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What is an asymmetric jurisdiction clause?

An asymmetric jurisdiction clause, also known as a unilateral or one-sided jurisdiction clause, requires one party to sue the other in the courts of a specified country, while the other party can sue in the jurisdiction of its choice. These clauses are very common in international financing agreements, in particular those based on the templates produced by the Loan Market Association (LMA). Typically, they allow borrowers to sue lenders only in a specified country, while lenders can sue borrowers in that country or in any other country with jurisdiction over the dispute. This enables the lenders to take action against the borrowers wherever its assets are located, making enforcement easier.

Although asymmetric jurisdiction clauses have been widely used in international financing transactions for many years, their validity has been debated for more than a decade in several jurisdictions, leading to conflicting judicial positions in the European judicial area. In France, since 2012, the French Supreme Court (Cour de cassation) has been repeatedly challenging the validity of asymmetric jurisdiction clauses³. As a result, the LMA included in 2013 a note in their templates of facility agreements, inviting users to consider (not) to include an asymmetric branch to the jurisdiction clause and published a guidance note to help practitioners in the syndicated loan market evaluate the risks and benefits of providing an asymmetric jurisdiction clause (as opposed to having an exclusive jurisdiction clause) in the facility documentation of any particular transaction with a French nexus.

In 2023, to settle its position on asymmetric jurisdiction clauses, the French Supreme Court sought a preliminary ruling from the CJEU in the SIL v Agora case⁴. The CJEU has now responded to the questions referred by the French Supreme Court.

What has the CJEU decided in the SIL v Agora case?

In this case, a supply contract between a French and an Italian company contained a clause granting exclusive jurisdiction to the court of Brescia (Italy) but allowing the Italian company to initiate proceedings before another competent court in Italy or abroad⁵. When a dispute arose, the French company brought proceedings in France. The Italian company contested the court’s jurisdiction, on the grounds of the asymmetric clause. French courts rejected this argument at both trial and appellate levels.

The case was then brought before the French Supreme Court, which referred certain questions of law to the CJEU. First, it asked whether the validity of asymmetric jurisdiction clauses should be assessed based on autonomous criteria from article 25(1) of Brussels Regulation (recast) (which applies when contracting parties have agreed on the jurisdiction of an EU court) or by national laws defining when jurisdiction clauses are “null and void as to [their] substantive validity”. Secondly, it inquired whether the specific clause in question met these criteria.

The Court ruled that the validity of an asymmetric jurisdiction clause is assessed only as a matter of EU law within the scope of article 25(1) of the Brussels Regulation (recast) and not the substantive law of any Member State. Matters of substantive validity – for which the law of the relevant Member State shall apply – only concern causes which vitiate consent, such as error, deceit, fraud or violence and incapacity to contract.

The Court then turned to the interpretation of the autonomous criteria set out in article 25(1) of the Brussels Regulation (recast) and held that an asymmetric clause was in principle valid under the Brussels Regulation (recast) or the Lugano Convention if it designated with sufficient precision the courts of EU Member States or States that are parties to the Lugano Convention.

Is the asymmetric jurisdiction clauses saga over?

The CJEU decision supports the validity of an asymmetric jurisdiction clause within the EU and clarifies how EU Member States should determine whether an asymmetric jurisdiction clause is valid for the purposes of article 25 of the Brussels Regulation (recast). But it leaves several questions unresolved.

Application of EU law for the validity of asymmetric jurisdiction clauses

This decision removes the issue of validity of an asymmetric clause from the scope of national rules on choice of court clauses. This should achieve consistency within the EU legal framework, without depending on the varying national laws of the Member States.

In France, it may be expected that the French Supreme Court will follow the CJEU decision and that challenges of similar clauses will be less likely to succeed than before the decision.

Validity of asymmetric jurisdiction clauses… under strict conditions

The CJEU upheld the principle of asymmetric jurisdiction clauses based on the principle of the parties’ freedom of choice. Such clauses, even if they give one party a broader choice of courts in which to bring proceedings than it allows the other party, are in principle valid. But the CJEU subjected such validity to strict conditions⁶.

The CJEU specified that an asymmetric jurisdiction clause must “identify objective factors which are sufficiently precise to enable the court seised to ascertain whether it has jurisdiction”. The main contribution of the CJEU ruling is that it clarifies that a clause designating any court having jurisdiction under the Brussels Regulation (recast) satisfies the requirement of precision resulting from Article 25(1) of that regulation and the objectives of foreseeability, transparency and legal certainty. Thus, where an asymmetric jurisdiction clause refers to the competent courts of the EU or Lugano states (Iceland, Norway and Switzerland), it should be considered sufficiently precise, and its validity should not be called into question.

This is a welcomed clarification, but one whose scope is limited because it applies only to EU and Lugano courts.

The CJEU decision does not resolve the issue of jurisdiction clause designating one or several courts outside the EU or Lugano contracting states. Indeed, according to the CJEU, such clauses may not be consistent with the objectives of foreseeability, transparency and legal certainty as the EU law does not, in itself, make it possible to designate the courts which have jurisdiction as that designation may require, where appropriate, the application of rules of private international law of third countries. According to the CJEU, such clauses also increase the risk of conflicts of jurisdiction, which would be detrimental to legal certainty.

Asymmetrical jurisdiction clauses in favour of English courts

The CJEU decision does not address the validity of asymmetric jurisdiction clauses in favour of non-EU courts, such as where the borrower is required to sue in the English courts but the lender is allowed take proceedings in any other courts with jurisdiction. It does not impact the validity of such clauses under English law because they fall outside article 25 of the Brussels Regulation (recast) which applies only when the designated courts are EU courts. English courts are not bound by the decision of the CJEU and should continue to view these clauses as valid and enforceable.

But all EU Member States must take into account the conditions set out by the CJEU and courts in the EU could interpret asymmetric jurisdiction clauses in favour of English courts in light of this decision.

Lastly, the decision may have an impact on asymmetric jurisdiction clauses designating non-Member State courts such as English courts, where the person with the choice is domiciled in an EU Member State. In that situation, it may be necessary to start proceedings pre-emptively in the non-Member State, so that the Member State courts are not forced to accept jurisdiction under article 4 of the Brussels Regulation (recast) - based on the defendant’s domicile but have the option under articles 33 and 34 to stay proceedings in favour of the earlier non-Member State proceedings. 

The implications of the decision of the CJEU will need to be considered on a transaction-by-transaction basis. Parties to an agreement containing an asymmetric jurisdiction clause in favour of English courts with an European nexus will need to consider whether the potential advantages of an asymmetric clause outweigh the potential uncertainties as to whether an EU court would give effect to such clause.

We will be closely monitoring the French Supreme Court position after the CJEU decision in this case.