The European Court of Justice (ECJ) delivered a judgment on the 27th of December 2024 dealing with the validity of asymmetrical clauses (C-527/23). Asymmetrical clauses are very common in finance and banking contracts, so this judgment will be relevant in the future. Under this type of clause, the lender and the borrower agree to submit to the exclusive jurisdiction of the Courts of England (or of New York) but the lender keeps the option to sue the borrower in the courts of a third country of competent jurisdiction. They are called asymmetrical because they establish a difference of treatment to the detriment of the borrower. The jurisprudence of certain EU member countries has been divided on the efficacy of these clauses. It is worth noting an initial arrêt of the French Cour de Cassation (Mme X contre Edmond de Rothschild Bank, Civile, 26 September 2012, nº 11-26022) which considered them inapplicable in France.
The decision of the ECJ considers that asymmetrical clauses have to be reviewed from the standpoint of Article 25 of Regulation (EU) 1215/2012, disregarding the provisions of the national laws of member countries, because the validity or non-validity of these clauses of choice of jurisdiction falls under the purview of Article 25 of said Regulation. However, the ECJ acknowledges that certain matters relating to consent of the parties, existence or nonexistence of consideration, formalities, nullity, etc., of the agreement where the clauses on jurisdiction have been inserted, have to be determined according to the member state national law which is the governing law of the agreement, not in accordance with Regulation (EU) 1215/2012 (European law characterization).
In general terms, the ECJ has decided that asymmetrical clauses are valid under EU law, but with the following exceptions:
a) The clause must be minimally precise as to the courts which are competent and designated in the asymmetrical limb. Thus, the ECJ rejects clauses where the lender can freely and without limitation sue the borrower in any other jurisdiction. However, asymmetry is permitted if the courts of other EU member countries are expressly designated (for example: France, the Netherlands, Italy, etc.).
b) Regulation (EU) 1215/2012 forbids such court designation if the dispute deals with a matter under the exclusive jurisdiction of the court of another EU country.
c) It is worth pointing out that Regulation (EU) 1215/2012 does not apply to jurisdictional claims between courts of EU member states and third countries. In the case of a dispute over an asymmetrical clause in a banking contract submitted to the jurisdiction of the English courts, being heard, for example, by a Spanish court, Spanish domestic jurisdictional rules will be applied. It is interesting to note that, in the case of Spain, the jurisdictional rules follow very closely the provisions of the Brussels Convention (1968), which is the predecessor of Regulation (EU) 1215/2012, and therefore it is very likely that the decision of the Spanish court will be inspired by the standard set out in the recent ECJ judgment (C-527/23).
Therefore, this European judgment will be more relevant in the EU countries which have jurisdictional rules following closely the provisions of the Brussels Convention (1968) or the EU Regulation 1215/2012.
Finally, the validity of asymmetrical clauses is justified based on the principle of freedom of contract, which permits an unbalanced or privileged choice of jurisdiction favoring one of the parties, which in financial contracts is always the lender, except if the borrower is a consumer or another weak party who deserves protection.
Author:
Alfonso López-Ibor Aliño, Partner
Email: alfonso.lopezibor@l-ia.com