European Court of Justice rules on asymmetric jurisdiction clauses

Asymmetric clauses

An asymmetric jurisdiction clause limits one contracting party to bringing proceedings in a specific court, but allows another contracting party to bring proceedings elsewhere; typically, in “any other competent court” but, sometimes, in arbitral proceedings.

In Società Italiana Lastre SpA (SIL) v Agora SARL Case C 537/23 ECLI:EU:C:2025:120 the clause in question read as follows:

‘The jurisdiction of the court of Brescia (Italy) shall apply to any dispute arising from this contract or related to it, [the Italian supplier] reserving the right to proceed against [the French buyer] before another competent court in Italy or abroad.’

While the facts in Lastre concerned a sale of goods, asymmetric jurisdiction clauses are most commonly seen in finance agreements where the lender has greater bargaining power and wishes to be able to commence proceedings in the courts of a jurisdiction in which the borrower has assets at the time of the dispute. Because of this we will, for the purposes of this article, call the party with the benefit of the clause and option to bring proceedings in other courts “a lender” and the party confined to one named court “a borrower”.

Longstanding doubts

The question of whether asymmetric jurisdiction clauses would be recognised if a borrower commenced proceedings before the courts of another jurisdiction has been a live one since the French Cour de Cassation refused to stay proceedings brought in France in breach of such a clause in the case of Rothschild in 2012 (Ms X v Banque Privée Edmond de Rothschild, No. 11-26.022).

Russian courts have also refused to recognise the validity of asymmetric jurisdiction clauses, even before the enactment of more recent legislation which facilitated the Russian courts taking jurisdiction regardless of the parties’ choices.

The decision in Lastre involved the French courts once again. The French buyer brought proceedings before the Cour de Cassation, despite the jurisdiction clause requiring it to commence proceedings in Brescia in Italy. The Cour de Cassation made a reference to the ECJ and asked three questions:

• first, whether the lawfulness of asymmetric jurisdiction clauses should be evaluated under: (i) the autonomous principles of the Brussels Regulation (Recast); or (ii) applicable national law;
• second, if the Brussels Regulation (Recast) were to apply, whether it would permit such clauses; and
• third, if national law were to apply, how to determine which Member State’s law should take precedence.

The Lastre ruling

The ECJ held that asymmetric jurisdiction clauses fall to be assessed under the Brussels Regulation (Recast) and not national law.

The court ruled that as long as the clause respects the mandatory elements of the Brussels Regulation (Recast) (which include provisions on certain categories of agreement in areas such as insurance, consumer and employment contracts) the principle of contractual autonomy will prevail.

If the parties have agreed to an asymmetric jurisdiction clause, that choice of court will be respected provided that the clause identifies objective factors enabling any court seised to determine whether it has jurisdiction. A clause referring to ‘any other competent court’ meets the requirements of foreseeability, transparency and legal certainty of the Brussels Regulation (Recast).

But, importantly, the court went on to limit its recognition of validity to clauses which can be interpreted to limit competent courts to the courts of Member States or members of the Lugano Convention (namely, the EU, Denmark, Iceland, Norway and Switzerland).

The ECJ did not rule on whether a clause, such as the one in question, which allows one party to bring proceedings in “any competent court” without any further constraint should be interpreted to limit such courts to those of Member States or members of the Lugano Convention. That will presumably be a matter for the national court faced with such a clause and a party seeking to circumvent it. The law applicable in that situation should be the law governing the agreement.

English court asymmetric clauses

The key question for many UK-based finance parties is what impact the decision will have in those cases in which an asymmetric jurisdiction clause limits a borrower to the English courts but allows a lender to bring proceedings in other competent courts.

Obviously, the ECJ did not rule on this question in Lastre and it would be for the national court of the relevant Member State to determine whether it should stay proceedings brought by a borrower in breach of such a clause.

The Brussels Regulation (Recast) gives the courts of Member States the discretion to stay proceedings in favour of a non-EU court if those proceedings were commenced first. No other express discretion exists. The courts of Member States are obliged to stay proceedings in favour of a non-EU court if there is an exclusive jurisdiction clause in favour of that court. However, an asymmetric jurisdiction clause is unlikely to be considered to be an exclusive jurisdiction agreement.

As the UK does not have the benefit of either the Brussels Regulation (Recast) or the Lugano Convention, it seems likely that the court of a Member State would not consider itself bound by such a clause if a borrower were to commence proceedings elsewhere.

Asymmetric arbitration clauses

The ECJ did not address the situation in which an asymmetric jurisdiction clause grants one party a right to bring arbitral proceedings, instead of court proceedings. Arbitration expressly falls outside the Brussels Regulation (Recast) and so the decision regarding the effect of that regulation has no application in this situation.

If a lender had commenced an arbitration, but the borrower started court proceedings in breach of the clause, the court in which those proceedings were brought would decide the validity of the clause and whether to stay the proceedings. The law applicable to that decision should be the law of the arbitration agreement.

Impact

Despite the uncertainty caused by the Rothschild decision, and arguably increased by Brexit, many financial institutions have continued to use asymmetric jurisdiction clauses and run the risk that a borrower may start proceedings in foreign courts.

The ECJ’s decision in Lastre increases the risk of an asymmetric jurisdiction clause in favour of the English courts not being recognised by the courts of a Member State or member of the Lugano Convention in this situation.

The safest option to ensure that proceedings are brought in the English courts would be to forego the option of bringing proceedings in other competent courts and to use an exclusive jurisdiction clause because this will be upheld by courts of all members of the Brussels Regulation (Recast) and the Lugano Convention.

The judgment in Lastre may increase the importance of being the first to commence proceedings where an asymmetric jurisdiction clause has been used. If a lender were to bring proceedings in England first, the courts of any EU Member State to which a borrower applies will at least have a discretion to stay proceedings in favour of the English court. Whether it will exercise that discretion is, of course, another matter.

While immediately post-Brexit there was some hope of the UK being allowed to accede to the Lugano Convention, those hopes have all but died. This means that there is no immediate prospect of the situation changing in favour of asymmetric jurisdiction clauses specifying the English courts.

Finally, the decision in Lastre should not affect the enforceability of English court judgments granted pursuant to asymmetric jurisdiction clauses once the 2019 Hague Convention on the Recognition and Enforcement of Foreign Judgments in Civil and Commercial Matters comes into force in the UK (on 1 July 2025), as the convention will have effect when a non-exclusive jurisdiction clause applies.