The Law Governing the Substantive Validity of Jurisdiction Clauses under Article 25§1 of the Brussels I Recast Regulation - Chapter Summary in English

Unlike Article 17 of the Brussels Convention and Article 23 of the Brussels I Regulation, Article 25 of the Recast Brussels I Regulation provides for an explicit choice-of-law rule concerning the substantive validity of jurisdiction clauses. The provision reads as follows: “If the parties, regardless of their domicile, have agreed that a court or the courts of a Member State are to have jurisdiction to settle any disputes which have arisen or which may arise in connection with a particular legal relationship, that court or those courts shall have jurisdiction, unless the agreement is null and void as to its substantive validity under the law of that Member State. (…)”. This new choice-of-law rule is welcome. It puts an end to the uncertainty that prevailed under the previous European instruments concerning, not only the law which should govern the substantive validity of choice-of-court agreements, but also the very possibility of striking down such agreements on grounds of substantive invalidity. Indeed, Article 17 of the Convention and Article 23 of the Regulation explicitly laid down a number of requirements as to the formal validity of the agreement and its compatibility with the exclusive and mandatory jurisdiction of other courts, but otherwise they remained silent on the substantive validity of the agreement. One could thus wonder whether the requirements explicitly laid down in Article 17, and later on in Article 23, were comprehensive and exclusive of all kinds of additional requirements. However, such an interpretation of the silence of these provisions on the substantive validity of jurisdiction clauses was highly debatable. Jurisdiction clauses are contracts and, like any other kind of contracts, their validity may be affected by vitiating factors such as duress, misrepresentation or incapacity. Article 25 § 1 of the Brussels I Regulation Recast unravels these problems by making clear, first, that the substantive validity of choice-of-court agreements may be challenged by litigants even if the vitiating factor which is invoked in a given situation is not explicitly considered in the Regulation, and second, that the law under which such a challenge must be decided upon is that of the Member State having jurisdiction under the clause.

The meaning of the reference made in Article 25 § 1 to the law of the Member State of the chosen court calls for clarification, because it is somehow misleading. At first sight, Article 25 § 1 means that the law governing the substantive validity of a choice-of-court agreement is the substantive law of the Member State of the elected court. Yet, Recital 20 of the Brussels I Regulation Recast casts a slightly different light on the meaning of Article 25 § 1. It states that: “When a question arises as to whether a choice-of-court agreement… is null and void as to its substantive validity, that question should be decided in accordance with the law of the Member State of the court… designated in the agreement, including the conflict-of-laws rules of that Member State” (italics added). Accordingly, the applicable law is not necessarily that of the Member State of the chosen court, but rather the law that is applicable under the choice-of-law rules of the Member State of the chosen court. Article 25 § 1 thereby adopts the same choice-of-law rule as the Hague Convention of 30 June 2005 on choice-of-court agreements (see art. 5 § 1; art. 6, a; art. 9, a). Thus, when proceedings are brought in a Member State’s court in breach of an agreement conferring jurisdiction on another Member State’s court, and the plaintiff challenges the substantive validity of the agreement in order to resist the defendant’s claim for a stay of the proceedings brought in breach of the clause, Article 25 § 1 requires the court to investigate into the choice-of- law rules of the Member State of the elected court to identify, and then apply, the law that would be applicable to the substantive validity of the clause under those rules, as if the elected court had to decide the question. In other terms, the idea underlying the new choice-of-law rule is that when proceedings are brought in breach of a jurisdiction clause, the court seized in breach of the clause must review its substantive validity under the same legal rules as the elected court. In this perspective, the choice-of-law rule laid down in Article 25 § 1 seems convincing, since it ensures a uniform assessment of the validity of jurisdiction clauses in all Member States of the European Union, by imposing the point of view of the elected court on the validity of the clause upon all other courts. Nevertheless, it is very likely that, in practice, courts will face difficulties in applying this new choice-of-law rule, because many Member States do not have clear choice-of-law rules on the substantive validity of choice-of-court agreements. To avoid this problem, a classic, bilateral, choice-of-law rule could have been adopted in the Regulation. The main option, in deciding which law governs the substantive validity of jurisdictions clauses, is to apply either the law governing the main contract or the (substantive) law of the State of the elected court. The drafters of Article 25 § 1 would have had to choose between these two approaches. But whatever their choice, such a classic uniform choice-of-law rule would have been simpler to apply for Member States’ courts and it would have led to more homogenous results than the rule finally adopted in Article 25 § 1.

Despite the practical difficulties it raises, Article 25 § 1 seems fairly convincing in so far as its philosophy is to assess the substantive validity of a jurisdiction clause by adopting the point of view that the elected court would have on this issue. Such a choice-of-law rule is both favourable to the enforcement of jurisdiction clauses and logical in terms of legal methodology. One may then wonder whether the rule should be extended to the assessment of the substantive validity of arbitration clauses. When proceedings are brought in a state court in breach of an arbitration clause, for instance, would it be possible for the state court to decide whether it has to decline jurisdiction because of the arbitration clause by reviewing the substantive validity of the clause under the law that the arbitral tribunal would apply to this issue? Unfortunately, the answer to this question is obviously negative, not because it would be unfair or inappropriate, but because it is impossible to predict which law an arbitral tribunal would apply to the substantive validity of the arbitration clause. French law and English law, at least, do not require arbitral tribunals to decide choice-of-law issues by applying a particular system of conflict-of-law rules. Arbitral tribunals are thus free to select the choice-of-law rule under which they identify the law governing the arbitration agreement, and in France arbitrators are even allowed to identify directly the legal rules that govern the dispute and the arbitration agreement, without referring to any choice-of- law rule. As a consequence, it is impossible to determine in advance the point of view that the arbitral tribunal will have on the validity of the arbitration agreement.

The French reaction to this impossibility consists in enforcing almost systematically the arbitration clause through the well known “effet négatif du principe de compétence-compétence”, to let the arbitral tribunal decide itself whether the clause is valid or invalid. In the light of Article 25 § 1, the choice made by French arbitration law appears fairly pragmatic and convincing. Indeed, it amounts to saying that the most likely point of view of the arbitral tribunal on the validity of the agreement is that it is valid and enforceable — an assertion which seems pretty hard to deny given that arbitrators have a clear and tangible interest in holding that the arbitration clause is valid, rather than invalid. Confronting the French principle of “effet négatif” to the approach followed in Article 25 § 1 of the Brussels I Regulation Recast thus leads to the identification of new justifications for the principle. The English reaction to the impossibility to assess in advance the law under which an arbitral tribunal will review the validity of the arbitration clause is quite opposite. English courts decide whether an arbitration agreement is valid applying the law that governs the agreement under the English choice-of-law rules. Recent cases, such as the Sulamérica and the Arsanovia cases, illustrate this approach. The two cases differ about the way in which the English choice-of-law rule should be applied where the main contract, though silent on the law governing the arbitration agreement, provides for arbitration in England while stating that the contract is governed by the law of another State. But Sulamérica and concur on the idea that the English choice-of-law rules must be applied in order to identify the law governing the arbitration agreement and neither case suggests that the law that the arbitral tribunal would apply to the agreement should be taken into account by English courts. In practice, it means that the English legal system is willing to enforce an arbitration agreement only if it is valid under the law that governs it under the English choice-of-law rules. Such an approach is not necessarily unsound or irrational, even though it is less favourable to the enforcement of arbitration agreements than the French approach. But at least it implies that the content of the English choice-of-law rules is clear and definite enough to allow parties to arbitration agreements to predict with reasonable certainty which law will govern the validity of their agreements. Unfortunately, when one reads together the decisions in Sulamérica and Arsanovia, this need for clarity seems not to be fulfilled.