The War On Asymmetric Jurisdiction Clauses

• Jurisdiction: European Union
• Law Firm: Ganado Advocates
• Subject Matter: Corporate/Commercial Law, Litigation, Mediation & Arbitration, Contracts and Commercial Law, Trials & Appeals & Compensation
• Author: Mr Louis Cassar Pullicino
• Published date: 27 October 2023

Asymmetric jurisdiction clauses - or so-called 'lop-sided' jurisdiction clauses - have become market practice in many industries. Most loan facilities give lenders the power to sue not only in the court specified, but also any other competent court of its choosing, while the borrowers are limited to only one.

The Brussels Regulation Recast introduced a specific conflict-of-laws rule to govern the substantive validity of jurisdiction agreements in favour of the courts of a Member State. Article 25 provides that such agreements must be substantively valid according to "the law of that Member State" chosen in the clause. What constitutes an issue of 'substantive validity' has never been defined, and it is not clear where 'asymmetry' falls on the spectrum between substantive and material validity. Nevertheless, English courts have not hesitated to confirm that asymmetric jurisdiction clauses are valid and enforceable, and prior to Brexit the Commercial Court went so far as to classify such clauses as 'exclusive' for the purpose of Article 25 of the Brussels Regulation Recast.¹

While asymmetric jurisdiction agreements have not been specifically challenged before Maltese courts, it is common for our courts to look to their English counterparts for guidance in commercial matters, and in general our courts do tend to uphold jurisdiction agreements where it is evident that they reflect the intention of the parties on the basis of the principle pacta sunt servanda.

French courts have expressed their discomfort with these clauses for years. On the 4^th November 2021 in Agora vs SPA Italiana Lastre, the Court of Appeal of Rennes in France struck down the following jurisdiction agreement as illicit under French law:

The jurisdiction of the court of Brescia will apply to any dispute which arises out of or in relation to this contract. Societa Italiana Lastre reserves the right to proceed against the buyer before another competent court in Italy or abroad.²

SPA Italiana Lastre appealed to the Cour de Cassation, arguing that the validity of this asymmetric jurisdiction clause had to be assessed in accordance with Italian law, being the law of the Member State court chosen in that agreement. On the 13^th April 2023, the Cour de Cassation referred the following questions to the Court of Justice of the European Union:³

1. Is the question of validity of an asymmetric jurisdiction agreement a material issue, or one that affects substantive validity? In other words, is validity to...