knowledge | 26 November 2015 |
Asymmetry Untangled - Clarity on Choice of Forum Clauses
A recent significant judgment by France’s Supreme Court, the Cour de cassation, in a case involving an Irish litigant, has happily resolved a worrying issue for businesses contracting in multiple EU states who want to make a choice of a single EU forum for resolution of disputes under the standard contract concerned1
The basic rule in the EU is that if the parties to a contract (regardless of where they are domiciled), agree that the courts of a particular Member State are to have jurisdiction in disputes in connection with their particular legal relationship, those courts may decide the dispute and their jurisdiction cannot be challenged, provided the agreement is itself valid and certain minimum requirements as to how the agreement is recorded are met. The current formulation of the rule (EU Regulation 1215/2012, known as Brussels I recast, Article 25) goes on to provide that the jurisdiction of the chosen court is exclusive unless the parties have agreed otherwise.
This rule is straightforward to apply in the
case of a simple choice of forum clause; if the parties to a cross-border
contact (wherever they operate from) choose the Irish courts to decide their
disputes, then the Irish courts’ right to decide those disputes cannot be
However, it is common for multinational
businesses who operate standard commercial arrangements in multiple states to
use what is known as an “asymmetric jurisdiction clause” where the local
operator can only sue in the multinational’s chosen court (which gives
confidence that rulings on the commercial arrangement will be consistent), but
the multinational can choose to sue anywhere.
Obviously, it may be commercially necessary
to sue the local operator in its home court where it is in breach of the agreed
The dominant view has traditionally been that
asymmetric jurisdiction clauses are perfectly valid and effective. If the
parties agree that particular courts should decide a dispute, then that
agreement must be given effect; it should not matter that the choice is wider
on one side of the contract than the other.
However, in a series of controversial
judgments, which criticised asymmetric jurisdiction clauses as unbalanced or
uncertain as to their effects, the French courts had cast significant doubt on
the reliability of a standard asymmetric jurisdiction clause where the
counterparty was based in France.
That doubt has finally been removed by the
Cour de cassation in a case involving Apple Sales International, an
Irish-incorporated company, and a French approved reseller. The asymmetric
jurisdiction clause was relatively conventional for this kind of commercial
relationship and read: “This agreement and the corresponding relationship
between the parties shall be governed by and construed in accordance with the
laws of the Republic of Ireland and the parties shall submit to the jurisdiction
of the courts of the Republic of Ireland. Apple reserves the right to institute
proceedings against Reseller in the courts having jurisdiction in the place
where the Reseller has its seat or in any jurisdiction where a harm to Apple is
the argument that the inbuilt imbalance undermined the clause’s validity, the
Cour de cassation confirmed that the clause was sufficiently certain about
identifying the court to be selected to decide a particular dispute to be
valid. This significant judgment gives considerable reassurance that, as long
as the court to have jurisdiction at the option of the party obtaining the
benefit of the asymmetry can be objectively identified, the use of asymmetric
jurisdiction clauses in commercial arrangements, is effective not just in
France but throughout the EU.
addition to this French judgment, the effectiveness of an asymmetric
jurisdiction clause was recently upheld in Ireland in Clubgear v Mitre
Sports International Ltd  IEHC 708. While there was some reference in
argument in that case to the French authorities decided before the Cour de
cassation’s Apple judgment, this line was not exhaustively pursued. It is
arguable that the basis on which such clauses are considered effective in
Ireland may even be slightly broader than what the French courts are now
prepared to accept.
judgments are to be welcomed as they remove worrying uncertainty and litigation
risk in commercial arrangements involving local counterparties in multiple
- Cass. 1ère Civ., 7 October 2015, 14-16.898
This briefing is for general guidance only and should not be regarded as a substitute for professional advice. Such advice should always be taken before acting on any of the matters discussed.