CJEU clarifies conditions for validity of asymmetric jurisdiction clauses

Advantages of asymmetric jurisdiction clauses

Asymmetric (or unilateral) jurisdiction clauses are common in certain types of commercial contracts, including financing agreements. They require one party (such as a borrower under a loan agreement) to bring any legal proceedings before an agreed court, but allow other parties (such as the lenders under the same loan agreement) to bring proceedings either before the agreed court or any other court that has jurisdiction​. Such clauses combine the predictability of an agreed forum with flexibility for lenders to bring proceedings before other competent courts, which can be an advantage when recovering debt if the borrower has assets spread across multiple jurisdictions.

Despite their wide use in finance transactions, the validity and enforceability of asymmetric jurisdiction clauses within the scope of Regulation (EU) No. 1215/2012 (Brussels Recast) and the 2007 Lugano Convention have been questioned in recent years. This uncertainty follows a series of decisions from French courts, primarily the infamous decision in Mme. X v. Banque Privée Edmond de Rothschild by the Cour de cassation in 2012, where an asymmetric jurisdiction clause was found to be invalid and unenforceable in France. Although national courts in other contracting states to Brussels Recast and the Lugano Convention (hereinafter collectively referred to as the “Convention Sates”) subsequently upheld and enforced such clauses, the question of their enforceability within the scope of Brussels Recast and the Lugano Convention remained uncertain pending a definitive ruling by the CJEU.

Although there have been some discussions regarding their enforceability in Norway, it has generally been assumed that asymmetric jurisdiction clauses would be upheld by Norwegian courts, subject to the Contracts Act Section 36 (granting courts the authority to modify or set aside contractual terms that are deemed unreasonable or unjust). To date, we are not aware of any decisions from Norwegian courts specifically addressing the validity of asymmetric jurisdiction clauses. Going forward, Norwegian courts will be required to observe CJEU’s new guidance in proceedings within the scope of the Lugano Convention.

CJEU decision confirms validity

In its recent ruling, the CJEU confirmed the validity of unilateral jurisdictional clauses under EU law. However, the CJEU introduced certain requirements that, from a Norwegian perspective, impose new and stricter conditions for the validity of these clauses, compared to what has been assumed to apply so far in Norwegian law.

First, the CJEU determined that the validity of unilateral jurisdictional clauses should be determined by reference to the autonomous principles of EU law derived from Article 25 of Brussels Recast, not the laws of the Convention States, thus reducing the risk of different approaches being adopted by various Convention States, as had been the case previously. For Norway, this means that for proceedings within the scope of the Lugano Convention, the validity of such clauses must be measured against the relevant requirements of the Convention.

Second, the CJEU found that unilateral jurisdiction clauses are valid under Article 25 of Brussels Recast only if the following conditions are met:

1. The designated courts before which a party is permitted to bring proceedings (in addition to the agreed court) must be in one or several Convention States. The CJEU concluded that a clause referring to “another competent court… elsewhere”, that is, including courts of non-Convention States, “would not be consistent with the objectives of foreseeability, transparency, and legal certainty” because EU law would not, in itself, designate the courts which have jurisdiction. However, the CJEU did not address whether a clause allowing a party to bring proceedings before the courts of a designated non-Convention State (in addition to the agreed court) could satisfy the aforementioned criteria of foreseeability and certainty.
2. The clause must identify objective factors that are sufficiently precise to enable the court to ascertain whether it has jurisdiction. For example, by referring to another “competent” court of a Convention State (understood as a court that is competent, determined based on the general rules in Brussels Recast or the Lugano Convention, as relevant) would allow the court to ascertain whether it has jurisdiction.
3. The clause cannot be contrary to the special jurisdictional rules applicable to certain contract types (insurance contracts, consumer contracts and individual contracts of employment) or with the rules on exclusive jurisdiction (mainly pertaining to immovable property, intellectual property rights and company law).

Implications for Norwegian law

Although Brussels Recast does not apply in Norway, the clarifications from the CJEU are relevant for Norwegian law. Norway is a contracting state to the Lugano Convention, which mirrors and is interpreted uniformly with Regulation (EC) No 44/2001 (the predecessor of the current Brussels Recast). Accordingly, Norwegian courts are required to take into account relevant CJEU case law to ensure uniform interpretation of these instruments.

For Norwegian parties and parties from other Convention States bringing proceedings in Norway, the validity of a unilateral jurisdiction clause would therefore be measured against Article 23 of the Lugano Convention, which is the equivalent provision to Article 25 of Brussels Recast. Going forward, Norwegian courts (as well as national courts in other Convention States) should interpret Article 23 of the Lugano Convention consistently with the CJEU’s new guidance to maintain uniform application of jurisdictional rules, as required by the provisions on uniform interpretation in the Lugano Convention.

Important considerations

The CJEU has clarified that unilateral jurisdiction clauses designating courts in Convention States are valid under EU law and should be upheld and enforced by national courts in those states. Any previous uncertainty created by diverging national practices has thereby been alleviated.

However, the CJEU’s decision does not fully clarify the consequences of a clause not satisfying the specified criteria. For instance, while the CJEU found that a clause simply referring to “another competent court… elsewhere” does not meet the necessary precision requirements, it did not address whether this would render the clause itself invalid or whether the clause should be interpreted in a manner that is consistent with EU law. If the clause itself is invalid, the restriction on the one party to only bring proceedings before the agreed court may no longer be enforceable.

The CJEU also does not directly address clauses allowing a party to bring proceedings in competent courts of Convention States, as well as the courts of designated third states. Conferring jurisdiction to courts in third states is beyond the scope of Brussels Recast and the Lugano Convention. Consequently, the implications of the territorial limitation in CJEU’s decision for clauses which also confer jurisdiction to courts in third states remain to be monitored going forward (e.g., in the context of enforcing a judgment from a third-state court where jurisdiction is based on an asymmetric jurisdiction clause).

In summary, while the CJEU has provided guidance and enhanced legal certainty for specific types of asymmetric jurisdiction clauses, it also underscores the necessity for parties to carefully consider the suitability of such clauses on a case-by-case basis in light of the guidance now given by the CJEU.