In a significant judgment for parties to EU law finance contracts, the Court of Justice of the European Union (CJEU) has found that asymmetric jurisdiction clauses are valid under EU law, but only if they contain a level of precision in their choice of alternative jurisdictions which is unlikely to be satisfied by traditional forms of asymmetric jurisdiction clauses.

The judgment provides clarity that EU member state courts will give effect to such clauses where the CJEU's criteria are met, but finance parties may instead prefer to adopt a mutual exclusive choice of jurisdiction to minimise the risks of an invalid clause. While the judgment does not address the validity of asymmetric jurisdiction clauses designating the English courts, it may indirectly affect how the courts of EU member states treat such clauses in the future.

Asymmetric jurisdiction clauses in finance transactions

Asymmetric jurisdiction clauses have traditionally been a common feature of finance contracts. They have typically required borrowers, issuers and other obligors to bring proceedings against the lenders or other finance parties exclusively in one jurisdiction (for example, the English courts where the facility agreement is governed by English law), while providing the creditors with the flexibility to bring claims against the obligors in either that court or any other court of competent jurisdiction.  

While the English courts have consistently given effect to such clauses, a combination of:

• decisions from the courts of certain EU member states declining to give effect to them; and
• in the case of clauses designating the English courts, a narrower regime for the reciprocal enforcement of judgments between the UK and EU member states post-Brexit,

have discouraged their use in some finance transactions involving EU obligors in recent years, although they have remained common in English law debt capital markets contracts. 

CJEU's decision 

Following a dispute concerning the validity of an asymmetric jurisdiction clause in a supply contract in favour of the courts of Brescia, Italy (with one party reserving the right to bring claims "before another competent court in Italy or elsewhere"),¹ the French Cour de Cassation referred certain questions to the CJEU including (i) which law applies to govern validity of an asymmetric jurisdiction clause (EU law or the law of the applicable EU member state), and (ii) if EU law, whether an asymmetric jurisdiction clause is valid under applicable EU law. 

The CJEU confirmed that:

• validity is to be assessed by reference to autonomous EU law principles under the recast Brussels Regulation (the Regulation),² which governs questions of jurisdiction and enforcement of judgments as between EU member states;
• an asymmetric jurisdiction clause otherwise within the scope of the Regulation (i.e. designating a court or the courts of a member state) will be valid under Article 25 of the Regulation³ if:
  • the asymmetric element of the clause has the effect of conferring jurisdiction only on the courts of one or more EU member states and Lugano Convention states (Norway, Iceland and Switzerland). This is because conferring jurisdiction on the courts of a third country would be contrary to the requirements of foreseeability, transparency and legal certainty under the Regulation;
  • it identifies the relevant court(s) by reference to objective factors which are sufficiently precise to allow a court to determine whether it has jurisdiction; and
  • it does not fall foul of the mandatory exclusive jurisdiction rules under Article 24 of the Regulation⁴ or the special rules under Articles 15, 19 and 23 of the Regulation in respect of consumer contracts, employment contracts and certain insurance contracts. 

What does this mean for finance parties? 

While the decision provides further legal certainty where parties have designated an EU member state court in their asymmetric clause, such clauses are not normally drafted to restrict a finance party's recourse to the courts of EU and Lugano Convention states. While it should be possible to draft an asymmetric clause in a way which meets the criteria laid down by the CJEU, care will need to be taken to avoid inadvertently conferring jurisdiction on courts in other jurisdictions. Lenders and other creditors party to EU law finance documents may wish to avoid this risk by opting instead for a mutual exclusive jurisdiction clause.  

Other considerations

Asymmetric clause in favour of English courts

The decision does not directly impact the validity of an asymmetric clause in favour of the English courts. While the English courts have accepted the validity of such clauses, questions remain as to how the courts of an EU member state would treat such a clause, and whether the Regulation would allow that court to stay proceedings or decline jurisdiction in favour of the English courts where it is asked to hear the claim in breach of an asymmetric jurisdiction clause. See our previous discussion of this issue here.

Enforcement of judgments

The question of whether an EU member state court will enforce an English court judgment given pursuant to an asymmetric clause, or vice versa, is separately addressed by the 2019 Hague Convention on the Recognition and Enforcement of Foreign Judgments in Civil and Commercial Matters (the 2019 Hague Convention), which provides for mutual recognition and enforcement of judgments between contracting states in a range of circumstances, including where the court was designated in an asymmetric jurisdiction clause. With effect from 1 July 2025, EU member states (except Denmark) will be required to enforce an English judgment handed down in proceedings commenced on or after that date relying on an English asymmetric jurisdiction clause.⁵ However, the 2019 Hague Convention does not regulate whether the courts of contracting states will accept jurisdiction or stay proceedings pursuant to asymmetric jurisdiction clauses. See our previous discussion of this issue here.

1. C-537/23 Lastre. ↩
2. Regulation (EU) 1215/2012.↩
3. Article 25 applies where parties have agreed that the courts of an EU member state are to have jurisdiction.↩
4. These provide for the courts of one EU member state to have exclusive jurisdiction where the claim relates to particular subject matter (for example, the validity of a company's constitution).↩
5. The UK has restricted application of the Convention to England and Wales only, though this can be modified. It will therefore not apply to judgments from the courts of Scotland or Northern Ireland.↩