French Supreme Court Strikes Down One Way Jurisdiction Clause

by Gilles Cuniberti on October 3, 2012

In a judgment of September 26th, 2012, the French Supreme Court for private and criminal matters (Cour de cassation) struck down a one way choice of court agreement governed by Article 23 of the Brussels I Regulation. A woman had received € 1,7 million from her father. She had put it on a bank account in Luxembourg. The contract with the bank included  a clause providing for the exclusive jurisdiction of Luxembourg courts, but allowing the bank to sue wherever it wanted to. The woman sued the bank and its French sister company in Paris. The Cour de cassation holds that the bank was not genuinely bound by the clause, as it had the right to disregard it. It was thus void, for being "potestative". This is an implicit referrence to the French law of obligations, which provides that obligations conditional upon an event that one party entirely controls is void (Civil Code, articles 1170 and 1174). The court also rules that such potestative clauses contradict the rationale and purpose of Article 23 of the Brussels I Regulation.
ayant relevé que la clause, aux termes de laquelle la banque se réservait le droit d’agir au domicile de Mme X... ou devant “tout autre tribunal compétent”, ne liait, en réalité, que Mme X... qui était seule tenue de saisir les tribunaux luxembourgeois, la cour d’appel en a exactement déduit qu’elle revêtait un caractère potestatif à l’égard de la banque, de sorte qu’elle était contraire à l’objet et à la finalité de la prorogation de compétence ouverte par l’article 23 du Règlement Bruxelles I
The case is of the highest importance given how standard the clause is in banking contracts, and possibly in others. One might want to argue that the fact that the plaintiff was a natural person, maybe a consumer, suggests that the Cour de cassation would be more friendly to a pure business clause. This would not be convincing. The case does not insist on who the plaintiff was, and it only refers to Article 23. Furthermore, it gives full publicity to the jugdment by publishing it immediately on its website, for the purpose of indicating that all should take notice of the case. An interesting aspect of the case is that it applies a doctrine of French law and thus implicitly rules that French law governed the validity of the clause. One should note, however, that while Luxembourg law seemed more appropriate, as it was both the law of the designated court (likely future choice of law rule under the amended Brussels I Regulation) and the law chosen by the parties to govern the contract, the Luxembourg civil code contains the exact same provisions on potestativité.

{ 12 comments }

adrian briggs October 3, 2012 at 5:19 pm

Had the customer agreed in writing to the jurisdiction of the court of Luxembourg, the jurisdiction of which shall be exclusive unless the parties agree to different effect ? She had. Why is that not the end of the story ?

Bruno Trotteyn October 11, 2012 at 7:55 am

@adrian: (i) the clause does not say “unless the parties agree otherwise”, but it gives the right to one of the parties to bring proceedings in every court of competent jurisdiction; (ii) it would be the end of story under Common Law, but not under codified French law (see references in the article)

Adrian Briggs October 11, 2012 at 8:00 am

But the comment from Bruno Trotteyn demonstrates perfectly that the clause was exclusive for the kinds of dispute (customer v bank) which fell within it; and the difference between ‘common law’, and French law, is surely not the point: the interpretation and application of these clauses is not to be filtered through the individual, idiosyncratic mesh of national law rules on substantive contracts. Article 23 tells us just to read the words of the agreement, assuming them to be in proper form, and to leave it at that.

Gilles Cuniberti October 11, 2012 at 8:21 am

Adrian, would you say that, as long as Article 23 has not been amended, the validity of the clause was solely governed by the Brussels I Regulation?

Adrian Briggs October 11, 2012 at 8:48 am

Yes, I would. This is admittedly not the view I once had, but reading the material generated by the Court, I think it is right; and when you look at the alternative, I think it makes sense. I also think that there is no need to look on the written agreement to accept or to forgo jurisdiction as a contractual, as distinct from a formal, act; and to assess it is contractual terms is to distort it. For this reason, I think that the Hague Convention goes off in a silly direction, at least if its mechanisms are to displace those currently found in Art 23; and it follows that the lame projection of its ideas into the draft amendments to Brussels I is a giant step backwards, a real disaster. The more one says that jurisdiction depends on finding there to be a valid contract (all the more so where this contract is to be assessed by using rules of the conflict of laws of the law of the state in which the designated court sits, for heaven’s sake), the odder and more complex the question becomes. What is wrong with asking whether the party to be bound by/to the jurisdiction in question agreed in writing to it ? And then leaving the question of jurisdiction at that ? (Other questions, however, such as whether a person bound themselves in a particular way, are separate from asking whether the particular court had jurisdiction, and can be left for another day.)

Gilles Cuniberti October 11, 2012 at 8:59 am

I think that Benincasa could indeed be read as an authority for the proposition that the clause is only governed by the Regulation. But except for officially weaker parties identified by the Regulation, this leads to the exclusion of all mechanisms of protection of the parties. And it is not only the civil law which has generated them: there is for instance the unconscionability doctrine in the U.S.

Adrian Briggs October 11, 2012 at 9:02 am

Protection from what ? I agree that if we are concerned with jurisdiction agreements for Burma or Paraguay we might want to be a bit more cautious, but inside Europe, what is there to be protected from ? The Regulation tells us who has jurisdictional privileges; and it otherwise says that those who agree in writing are bound by what they agreed to (in cases of oppression or fraud, it is easy enough to say that there was no agreement in the relevant sense).

Gilles Cuniberti October 11, 2012 at 9:11 am

One argument could indeed be that since 1) jurisdiction agreements are good, and 2) all European courts are equal and to be trusted, conditions of validity should be limited to the minimum.

But if you still want to reserve “fraud” or “oppression”, then you are back in square one: you must define these doctrines. This will be done either by looking at the applicable national law, or by defining it at the European level.

Adrian Briggs October 11, 2012 at 9:15 am

Yes; and the latter, not the former. The idea that an English court should have apply Lithuanian rules of private international law in order to work out which rules of (probably foreign) law tell it whether the parties agreed to the jurisdiction of the court in Vilnius is, surely, one of the sillier things to have been seen in recent years. These things can be defined at a European level; one rule for all. Anything else seems almost dementing.

Bruno Trotteyn October 11, 2012 at 11:31 am

My reaction was just my first idea, but in my opinion, you are overlooking material French law of obligations, that provides that obligations conditional upon an event that one party entirely controls is void (read the Civil Code, articles 1170 and 1174).

Adrian Briggs October 11, 2012 at 12:04 pm

With respect, I am not. I am saying that this French material is irrelevant to the application of Article 23, in just the same way that English material – for example, that unless there is consideration there is no enforceable contract – is irrelevant to it.

Bruno Trotteyn October 11, 2012 at 7:19 pm

Re ‘material’: this was a wrong translation from the French word ‘matériel’. What I meant was ‘substantive law’ (as opposed to procedural law and PIL). Funny to read how it was picked up, though.

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