Legal Translation Services
and the Effect of the Rothschild Decision
on Jurisdictional Clauses in International Contracts

International Contract Translation Services

We’ve blogged about the role of legal translation services for international disputes cases. The recent ‘Rothschild’ decision out of France is likely to have a significant impact on international litigation, and, in particular, on the utilization of so-called one-sided jurisdiction clauses. In summary, the Rothschild decision seems to indicate that jurisdiction clauses within international contracts that give one party unfettered discretion for choosing where to sue will be set aside.

In terms of background, the case involved a French national living in Spain who placed a large sum of money into a bank account located in Luxembourg. This transaction was done via a French company of the Luxembourg banking group (Rothschild Group) and did not involve any activities within Spain, thus denying the plaintiff the protection of conflicts of jurisdiction rules applicable to consumers in accordance to the Brussels I Regulation. In 2009 the plaintiff accused the Luxembourg bank of having failed in its advisory duties that led to a financial loss and filed lawsuits against the Luxembourg bank and the French company in the French courts.

During the initial stage the jurisdiction clause relied on by the Luxembourg bank was set aside and the French court’s jurisdiction was accepted in regards to the claim against the Luxembourg-based bank due to its connections to France. It is important to note that the contract between the French company and the plaintiff contained a standard jurisdiction clause that read: “The relations between the bank and the client are subject to the laws of Luxembourg. Any dispute between the client and the bank will be subject to the exclusive jurisdiction of the courts of Luxembourg. Notwithstanding the above, the bank reserves the right to start proceedings in the client’s place of domicile or in front of any other competent court”.

In its decision to set aside this clause, the French Appeals Court held: “Having noted that the clause which allowed the bank to start proceedings in the courts of the client’s domicile or any other competent court tied only (the Plaintiff)…who was the only party limited to starting proceedings in the courts of Luxembourg, the court correctly held that the clause was potestative“. The court went further, stating that such one-sided jurisdiction clauses are contrary to the object and the finality of the jurisdictional rules of civil procedure.

Essentially what the Rothschild decision does is hold that such one-sided jurisdiction clauses are substantially disadvantageous to the consumer and thus not enforceable. This should be a cause of concern for international businesses who regularly enter into contracts with consumers, since what is substantially disadvantageous is highly objective. For example, a jurisdiction clause that does no more that restate or reorganize the objective distribution of competences should not be questioned, although a broad reading of the Rothschild decision would suggest that they could.

It is up to the courts to apply the Rothschild standard on a case-by-case basis, to take a close look at the evidence, and, in particular, any assistance given to the party who, may appear to be ‘disadvantaged’. For example, in the case at hand if the contract contained a clause requiring the claimant to use a court not located in either Luxembourg, France or Spain, then the claimant could have been considered ‘disadvantaged’ (particularly if the jurisdiction required was outside the EU). However, as this was not the case there is reason to be concerned that the Rothschild decision in fact challenges the sanctity of contracts. More so, when utilized in international law, it requires a careful use of foreign language translations of all contractual clauses and evidence supporting a claim to make sure that the clause does not in any way disadvantage the claimant.

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