Asymmetric jurisdiction clauses and enforcement of English judgements following Brexit – creditors and other parties to reconsider?
Parties usually include a jurisdiction clause in their agreement to decide on which national court(s) shall have the authority to determine a dispute. In credit agreements asymmetric clauses are often used. Asymmetric jurisdiction clauses are characterized by giving the parties non-symmetric options regarding jurisdiction. In a credit agreement the creditor is typically given the right to initiate proceedings in any court of any competent jurisdiction, while the borrower may only initiate court proceedings in the one jurisdiction specified in the relevant jurisdiction clause. This ensures that the creditor can initiate proceedings against the borrower where it is incorporated, but also in any other jurisdiction where it conducts business or where any of its assets are located.[1] Further, the asymmetric clause seeks to reassure the creditor that it may only become the subject of court proceedings in its preferred jurisdiction.[2]
The question is what effect an asymmetric clause will have after Brexit? This has not yet been tried by the Swedish courts.
Based on caselaw from the European Court of Justice (ECJ), English courts have stated that asymmetric jurisdiction clauses are valid under the Brussels Recast Regulation as an exclusive jurisdiction clause.[3] However, this has only immediate relevance in relation to proceedings commenced on or before 31 December 2020 since the Brussels Recast Regulation ceased to apply in the UK in conjunction with Brexit.
Following Brexit, most parties will seek to find jurisdiction and mutual recognition of judgements under the 2005 Hauge Convention on Choice of Court Agreement (Hague Convention), assuming that the UK does not accede to the 2007 Lugano Convention. The Hague Convention is an international treaty that applies to exclusive choice of court agreements concluded in civil or commercial matters. The Hague Convention is not an instrument of EU law, but the EU is a party to the convention. As a result of Brexit, the Hague Convention will apply to proceedings between the EU and the UK. The question is therefore whether asymmetric clauses are recognized as exclusive choice of court agreements and valid under the Hague Convention?
In Article 3 (a) of the Hague Convention, an exclusive choice of court agreement is defined. The definition does not give a clear answer to the question whether an asymmetric clause shall be considered an exclusive jurisdiction clause. However, as noted in the explanatory report by Professors Hartley and Dogauchi (framers of the Hague Convention) (para 106):
‘It was agreed by the Diplomatic Session that, in order to be covered by the Convention, the agreement must be exclusive irrespective of the party bringing the proceedings. So agreements of the kind referred to in the previous paragraph [ie asymmetric agreements] are not exclusive choice of court agreements for the purposes of the Convention’.[4]
It should also be noted that a proposal for an amendment expressly to include asymmetric clauses in the Convention’s definition of an exclusive jurisdiction clause was debated in the Diplomatic Session on 15 June 2005 but found no support and was then withdrawn.
If Swedish courts, based on the above sources, would come to the conclusion that asymmetric clauses cannot be considered as exclusive jurisdiction clauses, this would mean that judgements from legal proceedings based on an asymmetric jurisdiction clause cannot be recognized in Sweden with on the basis of the Hague Convention. Hence, creditors and other parties that up until now have negotiated and benefitted from asymmetric clauses should consider whether they rather should seek to agree exclusive jurisdiction clauses, i.e. a jurisdiction clause pointing to a single specific jurisdiction. In the event thereof, the Hague Convention would apply and a judgement from a UK court would then be enforceable in Sweden in accordance with the provisions of the Hague Convention.
However, this is not necessarily the end for asymmetric clauses involving the UK. The U.K. government has applied to accede to the 2007 Lugano Convention, which is broadly similar to the Brussels Recast Regulation, meaning that asymmetric clauses are most likely recognized as exclusive choice of court agreements under the 2007 Lugano Convention. It remains unclear whether or when the U.K. will in fact accede to it, as consent by all signatories is required and so far the EU has not given its consent.
[1] See R Fentiman, Unilateral Jurisdiction Agreements in Europe, The Cambridge Law Journal (2013), p. 24.
[2] See L Merrett, The Future Enforcement of Asymmetric Jurisdiction Agreements, International and Comparative Law Quarterly (2018), p. 40.
[3] See, for example, Etihad Airways PJSC v Lucas Flother [2020] EWCA Civ 1707 and Commerzbank Aktiengesellschaft v Liquimar Tankers Management Inc., Pauline Shipping Limited and Liquimar Tankers [2017] EWHC 161 (Comm).
[4] See the Explanatory Report on the 2005 HCCH Choice of Court Agreements Convention by Professor Trevor Hartley and Masato Dogauchi, paragraph 106.
[5] See, for example, Etihad Airways PJSC v Lucas Flother [2020] EWCA Civ 1707 and Commerzbank Aktiengesellschaft v Liquimar Tankers Management Inc., Pauline Shipping Limited and Liquimar Tankers [2017] EWHC 161 (Comm).
