Jurisdiction clauses are an essential feature in all types of international contracts in all legal systems. They are an essential means to managing risk and providing for legal certainty. The parties intent behind selecting a court to rule on their future disputes because of its perceived competence and fairness is to exclude other courts which would have had jurisdiction had it not been for the jurisdiction clause. Legal certainty, the parties submit, requires that their choice of court be upheld even where the chosen court is wholly unconnected with the contract and the parties themselves.

Simple to draft and relatively short in size, jurisdiction clauses carry more weight than any other clause in the contract, including the governing law clause itself. The reason is that the jurisdiction clause will identify the court of law that will determine the applicable law according to its own conflict of laws rules and its own concept of public policy, including international public policy. This determination will affect the enforceability of the contract as a whole as well as any of its provisions. Moreover, according to whether an arbitral tribunal or a court of law is selected — and in such a case which court of law — challenging parallel proceedings will be treated differently.

Paradoxically, it is at a time when new laws such as Brussels I Regulation (Recast) uphold the priority of the parties’ choice of court to the detriment of the previous “first in time” rule in the Brussels I Regulation that jurisdictional choices are running into unprecedented choppy waters.

Courts in some jurisdictions are holding jurisdiction clauses unenforceable under the pretext that they contain asymmetrical elements.1 Other courts are upholding identically-worded jurisdiction clauses including — and here lies the paradox –situations where those courts apply the same governing law that led other courts to annul the clause!2 Would the same fate await jurisdiction clauses where the unilateral option is in favour, not of a court of law, but of an arbitral tribunal? Nothing is less sure as one of the decisions for invalidation3 invoked obscure reasons in the Brussels I Regulation which, it is well known, does not apply to arbitration, but other decisions were built on general principles of fairness and equality4 which could lend support to a broad application also to cover unilateral arbitration optional agreements.

This is a cause of considerable uncertainty with no easy solution. Offering both parties equal options to opt out of the main selected jurisdiction in favour of other jurisdictions of their choice is akin to drafting the clause as a non-exclusive choice, which is hardly conducive to legal certainty. More importantly, such a solution ignores the economic rationale for choosing unilateral jurisdiction clauses in the first place. In secured financing for instance, the clause offers the lender the choice between bringing a claim at the place of business of the borrower, of the guarantor or at the location of the collateral, a choice that, if it were equally to benefit the borrower, would carry no compelling justification.

It is now too late for a solution to come from the European Council of Ministers which has recently adopted the Brussels I Regulation (Recast). But it is not too late for a court in any EU member state to put the matter in the hands of the European Court of Justice for interpretation of the relevant European provisions. In the meantime, courts in the EU should seek to understand the rationale behind unilateral jurisdiction clauses and, barring fraud, uphold them as an expression of party autonomy.

Another challenge facing jurisdiction clauses is the issue of the law applicable to the clause itself, which is essential to determine its validity and scope. To take as example the issue of the law applicable to an arbitration agreement, depending on the competent court looking at the challenge, the determination of the applicable law will result from a conflict of law approach, as it is the case under English law, or from a direct substantive law approach, as it is the case under French law. The consequences in terms of predictability are different. The decision of the English Court of Appeal in Sulamérica took many observers by surprise.5

It was generally presumed that the law selected to govern the contract as a whole would also govern the arbitration clause contained in that contract. Not so, indicated the court which proceeded instead to verify whether in the absence of an explicit choice of law in the arbitration clause an implied choice could be inferred. Without such a choice, the court went on to ascertain that the proper law of the arbitration clause was the one with which it had its closest and most real connection. At the term of this exercise, the court decided that the validity of the arbitration clause should be ascertained on the basis of the law of the seat of arbitration — which was hence considered as prevailing over the parties’ express choice of law to govern their contract.

In the wake of this decision, the market saw the emergence of a new drafting trend whereby the law chosen to govern a contract is repeated in the arbitration clause itself where that law is English law or the place of arbitration is in England. Attempts to question the logic behind the policy proved to be short-lived as they faced the prospect of triggering material qualifications in legal opinions confirming the validity and the enforceability of the contract.

The challenges outlined above climaxed at a time when the European law relating to the enforcement of jurisdictional choices was undergoing a profound change resulting from the concomitant advent of the Brussels I Regulation (Recast) and the ratification by the EU of the 2005 Hague Convention on Choice-of-Court Agreement. While the scope of each text is different, the latter applying only where the parties select the court of a third state which is a contracting party to the Hague Convention, the difference in the approach of both texts to common issues is intriguing. This has led some to suggest that the jurisdiction clause in favour of third state courts is governed, not by EU law, but by the domestic law of the relevant EU state. Another challenging question concerns anti-suit injunctions (again). Noting that the rationale that led the European Court of Justice to prohibit them, namely that the principle of mutual trust among courts of member states does not apply to extra-EU relationships governed by the Hague Convention, one may question whether EU member state courts are free to issue such injunctions when operating under the Convention!

Those challenging questions and many others in relation to the effectiveness of jurisdictional choices provoked a rich debate at the Institute conference Jurisdictional Choices in Times of Trouble, held in Paris on 23 May 2014. The outstanding reports presented by the speakers are now available in this publication.

The Council of the ICC Institute of World Business Law deserves credit in endorsing the proposal to dedicate the Spring Conference of the Institute to examining the challenges confronting jurisdiction clauses. With the support of the President of the Institute, Yves Derains, we had the task of organizing what turned to be a most interesting conference with speakers from 11 countries and participants from four continents. The debate was exceptionally vivid and supported by stimulating remarks both from the lectern and from the floor. We are fortunate having managed to transform the conference into this present publication — a testimony of the quality papers that were discussed throughout the day.

We decided to publish the articles in the linguistic version in which they were submitted, reflecting the language of the conference as delivered. This conforms to the bilingual tradition of the Institute. We have also kept in this publication the order ascribed to the respective contributions during the conference so as to allow the reader to follow the sequencing of the successive themes.

We wish the readers of this publication, as they go through the following pages, the same pleasure we felt co-chairing the conference in May 2014.

Georges Affaki and

Horacio Grigera Naón

Paris, 4 March 2015

1
See chapters by Maxi Scherer, Alan Scott Rau, Anton Asoskov and Marie-Elodie Ancel and the cases cited in the respective endnotes.

2
In Mauritius Commercial Bank Lmited v. Hestia Holdings Limited and Sujana Universal Industries Limited [2013] EWHC 1328 (Comm), the English court ruled on a unilateral jurisdiction clause governed by Mauritian law, which is based on French law, and cited, disapprovingly, the French Cour de Cassation decision in Banque Privée Edmond de Rothschild (11-26022), which had annulled a similar clause.

3
French Cour de Cassation decision in Banque Privée Edmond de Rothschild (11-

4
Bulgarian Supreme Court, judgment of 2 September 2011, No. 71 in commercial case 1193/2010, Supreme Arbitrazh Court of the Russian Federation, judgment of 19 June 2012, CJSC Russian Telephone Company v. Sony Ericsson Mobil Communications Rus LLC, No. A40-49223/11-112-401, both on file with the author.

5
Sulamérica CIA Nacional de Seguros SA and others v. Enesa Engenharia SA and others [2012] EWCA Civ 638.