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French Supreme Court Strikes Down One Way Jurisdiction Clause

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.