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20 Apr 2021

Asymmetric jurisdiction clauses & the Hague Choice of Court Convention: time to shape up? (Etihad Airways v Flöther)


The 2005 Hague Convention on Choice of Court Agreements (the “Convention”) has been thrown into the spotlight recently. Following Brexit, the Brussels Recast Regulation no longer governs jurisdiction with the EU and it is currently uncertain whether the UK will accede to the Lugano Convention. As a result, the Convention will become increasingly important. The decision of the Court of Appeal in Etihad Airways PJSC v Flother [2020] EWCA Civ 1707 focussed on an important aspect of the 2005 Hague Convention, namely the extent to which an asymmetric clause falls within the definition of an exclusive jurisdiction clause.

In Etihad v Flöther, the Court of Appeal confirmed that an asymmetric clause is an exclusive jurisdiction clause for the purposes of Article 31(2) of the Brussels Recast Regulation. However, in contrast to comments made in previous judgments by the High Court, it has also observed (while not deciding the point) that an asymmetric clause may not be an exclusive jurisdiction clause for the purposes of the 2005 Hague Convention. In this article, we consider the attraction of asymmetric clauses, the analysis of the Court of Appeal in Etihad, and consider the practical effect for parties navigating their way through choppy jurisdictional waters.

What is an asymmetric clause?

An asymmetric clause allows one party (typically a lender) to sue another party (typically a borrower) in any jurisdiction but restricts the borrower to sue in only one exclusive jurisdiction. Asymmetric jurisdiction clauses are commonplace in financing documents, such as loan agreements and guarantees. The benefits to the lender are obvious: the lender has the comfort of knowing that it can only be sued in its preferred jurisdiction but it has the flexibility to sue the borrower in any jurisdiction. This allows the lender to select, for example, the jurisdiction in which the borrower is incorporated or its assets are located at the relevant time.

Even before Brexit, however, asymmetric clauses have not been without their uncertainties in some jurisdictions. In France, for example, the courts have cast doubt on the enforceability of asymmetric clauses1, leading some lenders to carefully consider whether to adopt an exclusive, instead of asymmetric, clause where the borrowers or their assets are located in – or connected to – France.

The wording of asymmetric clauses varies but many parties adopt the standard wording set out in the Loan Market Association (LMA) facility agreements. Recently, the LMA has introduced an optional exclusive jurisdiction clause in light of concerns regarding the enforceability of asymmetrical clauses under the Convention.

Despite these concerns, as noted by the Court of Appeal in Etihad, asymmetric clauses “have been in widespread use for at least twenty five years, and it is common ground that they serve a legitimate commercial purpose”.

Etihad v Flöther  

A detailed background to the case is set out in our article on the first instance decision here. In brief, Etihad entered into various finance agreements with Air Berlin, including a Comfort Letter issued by Etihad to the directors of Air Berlin.  The Facility Agreement contained an asymmetric jurisdiction clause under which (for the benefit of Etihad only) the English courts had exclusive jurisdiction over any disputes arising out of or in connection with it.  The Comfort Letter did not contain a jurisdiction clause.

Air Berlin subsequently entered into insolvency and the Insolvency Administrator issued proceedings against Etihad in Germany alleging breach of the Comfort Letter and alternatively breach of its duty under German law to negotiate in good faith.  

Etihad then issued proceedings in England for declarations relating to the validity and scope of the jurisdiction clause.  The Insolvency Administrator sought a stay of the English proceedings on the grounds that the jurisdiction clause did not apply to the German proceedings.

First instance decision

At first instance, the Insolvency Administrator's application was dismissed. The sole ground of appeal for which permission was granted was the question of whether or not the judge had been wrong in law to conclude the English court was not obliged to stay proceedings under Article 29 Brussels Recast Regulation and had erred in concluding that the provisions of Article 31(2) Brussels Recast Regulation applied to the asymmetric clause in the Facility Agreement.

The Court of Appeal decision

The Court of Appeal upheld the first instance decision. It concluded that the Brussels Recast Regulation does apply to asymmetric clauses such as the one in question - confirming the analysis in Commerzbank AG v Liquimar Tankers Management Inc [2017] EWHC 161 (Comm). In particular, it construed the asymmetric clause as containing two distinct agreements: an agreement by Air Berlin to bring claims only in the English courts (i.e., an exclusive clause); and an agreement by Etihad to bring claims in the English courts or other courts with jurisdiction (i.e., a non-exclusive clause). The court was not persuaded by the Insolvency Administrator’s suggestion that the Brussels Recast Regulation and the Convention were designed to be interpreted with “maximum alignment”. While acknowledging the “general desirability” of reading the two instruments in conformity with each other, the court observed that the Brussels Recast Regulation neither refers explicitly to the Convention nor contains any explicit requirement that the two instruments should be interpreted consistently.

The court observed that the Brussels Recast Regulation is much wider in scope than the Convention including non-exclusive jurisdiction agreements and jurisdictional questions where there is no contractual jurisdiction agreement at all. The Convention, by contrast, only applies to exclusive jurisdiction clauses.

The 2005 Hague Convention

The Court of Appeal made no express finding on the application of the Convention to asymmetric jurisdiction clauses, which was not of course a matter for decision in that case. However, Lord Justice Henderson did state: “I am prepared to proceed on the basis that the Hague 2005 Convention should probably be interpreted as not applying to asymmetric jurisdiction clauses.” The court also referred to the Explanatory Report and the Diplomatic Minutes of the Convention. In particular, the court referred to the following extracts as providing a “strong indication” that the framers of the Convention took a deliberate decision not to include asymmetric agreements within its scope:

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 [i.e. asymmetric agreements] are not exclusive choice of court agreements for the purposes of the Convention.”

The minutes show that a proposal by the Swiss delegate to amend the proposed definition of an “exclusive choice of court agreement” so as to make it clear that it included asymmetric jurisdiction agreement (by inserting the words “for some or all of the parties to the agreement”) was debated, but found no support. The amendment was then withdrawn.”

This view contrasts with the analysis of Cranston J in Commerzbank and Jacobs J in the first instance decision in Etihad which had also considered the position under the Convention Looking at the same documents (including the minutes of the Diplomatic Sessions), Cranston J concluded there were “good arguments…that the words of the definition of exclusive jurisdiction clauses in Article 3(a) of the Hague Convention cover asymmetric jurisdiction clauses.” Similarly, Jacobs J concluded that although some of the documents preceding the Convention indicated that “asymmetric clauses were not to be equated with symmetric clauses for the purposes of the Convention”, there were still “good arguments that the rules in the Hague Convention are engaged by an asymmetric clause”2.

Asymmetric clauses – an uneven benefit?

Although the point was not decided by the Court of Appeal, the comment in Etihad clearly increases the risk that the English courts may find that asymmetric clauses should not be treated as exclusive jurisdiction clauses within the scope of the Convention. Other courts applying the Convention (rather than the Brussels Recast Regulation or the Lugano Convention) may take the same approach. It may be noted that the Hong Kong courts have decided (at first instance) that an asymmetric clause is not an exclusive jurisdiction clause for the purposes of reciprocal enforcement legislation between Hong Kong and Mainland China. For more information on this decision, see our article here.

Asymmetric clauses are intended to offer lenders security and flexibility at the same time. If, in fact, they are deemed to fall outside of what is now the UK’s primary reciprocal recognition and enforcement regime with the EU, the entire clause becomes less attractive certainly as regards enforcement in the EU.

As an alternative, some parties are adopting the option set out in the LMA facility agreements and selecting exclusive jurisdiction clauses instead of asymmetric clauses where counterparties are based in the EU so relying on the enforcement regime in the EU countries under the Convention. Other parties are providing for arbitration clauses in finance contracts  on the basis that arbitral awards are widely enforceable around the world by virtue of the New York Convention3.

Whatever solution is chosen, it is clear that careful consideration of the approach taken by the courts of all relevant jurisdictions is needed when selecting dispute resolution clauses in the current climate. Even if the English courts assume jurisdiction and give judgment in your favour, the ease of enforcement of that judgment will still be dependent on the interpretation of the clause in the courts of the country where you are seeking to enforce.  No matter how much more convenient it may be to deploy the same clause in every contract, recent decisions show that one size does not fit all.

For more information, see our related articles on the post-Brexit dispute resolution landscape here and here.


1 Ms X v Banque Privée Edmond de Rothschild, No 11-26.022 (December 2012 European Finance Litigation Review) and ICH v Crédit Suisse, No. 13-27264 (July 2015 European Finance Litigation Review). 

2 The Court of Appeal judgment also refers to Dr Louise Merrett’s analysis in her article in the International & Comparative Law Quarterly in 2018 (The future enforcement of asymmetric jurisdiction agreements, I.C.L.Q. 2018, 67(1))

3 The UN Convention on The Recognition and Enforcement of Foreign Arbitral Awards (New York, 1958)



Priya Grigoriadis

Priya Grigoriadis

T:  +44 20 7809 2005 M:  +44 7826 911 368 Email Priya | Vcard Office:  London

Charlotte Drake

Charlotte Drake
Of counsel

T:  +44 20 7809 2583 M:  Email Charlotte | Vcard Office:  London