Asymmetric jurisdiction clauses valid as a matter of English law

by Fran Worthington

Asymmetric jurisdiction clauses, which bind one party to a particular jurisdiction but permit the other to commence proceedings in any competent court, are commonly used, particularly in finance transactions. However, a decision of France's highest court, which declared such clauses to be inequitable and therefore invalid, created uncertainty regarding the effectiveness of these clauses in Europe¹. A recent English High Court decision confirmed the validity of these clauses as a matter of English law.

The facts

In Mauritius Commercial Bank Ltd -v- Hestia Holdings Ltd and Sujana Universal Industries Limited² the relevant agreement was governed by English law and contained a jurisdiction clause providing that the English courts were to have exclusive jurisdiction but that the claimant (as lender) had the right to commence proceedings in any other jurisdiction. When the claimant commenced proceedings for breach, the defendants challenged jurisdiction on the grounds that the jurisdiction clause was invalid under both Mauritian and English law.

Decision

The defendants' challenge was rejected and the Court refused their application to set aside the claim or stay the English proceedings.

The Court found that English law applied and accordingly, the jurisdiction clause was valid. The jurisdiction clause did not, as argued by the defendants, permit the claimant to sue anywhere; it allowed the claimant to sue in any court which regarded itself as competent. Such asymmetric provisions are considered to be valid under English law and have been regularly enforced by the English courts.

Although unnecessary, Mr Justice Popplewell commented on the position had Mauritian law applied. He considered the French decision to be controversial and arguably inconsistent with previous decisions. He concluded that even under Mauritian law there was a good arguable case that the jurisdiction clause would be treated as valid and effective, notwithstanding the decision of the French court.

Going Forward

The decision reinforces the English approach of giving effect to the parties' agreement. As Popplewell J commented, even if the clause had permitted the claimant to sue anywhere in the world, "that is the contractual bargain to which the court should give effect". However, until the European Court of Justice rules on the issue, the position remains uncertain in Europe. Given the need to ensure the validity of any disputes agreement in both the courts of the chosen forum and jurisdiction where enforcement will be sought, caution should always be exercised whenever incorporating one-sided clauses and local advice taken.

For more detail see our QuickGuide Dispute Resolution Clauses: an Overview, and briefing: Asymmetric dispute resolution clauses: proceed with caution. The judgment is on Bailii: http://www.bailii.org/ew/cases/EWHC/Comm/2013/1328.html.

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• Service: retrospective validation of the claim form permitted and receipt by fax sufficient for French courts to be seised
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• CPR 66th update
• Chancery Modernisation Reviewv
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• Judicial Review: reforms made and more to comev
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_Notes:

_{^1. La Société Banque privée Edmond de Rothschild Europe -v- Mme X (11-26.022) 26 September 2012.
^2. [2013] EWHC 1328 (Comm).}