One way or another, is jurisdiction going to give you the slip? Reflections on asymmetric jurisdiction clauses in England and Wales

A recent judgment of the English Court of Appeal on asymmetric jurisdiction clauses serves as a reminder of the importance of clear drafting that properly reflects the intention of the parties, and has potential broader implications for those seeking to include unilateral option clauses in their contracts.

The decision in Hipgnosis SFH 1 Ltd v Manilow¹ (Hipgnosis) confirms the enforceability of both asymmetric jurisdiction clauses and unilateral option clauses. It also raises interesting questions regarding the effect of parallel proceedings and whether the procedural challenges and risks of inconsistent decisions from concurrent proceedings should influence the interpretation of asymmetric and unilateral option jurisdiction clauses.

In this article, we provide an overview of both types of clauses and the English court's approach to them, before looking at the Hipgnosis case in more detail, including whether any lessons can be learned from it in the context of unilateral option clauses where one party has the option to arbitrate.

 

KEY TAKEAWAYS

• English law generally recognises the enforceability of asymmetric jurisdiction clauses and unilateral option clauses. However, how the English courts might interpret such clauses in practice is far more difficult to predict; as demonstrated by the Hipgnosis case.

• In Hipgnosis, the English Court of Appeal interpreted an asymmetric jurisdiction clause which purported to: (i) submit both parties to the agreement to the exclusive jurisdiction of the English courts in relation to all disputes; but also (ii) permit one party to commence proceedings relating to certain types of dispute in LA or New York. In the circumstances, one party sought to commence proceedings in the US, despite the other party already having brought proceedings in the UK.

• In interpreting the dispute resolution clause, the Court of Appeal held that:
  • The jurisdiction of the English courts was determined at the date of issue of proceedings and could not be "ousted" by the other party exercising its unilateral right to commence proceedings in another jurisdiction.
  • The parties' submission to the English courts could not be revoked simply by inclusion of the words "notwithstanding the foregoing" before the option to commence proceedings in the US; and
  • It was clear from the wording of the clause that it permitted submission to more than one jurisdiction. The fact that this generated a risk of parallel proceedings was not fatal to that interpretation.

• Going forward, parties should think carefully about the practical effect of any asymmetric jurisdiction or unilateral option clause and ensure that the wording properly reflects the parties' intention to avoid difficult (and often costly) questions of interpretation and jurisdiction.

 

WHAT ARE ASYMMETRIC JURISDICTION CLAUSES AND UNILATERAL OPTION CLAUSES?

The phrase "asymmetric jurisdiction clause" typically refers to a clause which entitles one party (Party A) to sue the other party in the courts of more than one jurisdiction, while the other party (Party B) is limited to bringing proceedings in the courts of just one jurisdiction. These clauses are commonly found in finance documents where the lender, often due to its stronger negotiating position and because it is bearing most of the financial risk, is able to insist on greater freedom over choice of forum, while limiting the borrower to bringing proceedings in only one jurisdiction. Such clauses are valuable where there are concerns as to the reliability or efficiency of the courts in the borrower's jurisdiction.

Asymmetric clauses are also referred to as "unilateral option clauses". However, that term is usually used to describe clauses which give Party A the option to choose between court litigation and arbitration, while Party B is restricted to one form of these binding forms of dispute resolution. Again, these types of clauses may be attractive to finance parties because they allow for greater flexibility in pursuing a debtor, while minimising the uncertainty and risk associated with the borrower having the same freedom.

 

HOW DO THE ENGLISH COURTS APPROACH ASYMMETRIC AND UNILATERAL JURISDICTION CLAUSES?

The English courts generally respect asymmetric jurisdiction clauses – for example, the Commercial Court has noted that "asymmetric jurisdiction clauses are a long established and practical feature of international finance documentation".²

There are also multiple examples of English courts recognising and enforcing unilateral option clauses providing one party with the option to either litigate or arbitrate. For example, in NB Three Shipping v Harebell Shipping Ltd³ the High Court recognised and enforced terms in two charterparties which granted the shipowner the option to refer disputes to arbitration but not the respondent charterers.

Globally, however, the picture is far less clear. The enforceability of such clauses is hotly debated in various jurisdictions, and the uncertainty and inconsistency of judicial treatment cause concern for parties. For example:

1. The recent Court of Justice of the European Union's decision in Società Italiana Lastre SpA (SIL) v Agora SARL⁴ arguably provided some certainty as to the conformity of asymmetric jurisdiction clauses with EU law. In particular, the CJEU confirmed that asymmetric jurisdiction clauses are, in principle, valid under EU law based on party autonomy, if they are sufficiently precise to as to confer jurisdiction on an EU Member State or Lugano Convention State.

2. However, uncertainty remains as to the validity under EU law of asymmetric jurisdiction clauses that confer jurisdiction on non-EU courts. Further, given arbitration falls outside the scope of the Recast Brussels Regulation, the decision has no application to unilateral arbitration clauses (the validity of which generally depends on the law governing the arbitration as it is the law of the arbitration agreement that is relevant for determining matters relating to its formal and substantive validity and interpretation).

3. In Hong Kong, a 2023 decision confirmed the validity of an asymmetric jurisdiction clause which gave the right to choose the dispute forum to just one party and specifically recognised and accepted that the purpose of the clause was to protect the creditor's position.⁵

4. Jurisdictions such as China, the UAE and Russia have also indicated that asymmetric jurisdiction and unilateral options clauses are (or are likely to be) unenforceable on the basis that they violate principles of equality and fairness. Therefore, the likely place of enforcement should be considered when negotiating and agreeing such clauses.

5. Due to the optionality afforded to certain parties, unilateral option clauses are likely to be viewed as non-exclusive jurisdiction clauses. This may make the enforcement of any judgment obtained following the exercise of an option to litigate more difficult in the EU as, until 1 July 2025, the Hague Convention on the Recognition and Enforcement of Foreign Judgments does not apply to UK judgments.

In contrast, the English law approach to asymmetric and unilateral clauses has been fairly consistent, whether the asymmetry relates to the freedom to choose different jurisdictions in which to bring proceedings or to arbitrate. A recent English Court of Appeal decision has raised some interesting questions about the effect of such clauses and whether they can be relied upon to prevent parallel proceedings in multiple jurisdictions or forums.

 

THE HIPGNOSIS CASE

The Hipgnosis dispute⁶ centred on a music catalogue agreement (the Agreement) that had been entered into by Hipgnosis SFH 1 Limited (Hipgnosis), a music rights investment company, and Barry Manilow and his management, Hastings, Clayton and Tucker Inc. (Hastings). The Agreement provided for Manilow and Hastings to receive royalties from Manilow's recordings, in return for Hipgnosis paying an initial purchase price and, if applicable, an additional amount.

The Agreement contained an asymmetric jurisdiction clause which provided that:

• any dispute or claim would be governed by English law;
• the parties irrevocably submitted to the exclusive jurisdiction of the English courts;
• any judgment obtained in the English courts could be enforced in any other jurisdiction; and
• notwithstanding the foregoing, Manilow and Hastings could bring any claims related to the purchase price in the courts of Los Angeles or New York and, solely in connection with such claims, Hipgnosis agreed to submit to the jurisdiction of those courts.

A dispute arose between the parties as to the sums alleged to be due under the Agreement and litigation was commenced.

On 12 August 2024, Hipgnosis issued proceedings in the English courts alleging that Manilow and Hastings had failed to pay royalties received from Sony Records which were due under the Agreement. In response, Manilow and Hastings commenced proceedings in Los Angeles, alleging that the additional purchase price payable by Hipgnosis was outstanding and that this justified their retention of the Sony royalties.

In November 2024, Manilow and Hastings applied for the stay of English proceedings, on the basis that they had validly utilised their option to commence proceedings in the US and this ousted the jurisdiction of the English courts.

The stay was granted at first instance, with the High Court finding that the final limb of the jurisdiction clause entitled Manilow and Hastings to derogate from the submission to the English court and that, as a result, the English court had no more than a "floating jurisdiction" over the purchase price element of the claims, which had crystallised in favour of the LA court once they had exercised their option to litigate. Hipgnosis appealed that decision.

Key issues

At the heart of this case was a question of contractual interpretation: Did the latter part of the asymmetric jurisdiction clause, which entitled Manilow and Hastings to bring proceedings in specific US courts, have the effect of ousting proceedings which were already on foot in England, in circumstances where the jurisdiction clause also provided for the exclusive jurisdiction of the English courts?

The Court of Appeal, with Sir Julian Flaux giving the leading judgment, overturned the decision of the High Court and lifted the stay. In doing so, it rejected the High Court's concept of a "floating jurisdiction" and that Hastings and Manilow bringing proceedings in LA had the effect of ousting the jurisdiction of the English courts.

Concept of a "floating jurisdiction"

The Court of Appeal swiftly disregarded the notion that there could be a "floating jurisdiction" in favour of the English courts, noting that the first instance judge had cited no authority to support that analysis, and there was nothing in the wording of the clause itself that could lead to that conclusion. In fact, the court went so far as to say that, in circumstances where proceedings had already been issued, the notion that jurisdiction of the English court was only "floating" was "heretical and contrary to authority" when the jurisdiction of the English court is determined at the date of issue of proceedings (and therefore cannot be displaced by subsequent proceedings).

What was the effect of the purported carve out?

It was argued by Manilow and Hastings that the words "notwithstanding the foregoing" preceding their option to bring proceedings in the US, had the effect of revoking the jurisdiction of the English court and overriding the wording providing for submission to the exclusive jurisdiction of the court.

The Court of Appeal determined that the words "notwithstanding the foregoing" preceding Manilow and hastings' option to bring proceedings in the US did not annul or override the parties' irrevocable submission to the English court or otherwise extinguish the jurisdiction which the English court already had over the claims brought by Hipgnosis. Moreover, the notion that the exercise of the option to sue in the US somehow trumped the exclusive jurisdiction clause completely overlooked the (deliberately) one-sided nature of the option.

The possibility of parallel proceedings

Perhaps the most compelling argument made by Manilow and Hastings as to why the stay should be maintained was that lifting it would enable parallel proceedings in the UK and US to continue, which would be undesirable from a procedural perspective. They also warned of the risk of irreconcilable judgments if the two sets of proceedings were allowed to continue.

The court considered, but ultimately dismissed, these arguments; describing Manilow and Hastings' predictions of a "procedural nightmare" as "somewhat exaggerated" and, in any event, not sufficient to disregard and disapply the express wording of the clause, which clearly provided for disputes to be submitted to more than one jurisdiction. As regards the possibility of irreconcilable judgments, the Court noted that this risk could be avoided through the application of the rules of issue estoppel.

 

WHAT NEXT?

1. The Hipgnosis case is a reminder that jurisdiction is determined at the date of issue of proceedings. In the context of unilateral option clauses, this means that where Party A has chosen to litigate pursuant to the exclusive jurisdiction element of the clause, but Party B later chooses to exercise their option to arbitrate, the initiation of arbitration proceedings will not in itself "revoke" or nullify the jurisdiction of the English courts in the extant proceedings.

2. In Hipgnosis, the court found nothing inherently problematic in parallel proceedings being on foot where the dispute resolution clause allows it. In doing so, it cited the principle of issue estoppel as a way of mitigating the risk of inconsistent judgments. As English law⁷ provides that arbitration proceedings can also create issue estoppel (ie not just court proceedings), it raises the question as to whether the reasoning could be applied where a court or tribunal is faced with the possibility (or reality) of concurrent arbitration and litigation proceedings under a unilateral option clause.

3. Perhaps most significantly for practitioners, the difficulties which the court faced in Hipgnosis in applying the asymmetrical jurisdiction clause as drafted highlights the need for precise drafting in order to ensure that the parties' intentions are properly reflected and effected. It is now clear that where the parties do not wish for parallel proceedings to be possible under any asymmetric or unilateral jurisdiction clause, they should make that clear by making provision for any proceedings which are already on foot to be discontinued if the party with the benefit of a unilateral option to bring proceedings in a different court or arbitrate exercises that option.

If you have any questions regarding the matters discussed in this article or more broadly, please contact the authors or your usual DLA Piper contact.

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¹Hipgnosis SFH 1 Ltd v Manilow and another [2025] EWCA Civ 486
²Commerzbank Aktiengesellschaft v Pauline Shipping and Liquimar Tankers Management Inc [2017] EWHC 161 (Comm), paragraph 41
³NB Three Shipping v Harebell Shipping Ltd [2004] EWHC 2001 (Comm)
⁴(Case C-537/23)
⁵China Railway (Hong Kong) Holdings Ltd v Chung Kin Holdings Co Ltd [2023] HKCFI 132
⁶Hipgnosis SFH 1 Ltd v Manilow and another [2025] EWCA Civ 486
⁷Fidelitas Shipping Co Ltd v V/O Exportchleb [1966] 1 Q.B. 630