It's very legal here in the United States. My company was recently sued in small claims court and before the judge even heard arguments, he had to acknowledge the 'change of venue' request we had presented to the court before the trial date (we also mailed it to the plaintiff).
Yes, we have a similar clause in my company's ToS.
The judge asked if both parties could present a copy of the ToS and we both did. The judge remarked that each ToS was identical. He clearly stated that all disagreements must be handled via arbitration, and that the courts had no jurisdiction in this case because both parties agreed to the same ToS. The judge dismissed right then and there.
The Plaintiff can still sue, but it must be done by arbitration.
On a personal note, I run a small business with a few great employees, built it from the ground up, and went through some tough, tough times, some folks in the past took a pay cut and so did I, but we pulled through. Anyway, the plaintiff was a dick. We provided double, in a dollar amount, of what this guy was suing for, and his case was baseless. I offered to pay his court fees, after three hours of mediation, before the case went before a judge, because I 99% already knew the outcome, but still, you never know. Even the mediator was shaking his head at the plaintiff. The guy rejected my offer and the above was the result.