Express Recognition of the Validity of Optional Dispute Resolution Clauses

Optional dispute resolution clauses provide the possibility to submit the dispute before several jurisdictions (national or arbitral court) determined by the parties beforehand.   The option may be open to either one party (in which case it is a unilateral clause) or several parties (the clause is then referred to as a bi- or multilateral clause).

In a decision of 12 June 2013, the first Chamber of the Cour de cassation expressly recognized the validity of multilateral optional dispute resolution clauses. By doing so it supplements its previous decisions admitting the validity of unilateral optional dispute resolution clauses (Civ. 1ère, 15 mai 1974, n°72-14706), is supplemented and confirmed.

In the case at hand, the company Thermodyn had provided M-Reak Alizay with a rotor (item that motions a turbine) for the operation of a plant.  Unfortunately, the rotor became dysfunctional and damages occurred.  A judicial expertise was conducted.  Thereafter, M-Real Alizay and its insurer initiated proceedings before the Paris Tribunal of commerce as per the optional clause contained the General Sales Conditions, which read:

If the dispute is not resolved within thirty (30) days after the meeting or at such other date as the parties may agree, each party may submit a claim to arbitration or bring action before the court having jurisdiction at the seat of the Buyer. The dispute shall be submitted and resolved definitively by the arbitration rules of the London Court of International Arbitration (LCIA), incorporated to this Article by reference (…)”

Thermodyn objected to the jurisdiction of the Paris Tribunal of commerce in favor of arbitration.  Among other arguments, it raised the fact that pursuant to the clause, “the dispute shall be submitted and resolved definitively by the arbitration rules of LCIA“.

On 12 June 2013, the Cour de Cassation upheld the Tribunal of commerce’s jurisdiction, finding that the clause providing for an alternative choice open to each of the parties to initiate proceedings before either an arbitral tribunal or the State court having jurisdiction at the seat of the Buyer, the reference in the optional dispute resolution clause to a center of arbitration not bringing into question the fact that recourse to arbitration is purely optional.

Consequently, the validity of optional dispute resolution clauses has been explicitly recognized.

The decision is available here.

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