Academic journal article Texas International Law Journal

Is the Unilateral Jurisdiction Clause No Longer an Option? Examining Courts' Justifications for Upholding or Invalidating Asymmetrical or Unilateral Jurisdiction Clauses

Academic journal article Texas International Law Journal

Is the Unilateral Jurisdiction Clause No Longer an Option? Examining Courts' Justifications for Upholding or Invalidating Asymmetrical or Unilateral Jurisdiction Clauses

Article excerpt

TABLE OF CONTENTS

INTRODUCTION........322

PART I..................323

A. What Is an "Asymmetrical" or "Unilateral" Jurisdiction Clause and How Is It Used?...........323

B. Common Challenges to Unilateral Jurisdiction Clauses, and Why.........325

PART II..................327

A. Madame X c. société Dubus v. Banque Privée Edmond de Rothschild, aka the Rothschild Case.....327

B. Russkaya Telephonnaya Kompaniya v. Sony Ericsson Mobile Communications Rus Ltd. Liability Co. Judgment of 19 June 2012, N A 40-49223/11 -112-401......330

C. Summary........332

PART III....................333

A. Decision of High Court of Appeal of Madrid of 18 October 2013 (LA LEY 172387/2013).....333

CONCLUSION......335

Introduction

Every arbitration attorney and professor will tell you that arbitration is a creature of contract.1 The principle of party autonomy allows parties to craft an arbitration agreement best suited to their needs and the circumstances of their relationship.2 While there are certainly limits to party autonomy, such as the governing law, until recently, unilateral jurisdiction clauses were held by courts in a majority of jurisdictions to be presumptively valid and enforceable.3

However, while it is accepted that asymmetrical clauses are prima facie unfair,4 in the last several years courts in multiple jurisdictions have held unilateral jurisdiction clauses to be against public policy5 or unconscionable,6 and therefore unenforceable.7 A court's holding of unenforceability can be exercised in one of two ways: Either by severing the unenforceable provision from the dispute resolution clause," or by making the provision bilateral,9 thereby allowing both parties the freedom to bring claims in any jurisdiction in the now-symmetrical dispute resolution clause.10

But why have these different courts suddenly started ruling against the enforceability of unilateral jurisdiction clauses? What do these recent cases mean for the future of drafting an arbitration agreement? Do these decisions indicate a burgeoning trend of hostility toward unilateral jurisdiction clauses? Is the inclusion of an asymmetrical clause no longer an option to be decided by the parties to a contract? Or is there a way to preserve party autonomy, and allow parties to continue to contract for a unilateral jurisdiction clause as part of their arbitration agreement?

In this Note, I will address the current problem of unilateral jurisdiction clauses in four different sections. In Part I, I will introduce and explain what kinds of clauses are defined as "unilateral jurisdiction clauses" for the purposes of this Note; in Part II, I will examine the cases in which courts in France and Russia have held a unilateral jurisdiction clause to be unenforceable; in Part III, I will address and analyze the recent case from Spain that shows evidence of potential continued support for asymmetrical clauses; and in the Conclusion, I will introduce some solutions that parties can use during the drafting of their arbitration agreements should they desire to negotiate a unilateral jurisdiction clause.

PartI

In this Section, I will endeavor to explain what a unilateral jurisdiction clause is, how it is most commonly used, and what challenges often arise upon the commencement of dispute resolution proceedings by either party.

A. What Is an "Asymmetrical" or "Unilateral" Jurisdiction Clause and How Is It Used?

Asymmetrical or non-mutual arbitration clauses, otherwise known as "unilateral jurisdiction clauses," allow one party in a contractual relationship at its option to decide whether to resolve its claims through arbitration or litigation (or in which specified court to litigate its claims);11 however, because this opportunity is only extended to one party, the other party only has the option to bring claims in one jurisdiction, usually either arbitration or litigation, or litigation in a specific forum. …

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