Jurisdiction of French courts for a construction site abroad: what to do if the arbitration clause fails?

Imagine: you are a property owner in Cholet, you sign a contract with a French company to build a villa in Saudi Arabia. The contract stipulates that any dispute will be decided by a Saudi court. But when the project goes sour, that court declares itself incompetent. What do you do? Can you bring a claim before a French court?

Many people ask this question without knowing that an answer has existed since 2009. The French Supreme Court, in a judgment of 30 September 2009 (No. 08-17.587), ruled: yes, a French court may have jurisdiction, even for a contract performed abroad, if the designated foreign court refuses to hear the case. A breath of fresh air for French companies, but also for individuals embarking on international projects.

In this article, I will tell you the story behind this decision, explain the judges' reasoning, and give you practical advice to avoid finding yourself in a legal dead end. Whether you are in Trélazé or Paris, the principles are the same.

The facts: a story like many others

The company THINET INTERNATIONAL, a French company specialising in real estate construction, had its registered office in Paris. It had signed a contract with a client to carry out a project in Saudi Arabia. The contract contained a jurisdiction clause (a clause designating which court will have jurisdiction in the event of a dispute): in this case, a Saudi court.

But then a disagreement arose between the parties. The French company wanted to bring the matter to court. It brought proceedings before… the Commercial Court of Paris. Why not the Saudi court? Because the latter had already declared itself incompetent to hear the dispute. The opposing party objected: the clause provided for Saudi jurisdiction, so the Paris court could not hear the case.

The Court of Appeal, ruling on a challenge to jurisdiction, found in favour of THINET INTERNATIONAL. It held that the designated foreign court had declared itself incompetent, that the claimant was a French company with its registered office in Paris, and that it had not been shown that the company had brought proceedings before the ordinary foreign courts (the ordinary Saudi courts).

The French Supreme Court approved this reasoning. It noted that Article 14 of the Civil Code (which allows a French national to sue a foreigner before a French court, even for facts occurring abroad) may apply, provided that the jurisdiction clause is no longer effective. In short, if the designated judge refuses to hear the case, the clause falls, and the court of the French claimant's domicile may be seised.

The court's reasoning — dissected

The French Supreme Court relies on two legal pillars. The first is Article 14 of the Civil Code: 'A foreigner, even one not residing in France, may be summoned before French courts for the performance of obligations contracted by him in France with a French national; he may be brought before French courts for obligations contracted by him abroad towards French nationals.' This text, dating from 1804, allows a French national to sue a foreigner before a French judge, even if the facts occurred abroad.

The second pillar is the concept of a jurisdiction clause. In principle, the parties are free to choose the competent court. But this freedom has a limit: if the designated court declares itself incompetent (or if the clause is invalid), then the clause becomes void (without effect). The French Supreme Court states this clearly in this judgment: the jurisdiction clause has 'neither application nor effect' since it was invalidated by the foreign judge's refusal.

The judges also verify that the French company did not bring proceedings before the ordinary foreign courts (for example, another Saudi court). If it had done so, that might have demonstrated that it accepted the jurisdiction of the Saudi courts. But in this case, nothing of the sort was proved.

This is a logical decision: a French litigant cannot be left without a remedy because the foreign judge designated in the contract refuses to hear the case. The jurisdiction of French courts then acts as a safety net.

What this means for you — in practical terms

For landlords, tenants, buyers or co-owners, this decision has direct implications if you sign a contract with a foreign party or if your contract contains a jurisdiction clause in favour of a foreign court.

Take an example: you are a property owner in Trélazé, you have a house built by a French company, but the land is located in Morocco. The contract says: 'any dispute shall be brought before the court of Marrakech'. If that court declares itself incompetent, you can bring proceedings before the Commercial Court of Paris (if your co-contractor has its registered office in Paris) or the High Court of your domicile, by virtue of Article 14.

Another scenario: you are a tenant of a flat in Cholet, but the landlord is a foreign company. If a dispute arises, you could, under certain conditions, sue that company in France, even if the lease provides for a foreign court.

In concrete terms, this case law gives you a second chance: if the jurisdiction clause fails (because the foreign judge refuses to hear the case, or because the clause is unfair), you can go back to French courts. But be careful: you must act quickly. Limitation periods (the time to bring legal action) are often 5 years for civil contracts, and 2 years for residential leases.

If you are in this situation, you must immediately consult a lawyer to check whether the clause is still valid and whether you can bring proceedings before a French court. Do not delay: every month that passes may reduce your chances.

Four tips to avoid this type of dispute

• Check the jurisdiction clause before signing: If the contract provides for a foreign court, make sure that court accepts to hear disputes of your type. Research local case law or seek legal advice. A simple 'competent court' can hide a trap.
• Prefer an international arbitration clause: Arbitration (recourse to a private arbitrator rather than a state judge) is often more reliable for international contracts. Arbitral awards (decisions of the arbitrator) are recognised in many countries. But beware: arbitration is expensive.
• Insert a safeguard clause: Add a clause providing that if the designated court declares itself incompetent, the dispute shall be brought before a specific French court (for example, the Commercial Court of Paris). This avoids uncertainty.
• Keep all evidence of the clause's failure: If the foreign judge refuses to hear the case, keep the decision of refusal (order or judgment). This is the key piece of evidence to convince the French judge of his jurisdiction.

Further reading: related case law and developments

This judgment is part of a line of decisions protecting French litigants against foreign jurisdiction clauses. For example, the French Supreme Court held in 2007 (Civ. 1st, 22 May 2007, No. 06-15.637) that a jurisdiction clause may be disregarded if it has the effect of depriving the claimant of his right of access to a court (a fundamental right).

In 2012, the same Court clarified (Civ. 1st, 26 September 2012, No. 11-20.422) that Article 14 of the Civil Code is a matter of public policy (a mandatory rule that applies even if the parties have agreed otherwise) when it comes to protecting a French national against a foreigner. But this protection is not absolute: if the French national freely chose the foreign clause, he may be bound.

The current trend is towards restricting jurisdiction clauses in international contracts involving a consumer (individual). European law (Brussels I bis Regulation) protects the consumer by allowing him to bring proceedings before his own court. But for purely international contracts outside the EU, Article 14 remains a valuable tool.

In the future, we can expect French judges to continue to check whether the foreign clause does not constitute a disproportionate obstacle to the right to bring legal proceedings. If you are a professional, it is better to anticipate by drafting robust clauses.

In practice: what to do

Checklist: What to do if your foreign jurisdiction clause fails

1. Obtain proof of the refusal: Obtain the decision of the foreign court declaring itself incompetent. Have it translated by a sworn translator.
2. Check your opponent's domicile: If it is a company, its registered office must be in France to use Article 14. If it is a French individual, you can also sue him at his domicile.
3. Consult a lawyer specialising in private international law: The rules of jurisdiction are complex. A lawyer will tell you which court to bring proceedings before (Commercial Court, High Court) and what deadlines to meet.
4. Act within the time limits: The limitation period (time to bring an action) is generally 5 years for contracts. But for leases, it is 3 years. Do not delay.
5. Prepare your file: Gather the contract, correspondence, invoices, evidence of the dispute. The more organised you are, the faster the judge can rule.

Are you in a similar situation? A first 30-minute consultation with Maître Zakine (€45) can save you months of proceedings — and often much more. Book an appointment →