law now simply applies the predictability principle set forth by the CJEU to determine whether the clause setting forth an unilateral option granted to one party to choose other courts is valid.

· Consequently, the parties are encouraged to draft very carefully the jurisdiction clause to set forth criteria that are sufficiently detailed and objective to render the exercise of the one sided option predictable. The parties must avoid simply providing that one of the parties is able to bring claims before “any other competent courts”.

· Although the two 2015 Cour de cassation’s decisions were rendered under the Brussels I Regulation that has been replaced by the European Regulation No. 1215/2012 (Brussels I Recast Regulation) as from 10 January 2015, their solutions remain valid since Article 25 Brussels I Recast Regulation relating to prorogation of competence has substantially the same content as former Article 23 of the Brussels I Regulation.

· Both the Brussels I Regulation and the Brussels I Recast Regulation expressly exclude arbitration from their scope. Thus, it may be argued that the asymmetrical jurisdiction clause providing for arbitration but granting one of the parties only the right to initiate proceedings before state courts, or vice versa, may be held valid whether or not the predictability tests discussed above are passed. However, this is to be stated with care, as both the Brussels I Recast Regulation and the 2007 Lugano Convention apply with respect to clauses designating state courts. If the option relates to arbitration, it will necessarily meet the objective and predictability test. If the option relates to state courts, it is advisable that it complies with the above criteria.

· The LMA will perhaps adjust its 2013 recommendations concerning asymmetrical jurisdiction clauses in financing contracts involving a French party. In its 24 January 2013 communiqué, without making recommendations as to jurisdiction clauses for any particular transaction, the LMA had set forth three alternative options for clauses giving jurisdiction to French courts: (1) a one sided clause with a fall back provision, (2) a single jurisdiction clause only, and (3) a multiple jurisdiction clause giving lenders and obligors the right to take proceedings in specified or other courts. Whilst all these options remain relevant, it would seem that the first option is no longer a good choice.

 

Footnotes: [1] The Cour de cassation is the higher civil court in France. [2] Civil Division, 1, 26 September 2012, Case no. 11-26022. [3] See e.g., Mauritius Commercial Bank Ltd. v. Hestia Holdings Ltd. And Sujana Universal Industries Ltd. [2013] EWHC 1328 (Comm); District court of Luxembourg, 15th Chamber, 29 January 2014. [4] Civil Division, 1, Case no. 13-27264. [5] Case C-387-98 of 9 November 2000, Coreck Maritime GmbH v Handelsveem BV and Others. [6] Civil Division, 1, Case no. 14-16898.