The CJEU announces its decision on asymmetric jurisdiction clauses: impact on financing agreements

Last February 27, the CJEU handed down a long-overdue judgment (Lastre case, C-537/23) on the validity of the most commonplace asymmetric jurisdiction clauses. Those are clauses that require one contracting party to refer disputes exclusively to one or several perfectly identified courts while, in contrast, the counterparty has the choice to bring proceedings not only in such court(s) but also in any other competent court according to the “ordinary” rules on international jurisdiction, that is, the rules that enter into play in the absence of express choice of court. Although the Lastre judgment derived from a supply agreement, the natural context for this type of clauses is a financing agreement in which a bank or financial institution usually has a stronger negotiating position and imposes the inclusion of the clause in its favor.

Despite its economic relevance, until the judgment date, the case law of the Member States had been divided regarding the enforceability of asymmetric clauses pursuant to Regulation 1215/2012 (Brussels I Recast). In this regard, whereas, for example, the French Cour de Cassation,  the court that requested the preliminary ruling on the Lastre Case and, in particular, the Chambre Civile I, had previously taken a contrary view, initially invoking the optional nature of such clauses and the fact that the enforcement of asymmetric clauses is exclusively subject to the will of only one of the parties and, subsequently, alleging the lack of precision of the designated courts and the uncertainty which that could cause, other Member States (the paradigmatic case is that of the United Kingdom pre-Brexit) considered them compatible with the European regulation.

Specifically, in the case that gave rise to the CJEU judgment, the clause stipulated that the courts of Brescia (Italy) were competent to resolve on any dispute arising from or related to the supply contract executed between an Italian and a French company, although the Italian supplier reserved the right to sue the French company before any competent court both in Italy and in any other foreign State. The wording of the clause was as follows:

“The court of Brescia [(Italy)] will have jurisdiction over any dispute arising from or related to this contract. [SIL] reserves the right to bring proceedings against the purchaser before another competent court in Italy or elsewhere.”

1.- The possible invalidity of a clause due to being asymmetric should be assessed in the light of article 25 of the Brussels I Recast, not of national law

The CJEU clarified, firstly, that when determining the validity of a choice of forum clause, Brussels I Recast distinguishes between two types of issues. On the one hand, the general conditions of substantive validity applicable to any agreement (it should be remembered that jurisdiction clauses are, ultimately, procedural contracts), that is, those relating to consent and the capacity to enter into the choice-of-court clause. This first set of issues is regulated by the national law applicable in accordance with the rules on international jurisdiction. On the other hand are the issues which the CEJU classifies as “conditions for validity that pertain to agreements conferring jurisdiction themselves.” Unlike the foregoing, this second group of conditions is regulated by the Brussels I Recast, irrespective of national laws. These conditions include the requirement that the parties must have concluded a specific agreement the purpose of which is to confer jurisdiction on one or more courts of a Member State (or, as stated in the first sentence of article 25 of Brussels I Recast: “if the parties have agreed that a court or the courts of a Member State are to have jurisdiction to settle any disputes which have arisen or which may arise in connection with a particular legal relationship.” In this regard, according to the CJEU, the assessment of the possible invalidity of a jurisdiction clause due to being asymmetric is a matter relating to the actual existence of an agreement conferring jurisdiction to certain courts, and therefore validity must necessarily be assessed according to the Brussels I Recast and not to national laws.

2.- Brussels I Recast is not opposed to clauses designating courts of different Member States

After assuming that the possible invalidity of a jurisdiction clause due to being asymmetric is a matter that must be decided, not based on national laws but based on the contents of article 25 of the Brussels I Recast and on the autonomous interpretation made by the CJEU of the requirement that there be an agreement between the parties, the CJEU makes a number of statements that are particularly relevant. Firstly, it considers that the possibility that an asymmetric clause offers to one of the parties of bringing disputes to courts of different Member States would not infringe article 25 of the Brussels I Recast, even though that article states that the parties must choose “a court or the courts of a Member State.” According to the CJEU, that provision cannot be interpreted as meaning that the parties must necessarily designate the courts of a single Member State. For the CJEU, such an interpretation would, on the one hand, be directly contrary to the freedom of choice of the parties which should always be respected (within the limits imposed in the case of contracts with a weaker party and exclusive jurisdiction) and, on the other, be inconsistent with the fact that the regulation itself offers plaintiff, in the absence of a jurisdiction clause, the possibility of bringing disputes to different courts (for example, those of the State of domicile of the defendant and those designated in articles 7.1 and 7.2).

3.- The establishment of an asymmetric procedural framework does not  in itself imply the invalidity of the clause

In addition, for the Luxembourg Court, the fact that in an asymmetrical clause one of the parties has more rights than the other (has more courts at its disposal) and, therefore, establishes an asymmetrical procedural framework between them, would not, in principle, render it invalid under article 25 of the Brussels I Recast. After again invoking the principle of the parties’ freedom of choice, the Lastre judgment states that the asymmetric nature of this type of clause does not render them null and void, provided that it is ensured that the parties have freely accepted them and that this does not infringe the protective rules established for contracts with a weaker party or the exclusive jurisdictions provided for in article 24 of the Regulation. The CJEU adds that the fact that, under the agreement conferring jurisdiction at issue, only one of the parties is obliged to respect the exclusive jurisdiction attributed to the court of Brescia is not, in itself, contrary to article 25, since, although that provision stipulates that jurisdiction clauses establish exclusive jurisdiction in favor of the designated courts, such exclusivity may be waived by agreement between the parties.

4.- The requirement for a minimum level of precision of the designated courts

Although for the CJEU the asymmetric nature of the agreement conferring jurisdiction would not in principle clash with the requirements of article 25 of the Brussels I Recast, the lack of precision regarding the courts that could have jurisdiction could, on the other hand, render it null and void. The court recalls that the clause must identify “(…) the objective factors on the basis of which the parties have agreed to choose a court or the courts to which they wish to submit disputes which have arisen or which may arise between them. Those factors, which must be sufficiently precise to enable the court seised to ascertain whether it has jurisdiction, may, where appropriate, be determined by the particular circumstances of the case being examined by the court.” In short, the CJEU considers that the requirement imposed by article 23 of the Brussels I Recast that the parties "have agreed" to select one or more courts includes compliance with a minimum level of precision, as the only way to guarantee the objectives of foreseeability, transparency, and legal certainty required by the regulation through recitals 15 and 16.

5.- The clause is invalid if non-exclusive jurisdiction cannot be determined under the Brussels I Recast or the Lugano Convention

Finally, the last step in the CJEU’s reasoning consists of identifying the criteria for considering that an asymmetric jurisdiction clause guarantees the minimum level of precision required by article 23 of the Brussels I Recast. For the court, this minimum level of precision would be achieved when the clause designates, on the one hand, the exclusive jurisdiction of certain courts and, on the other, the possibility for one of the parties to bring their claim before any court that has jurisdiction in accordance with the rules on jurisdiction in the Brussels I Recast or the Lugano Convention (in force in all Member States). In this case, according to the CJEU, what would actually occur is a mere reference to the general rules of jurisdiction of the regulation or of the convention and, therefore, the foreseeability of the designated courts would be guaranteed. The judgment requires, however, that the parties identify “objective factors which are sufficiently precise to enable the court seised to ascertain whether it has jurisdiction,” and it also points out that the choice of court cannot infringe the protected jurisdictions established for contracts with a weaker party (consumer, employment, and insurance contracts), or exclusive jurisdictions.

On the contrary, a jurisdiction clause such as the one analyzed in the judgment, which, alongside the courts identified as exclusive (those of Brescia), it  indicates that the other party may also bring proceedings before “another competent court in Italy or elsewhere”, would run counter to Brussels I Recast. In this case, the CJEU considers that the necessary foreseeability of the designated courts would not be guaranteed, since the identification of the competent courts could depend on the application of private international law provisions of third countries.

6.- Possible consequences when courts of third countries consider that they have jurisdiction in accordance with an asymmetric clause

A particularly important question that arises for the future is what position the courts of the Member States will take in the event that courts of third countries (e.g., English courts) consider that they have jurisdiction by virtue of an asymmetric clause drafted in terms similar to the one analyzed in the Lastre judgment. Strictly speaking, article 25 of the Brussels I Recast does not apply when the jurisdiction clause designates courts of non-EU Member States, which means that the derogatory effect of these clauses must not be assessed by the courts of a Member State on the basis of the regulation, but rather in accordance with domestic law or, as the case may be, international conventions that may apply (CJEU judgment Coreck Maritime, C‑387/98). However, while the above is true, it is possible that, based on arguments such as internal consistency within the legal systems of the different Member States (it could be argued that it is not logical to reject the application of a particular jurisdiction clause within the EU and yet admit its effectiveness vis-à-vis third countries) or respect for the effectiveness of the Brussels I Recast, the courts of the Member States may deny the validity of these clauses, with the consequences that this would entail in situations of international lis pendens or in the recognition of judgments adopted in third countries that have considered that they have jurisdiction by virtue of them. It would therefore be advisable to analyze this type of jurisdiction clause on a case-by-case basis.