Benefit clause

"This clause is for the benefit of [the contracting party having the benefit] and shall not limit the right of [the contracting party having the benefit] to take proceedings in any other court of competent jurisdiction."

This wording will effect a “one-sided” jurisdiction clause by exempting the party (or parties) with the benefit of it from any exclusivity in the jurisdiction clause. That is, it limits one or more parties to suing in the specified, chosen, court, but permits the party (or parties) with the benefit to sue in the chosen court or any other courts which would otherwise take jurisdiction in the absence of choice. Thus, for example, a clause in a loan agreement could require that a borrower must sue in England but leave the banks free to sue in all countries which would otherwise have jurisdiction (for example, the borrower's country of domicile).

The wording may be added to:

(in either case, regardless of whether or not the relevant Exclusive jurisdiction clause has also first been supplemented with a Submission and Waiver)

When using such a clause, in addition to the general guidance contained in the above sections, recent developments in the EU have meant that there are a number of particular issues which may need to be kept in mind if it is proposed to couple such a clause with a choice in favour of a Brussels Regime State court. In particular:

  • Where litigation in France is either a possibility or positively desired (for example where a French counterparty is involved or where the parties wish to confer jurisdiction on the French courts), account will need to be taken of recent case law before the Cour de Cassation. In 2012, in Mme X v Rothschild the Cour de Cassation handed down a decision which appeared to indicate that it viewed the above form of clause as impermissible under the (then in force) Brussels I Regulation. Since then, the Cour de Cassation, in the 2015 cases of Danne and Apple, has clarified its stance in decisions which have been interpreted as meaning that, whilst it may remain hostile to the above form of clause, it views the Brussels I Regulation as permitting a clause which gives greater freedom to one party provided that the clause objectively identifies (either by name or other objective elements) a limited number of courts in which that party is free to bring proceedings. However, as the precise scope of this jurisprudence remains somewhat unclear, if a “one-sided” jurisdiction clause of any sort is contemplated in cases with a French nexus (which will itself depend upon the litigation risk and issues facing the parties) French lawyers should be consulted as to the precise form of clause proposed and its structuring. A further issue not to be overlooked will be an assessment of substantive validity under national law arising under new provisions in the Brussels I Recast (see below).

And, more generally within the Brussels Regime States (i.e. even in cases without a French nexus):

  • Although the French cases discussed above do not bind other Brussels Regime State courts and, in so far as they may be interpreted as impugning the above form of clause, would be highly contentious (the better view is that neither the Brussels I Regulation, Brussels I Recast, nor the Lugano Convention 2007 have any per se objection to such a form of clause), they have nonetheless increased the risk within the Brussels Regime States of challenges to such a clause and/or a reference to the CJEU to resolve the question (which would create delay). In this area it should, however, also be acknowledged that the risk posed by the French jurisprudence may have lessened to a degree as a result of the Apple decision. Following that case it is now clear that the Cour de Cassation does not view one-sidedness in itself as a problem under the EU legislation (the result being that the only objection to the above form of clause based on the French case law could be that the Brussels I Recast is intolerant of a non-exclusive clause – a proposition which is even harder to understand as being correct). Nonetheless, it would still seem sensible to consider whether the real benefits of the use of such a clause outweigh the risks and inconvenience of any such reference. A further reason for such an approach may also be the interface between the Brussels I Recast’s new rule on EU lis pendens and exclusive (EU) jurisdiction clauses, and such a clause. See proceedings brought in breach of an exclusive jurisdiction clause for more. (As a postscript; in so far as such clauses expressed in favour of the English courts are concerned there has been welcome English High Court authority rejecting the arguments discussed in this paragraph (click here and here for more). Even in such circumstances, however, the rationale for the type of cost/benefit analysis under discussion would seem to remain given the level of that authority, and that these issues are ultimately a matter for the CJEU).
  • Where the choice made is in favour of an EU Member State court the Brussels I Recast has now replaced the Brussels I Regulation before such courts (at least insofar as proceedings on the clause commenced on or after 10 January 2015). In this context the position under EU Law has been potentially complicated by the introduction by that instrument of a rule which states that the chosen court shall have jurisdiction unless the clause is null and void as to its substantive validity under the law of the chosen EU Member State. Note that determining the applicable law for such purposes includes the application of the chosen EU Member State’s conflict of laws rules (Recital 20). In this context, that means the court’s own, national conflict rules as to the law applicable to a jurisdiction clause - neither the Rome Convention nor the Rome I Regulation apply to jurisdiction clauses (nor arbitration clauses) as such are excluded from their scope.
  • If combining such a clause with a choice in favour of an EU Member State court, it may ,therefore, be advisable to consider whether and how it might be affected by this rule (clauses in favour of the Lugano States remain unaffected by this rule). From the perspective of a clause in favour of the English courts, in the usual circumstances where English law is also the governing law of the main contract, this is unlikely to cause a problem in most transactional or financing contracts between commercial entities as English law would apply to the clause and it generally upholds the parties’ bargain in this area. As with any contract governed by English law, however, in more specialised areas (e.g. consumer contracts) where some general regulation of the parties’ bargaining power may exist parties may wish to consider how, if at all, that may impact on the matter.
  • It should be noted that, even assuming that, in line with the above, a clause of the above type in favour of an EU Member State court is valid under this rule, it does not necessarily mean that the practical risks arising from the French jurisprudence (discussed above) are non-existent. Whether that instrument objects to such a clause per se is a separate issue and, accordingly, even though the better view is that, subject to the substantive validity issue discussed above, the Brussels I Recast permits such clauses; the rationale for the type of cost/benefit analysis discussed above would therefore seem to remain even where the clause is valid under this new rule

See Which jurisdiction clause? for guidance as to which clause to use in which circumstances.