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Full applicability of a clause assigning jurisdiction to an English court

10/10/2017

A dealership agreement concluded between an English company and a French distributor contained the following clause: "This agreement is subject to English law and the parties irrevocably submit to the exclusive competence of the English courts." The agreement was terminated and the French distributor brought proceedings before a French court for the abrupt termination it had suffered, basing its claim on article L.442-6 I 5° of the French Commercial Code. The Court of Appeal dismissed the proceedings on the grounds that it lacked jurisdiction to hear the case due to the clause assigning jurisdiction to the English courts.
The case was brought before the Court of Cassation which again took the opportunity to clarify its position (Cass. 1st civ., 18 January 2017, no. 15-26.105).
The French distributor had submitted two arguments in its appeal against the lack of jurisdiction ruling.

The first argued that the clause should be annulled since it linked the jurisdiction of the English courts with the application of English law. This was contrary, it argued, to the mandatory provisions of article L.442-6 I 5°.
The Court of Cassation dismissed this argument by adopting wording already used to address this type of question: the clause assigning jurisdiction must be subject to "mandatory provisions constituting public policy laws, even if applicable to the merits of the dispute." This reasoning has been used at least twice by the French supreme court to validate clauses assigning jurisdiction, either to San Francisco courts (Cass. 1st civ., 22 October 2008, no. 07-15.823) or to German courts (Cass. com., 24 November 2015, no. 14-14.924) in similar cases. The solution is technically logical since the potential existence of a public policy law is not relevant to determining the competent court; this should be decided when the case is heard on the merits (therefore by the English court) and, in practice, at the stage of enforcement in France of the English court's ruling. We will recall that, currently, the Court of Cassation has always refrained from ruling on the nature of the public policy law in article L.442-6 I 5°.
A second argument put forward to invalidate the clause involved claiming that it could not apply in the presence of a "tort liability action founded on the abrupt termination of a long-standing business relationship." In reality, although the Court of Cassation certainly considers that the action based on article L.442-6 I 5° is tortious (Cass. com., 6 February 2007, no. 04-13.178), the Court of Justice of the European Union (CJEU) meanwhile believes that the disputes over abrupt termination are not tort or quasi-tort matters (CJEU, 14 July 2016, C-196/15).
The debate was fairly irrelevant in this case, since the question was really whether the wording of the clause was sufficiently broad to encompass disputes occurring not only during the business relationship, but also those arising at the end of it. The Court of Appeal found that the clause applied in the event of abrupt termination. The Court of Cassation did not interfere in this sovereign assessment.
This ruling provided a further opportunity to draw attention to the painstaking care needed when drafting assignment of jurisdiction clauses.

Authors

Arnaud Reygrobellet
Arnaud Reygrobellet
Partner
Paris