The end of the road for ‘one-way’ jurisdiction and arbitration clauses?
Following the 2008 financial crisis, there has been greater focus by commercial parties on dispute resolution provisions in transaction documents. At the drafting stage, where (and how) parties’ disputes are to be determined has become a contentious issue on many deals.
There has also been an increase in jurisdiction battles. In this article, Allen & Overy discusses how market practice has developed in response to two 2012 decisions on ‘one-way’ jurisdiction and arbitration clauses — one of the French Supreme Court and the other of the Moscow Arbitzah Court (the highest commercial court in Russia). The French and Russian decisions have caused many to reassess their approach to forum selection in commercial contracts. This article also assesses what impact a recent 2014 decision of the Luxembourg court (which conflicts with the French decision) may have on current approach.
On 26 September 2012, the French Supreme Court invalidated a ‘one-way’ (also referred to as a ‘hybrid’ or ‘asymmetric’) jurisdiction clause in a loan agreement. A ‘one-way’ or hybrid jurisdiction clause requires one party to bring proceedings only in a named court but allows the other party (usually the party with the greater exposure) to bring proceedings in the named court, or any other court of competent jurisdiction. The French court’s decision in Mme X v Rothschild was significant because it was based on a provision in a European instrument (article 23 of the Brussels Regulation), which is applied by the courts of all 29 member states. The French court ruled that the clause was ‘potestative’ and, accordingly, void under article 23…
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