The Problem with Asymmetric Jurisdiction Clauses

In the recent Commercial Court case of Commerzbank Aktiengesellschaft v Liquimar Tankers Management Inc [2017] EWHC 161 (Comm), Mr Justice Cranston has held that an asymmetric jurisdiction clause can confer exclusive jurisdiction on the courts of a Member State (here, England) in accordance with the terms of the Brussels Regulation Recast and thus the proceedings in England did not have to be stayed in deference to litigation already proceeding in the Greek courts concerning the same issues..

By way of recap, an asymmetric jurisdiction clause generally allows one party, usually a bank, to sue the other party, generally a borrower, in any jurisdiction but prevents the borrower from taking proceedings otherwise than in one exclusive jurisdiction. A clause of that kind was in issue in this case and provided that the defendant guarantor could only sue the bank in the courts of England. Notwithstanding, the defendant guarantor took proceedings in Greece seeking orders that the guarantee had been discharged and it was not liable to the bank. In response, the bank commenced proceedings against the guarantor in the English courts for recovery of the sums due under the guarantee. The action in England was essentially a mirror-image of that in Greece.

The defendant guarantor argued before the English court that the asymmetric jurisdiction clause in issue here did not constitute an exclusive jurisdiction clause for the purposes of the Regulation essentially because the clause expressly permitted one party, here the bank, to bring proceedings in any court of competent jurisdiction.

Mr Justice Cranston was having none of this. Treating the question not as one of English law but of the autonomous interpretation of the Regulation, he held that an asymmetric jurisdiction clause did indeed constitute an exclusive jurisdiction clause for the purposes of the Regulation. The English court as second seised did not have to stay its proceedings in favour of those in Greece commenced in breach of the jurisdiction clause.

This decision is no surprise. The English courts have consistently held that asymmetric jurisdiction clauses constitute exclusive jurisdiction clauses for the purposes of the Regulation albeit courts in France, Bulgaria and Poland have taken a different view.

However, this case does exemplify the dangers of such clauses. In this case, the defendant had already commenced proceedings in Greece raising the same issues which subsequently were the subject of the English proceedings. Whether or not the Greek courts will adopt the same view of the matter as the English courts is yet to be decided. The result is that there are parallel proceedings in England and Greece and a race to judgment which Mr Justice Cranston recognised in indicating that he was minded to order a summary judgment hearing in advance of the next hearing in the Greek court.

In the light of hindsight, the bank would have been better off with a simple exclusive jurisdiction clause which would not have given the defendant the possibility of taking proceedings in Greece. Given the ubiquity of the asymmetric jurisdiction clause, there are likely to be more cases like this where a defendant decides to bring a case in a non-chosen jurisdiction.

Mr Justice Cranston also made an interesting but obiter observation to the effect that there were “good arguments” in favour of the view that an asymmetric jurisdiction clause would qualify as an exclusive choice of court agreement for the purposes of the Hague Convention on Choice of Court Agreements which is now in effect between the EU on behalf of Member States, Mexico and Singapore and to which it is likely the UK will accede upon Brexit. However, that view of Mr Justice Cranston was at odds with the view expressed in the Explanatory Report to the Hague Convention which held that asymmetric clauses were not exclusive choice of court agreements for the purposes of the Hague Convention. Whatever the position, and as noted above, in the interests of certainty it makes sense now to stick to plain vanilla exclusive jurisdiction clauses.