On 26 September 2012, in its decision Mme X v Banque Privée Edmond de Rothschild, the Cour de cassation, the French Supreme Court, decided that unilateral jurisdiction clauses are invalid both under the French civil code and the Brussels I Regulation (Regulation No 44/2001, the “Regulation”: note that this has now been replaced by Regulation No 1215/2012, the “Recast Regulation”, but the reasoning in Rothschild should apply also to the Recast Regulation). The Regulation is the principal source of law on jurisdiction for EU Member States. This decision was widely reported and criticized.
Rothschild concerned a jurisdiction clause in an investment management agreement between a Spanish client domiciled in France and a Luxembourg bank which gave the Luxembourg courts exclusive jurisdiction but which also gave the bank the right to bring actions against the client in the jurisdiction of the client and any other courts with jurisdiction. The French Cour de cassation held that the jurisdiction clause was null and void on the grounds that it was “potestative” (see below) and contrary to the purpose of the then applicable provisions of the Regulation.
According to article 1170 of the French Civil Code:
“A potestative condition is one which makes the execution of the agreement depend upon an event that one or the other of the contracting parties has the power to bring about or to prevent.”
Article 1174 of the same Code adds:
“Any obligation is null when it has been contracted subject to a potestative condition on the part of the party who binds himself.”
There appear to be a number of problems with the reasoning of the Cour de cassation. First, these Articles apply to contractual obligations – such as performance, payment, transfer of ownership – but it appears doubtful that they apply to jurisdiction clauses. Furthermore, even if they do apply to jurisdiction clauses, the ‘party who binds himself’ is the party who is bound to take action only in a specific jurisdiction and accordingly the “potestative” condition is not undertaken by him but by the other party to the contract.
Second, the Cour de cassation should have rendered its decision only under the Regulation and not under domestic French law. And it is difficult to see why a unilateral jurisdiction clause should be seen as contradicting the purpose of the Regulation. On the contrary, the Court of Justice of the European Community held in 1986 that jurisdiction clauses conferring a benefit on one party are valid (Anterist v. Crédit Lyonnais (Case 22/85)).
There was some hope that this decision was motivated by its particular fact pattern: the claimant was an individual French person pursuing a claim against an international bank which actually had used its French affiliate to negotiate the contract but was now seeking to take advantage of a jurisdiction clause to restrain proceedings in France. Many commentators argued that the effect would be limited to such situations.
These hopes have been somewhat dashed by a new case decided by the Cour de cassation.