A one-way jurisdiction clause (also known as “hybrid”, “asymmetrical” or “unilateral non-exclusive” jurisdiction clauses), requires that one of the parties to a contract must always submit a dispute arising from the contract to a particular country’s courts, whilst allowing the other party the flexibility to commence proceedings in the courts of any country it may choose.
One-way jurisdiction clauses are becoming more prevalent in Life Science transactions where, by way of example, licensors want the flexibility to deal with patent related disputes in the courts of the country where the patent is applied for or granted.
Recent court decisions in a number of jurisdictions have questioned the validity of one-way jurisdiction clauses.
To maximise the likelihood of a one-way jurisdiction clause being enforceable, consider taking the following steps:
- choose as governing law the laws of a jurisdiction that recognises the validity of one-way jurisdiction clauses;
- include in the one-way jurisdiction clause an explanation of why the unilateral right to bring proceedings in a second jurisdiction is required – many of the recent decisions on the validity of one-way jurisdiction clauses focus on the lack of fairness to one party; if there is an objective reason for making the jurisdiction clause it may give better arguments to defeat this “unfairness” defence;
- if you know at the outset that disputes are likely to arise in certain jurisdictions, take local law advice on the enforceability of one-way jurisdiction clauses in these jurisdictions before executing the contract;
- consider presenting a one-way jurisdiction clause as a non-exclusive jurisdiction clause.
Types of jurisdiction clause
There are three forms of jurisdiction clause:
- non-exclusive jurisdiction clauses, under which the parties to a contract agree that either party may submit a dispute arising from their contract to a particular country’s courts, whilst leaving the parties the option to commence proceedings in another country’s courts;
- exclusive jurisdiction clauses, under which the parties to a contract agree that the parties may only submit a dispute arising from their contract to an agreed country’s courts; and
- one-way jurisdiction clauses.
One-way jurisdiction clauses
The European position
One-way jurisdiction clauses have generally been considered to be valid under the Brussels Regulation on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters ((EC) 44/2001) (Brussels Regulation) and consistent with the object and purpose of the choice of jurisdiction offered by Article 23 of the Brussels Regulation.
The interpretation of EU Law is expected to be uniform across the EU. However, national courts apply their own interpretations to EU Regulations and Directives and this can result in inconsistencies in application between Member States. In two recent cases the courts of France and England have considered the validity of one-way jurisdiction clauses and come to very different conclusions. These judgements are summarised below. The effect of these conflicting judgements has been to create uncertainty as to the validity of one-way jurisdiction clauses in the European Union. In the absence of a decision by the ECJ on the validity of one-way jurisdiction clauses, which would bind the courts of the Member States, there is no longer any guarantee that clauses of this nature will be found to be valid by courts outside of England.
In the case of X v Rothschild, the French Supreme Court has regarded as invalid a jurisdiction agreement (governed by Article 23 of the Brussels Regulation) in an international loan agreement which provided for the parties to submit their disputes to the exclusive jurisdiction of the Luxembourg courts, whilst reserving for the lender the right to bring proceedings in any other competent court.
In contrast to the decision of the French Supreme Court, in Mauritius Commercial Bank Ltd v Hestia Holdings Ltd and another, the English Commercial Court declined to follow the approach taken by the French Supreme Court, holding that unilateral jurisdiction clauses are valid under English law. Moreover, the court observed that if it was wrong in holding that English law applied, and the matter fell to be determined by reference to Mauritian law (which is based on French law), there would have been a good arguable case that, notwithstanding the decision in X v Rothschild, the clause would be regarded as valid and effective.