Part III Jurisdiction, Foreign Judgments and Awards, 11 Jurisdiction Under the Brussels/Lugano System
Uglješa Grušić, Christian Heinze, Louise Merrett, Alex Mills, Carmen Otero García-Castrillón, Zheng Sophia Tang, Katarina Trimmings, Lara WalkerEdited By: Paul Torremans, James J. Fawcett
- Choice of law clauses — Jurisdiction under the Brussels-Lugano Regime — Jurisdiction under the Brussels I Regulation — Jurisdiction under the Lugano Convention
This chapter examines jurisdiction under the Brussels/Lugano system (ie the Brussels I Recast, the EC/Denmark Agreement, the Brussels Convention, and the Lugano Convention) and under the Modified Regulation, which deals with the allocation of jurisdiction within the United Kingdom. It also considers the effect of the Hague Convention on Choice of Court Agreements, which has been ratified by the European Union on its own behalf and on behalf of each of the Member States (except Denmark).
(a) Emergence of the Brussels/Lugano System and the Modified Regulation
One of the key pillars of European Union private international law is the effort to unify jurisdiction rules in civil and commercial matters and to ensure rapid and simple recognition and enforcement of judgments given in Member States. The current version of the EU rules on these matters is set out in the Brussels I Recast,1 which applies to proceedings commenced on References(p. 192) or after 10 January 2015.2 References in this chapter are to the rules in the Brussels I Recast, unless otherwise specified. The Brussels I Recast replaced the Brussels I Regulation,3 which itself had come into force on 1 March 2002.4
The Brussels I Recast directly applies in all the EU Member States,5 with the exception of Denmark.6 However, under the EC/Denmark Agreement7 the provisions of the Brussels I Regulation, with minor modifications, were applied by international law to the relations between the European Union and Denmark. For the purposes of the Agreement the application of the provisions of the Regulation were modified, but there were no modifications in relation to Chapter II (Jurisdiction) of the Regulation.8 Pursuant to the Agreement, Denmark has now agreed to apply the Brussels I Recast.9
The Brussels I Regulation was based on, and updated, the earlier Brussels Convention,10 which it replaced in virtually all cases.11 That Convention came into force in 1973 and applied (as an additional treaty arrangement) as between the original six members of the European Economic Community. The Brussels Convention was subsequently amended by four separate Accession Conventions, as the then European Community was enlarged.12References(p. 193) Although it has been replaced in virtually all cases by the Brussels I Regulation and now Brussels I Recast, unfortunately the Brussels Convention has not been consigned entirely to history. It still applies in relation to certain territories of Member States and will be examined later on in this chapter.13
The Treaty of Amsterdam, which entered into force in 1999, established Community competence in private international law, which enabled the Brussels Convention to be converted to a Regulation.14 The great advantages of a Regulation are that it is directly applicable in the Member States, automatically binding on new Member States, and may be readily modified through EU legislative procedures. In contrast, the Brussels Convention had to be ratified and in some cases separately implemented by each Contracting State. The legal basis for the Brussels I Recast is now set out in Title V of the Treaty on European Union, in particular Article 67, which authorises the adoption of measures in the field of judicial co-operation in civil matters. Article 81 specifically mentions “the compatibility of the rules applicable in the Member States concerning conflict of laws and of jurisdiction” and “the mutual recognition and enforcement between Member States of judgments and of decisions in extrajudicial cases”. The Brussels I Recast is one of a number of measures15 relating to judicial co-operation in civil matters having cross-border implications which have been adopted to promote the sound operation of the internal market.16 Such measures fall within the wider objective the European Union has set itself17 of establishing an area of freedom, security and justice, in which the free movement of persons is ensured.18
References(p. 194) The European Free Trade Association (EFTA) bloc was at one time the single most important trading partner of the European Community, and the need for legal and economic co-operation between the two blocs was recognised. A convention on jurisdiction and the recognition and enforcement of judgments was seen as part of this process of cooperation, and was agreed at Lugano in 1988.19 The 1988 Lugano Convention mirrored the Brussels Convention by adopting the same fundamental principles but there were some crucial differences in the terms of the two Conventions. The EFTA bloc has since contracted as its constituent states have acceded to the European Community and now European Union, being confined for the purposes of Lugano to just Iceland, Norway and Switzerland.20 With the replacement of the Brussels Convention in virtually all cases by the Brussels I Regulation it was desirable for the terms of the Lugano Convention to be amended to bring them into line so far as possible with the Regulation. A new Lugano Convention was concluded in 2007, which replaces the 1988 Convention.21 The European Community (now European Union) had exclusive competence to conclude this new Convention.22
The Brussels I Recast assigns jurisdiction to the courts of Member States. The United Kingdom is the Member State under the Brussels I Recast; this raises the particular problem of whether the courts of England and Wales, Scotland or Northern Ireland are to have jurisdiction. Section 16 of the Civil Jurisdiction and Judgments Act 1982, as amended,23 solved this problem by introducing a modified version of the Brussels I Regulation,24 which allocates jurisdiction within the United Kingdom. With some of the provisions in the Brussels I Recast it is possible to identify a part or place in the United Kingdom which is to have jurisdiction.25 It is not possible to do so where, for example, jurisdiction is allocated to the United Kingdom on the basis that the defendant is domiciled within the United Kingdom under Article 4 of the Brussels I Recast. The Modified Regulation is examined in detail towards the end of this chapter.26
(b) Interpretation of the Brussels/Lugano System and the Modified Regulation
(i) Referrals to the Court of Justice
Article 267 of the Treaty on the Functioning of the European Union authorises the Court of Justice, at the request of a Member State court, to give preliminary rulings on the validity and interpretation of acts of the institutions, bodies, offices or agencies of the Union, which obviously includes interpretation of the Brussels I Recast.27 A court can only request a preliminary ruling “if it considers that a decision on the question is necessary to enable it to give judgment”.28 As such, no reference is necessary or possible if the meaning of the Brussels I Recast is clear (known in EU law as the acte clair doctrine). The English courts have on occasion References(p. 195) relied on this doctrine in matters which might be considered slightly controversial,29 but in general have made numerous references to the Court of Justice in relation to the interpretation of the Brussels Convention and Regulation. If a matter of interpretation of the Brussels I Recast is not acte clair and raised in a court other than the Supreme Court, a reference to the Court of Justice is optional. A reference must be made as a matter of EU law if the matter is not acte clair and is raised in the UK Supreme Court (as the national court of final appeal). Under the EC/Denmark Agreement, the Danish courts are required to request a ruling from the European Court of Justice in the same circumstances as the courts of another Member State are required to do so in relation to the Brussels I Recast.30
The Lugano Convention is part of EU law and, accordingly, the Court of Justice also has jurisdiction to give rulings on the interpretation of its provisions.31 However, a reference for such a ruling can only be made from a court or tribunal of a European Union Member State, not from the courts of one of the three EFTA contracting parties. Where a reference to the Court of Justice is made for such a ruling, the EFTA States are entitled to submit statements of case or written observations.32 Any court applying and interpreting the Convention is required to pay due account to the principles laid down in any relevant decision of the Court of Justice.33 This obligation covers not only the courts in the Member States but also the courts in the three EFTA States.34
The Court of Justice does not, however, have jurisdiction to give a preliminary ruling on a question of interpretation of the Modified Regulation.35 Even though this is modelled on the Brussels I Regulation, the allocation of jurisdiction within the United Kingdom is not a matter of EU law. Section 16(3)(a) of the Civil Jurisdiction and Judgments Act 1982 requires the English courts to pay regard to the decisions of the Court of Justice and to the relevant principles followed by it in relation to the jurisdictional provisions in Title II of the Brussels Convention or Chapter II of the Brussels I Regulation and Brussels I Recast.36 However, if the Court of Justice interprets the Brussels I Regulation or Brussels I Recast in a way of which the United Kingdom disapproves, the United Kingdom can alter the Modified Regulation to nullify such decisions in relation to allocating jurisdiction within the United Kingdom.37
(ii) The principles and decisions laid down by the Court of Justice in respect of the Brussels I Regulation and Brussels Convention
The Brussels I Recast should be interpreted in the light of the substantial body of case law decided under the Brussels I Regulation and the Brussels Convention.38 Many of the rules in References(p. 196) the Brussels I Recast are the same as those in the Brussels I Regulation or Brussels Convention and their meaning has previously been explained by the Court of Justice. Even where the rules have been modified, an understanding of the previously applicable rules may assist in contextualising and interpreting the changes.
Other decisions by the Court of Justice may also be relevant in so far as they lay down principles of interpretation. These principles are important not only when interpreting rules in the Brussels I Recast which have been directly borrowed from the Brussels I Regulation or Brussels Convention but also when interpreting new rules introduced by the Brussels I Recast. The principles laid down by the Court of Justice when interpreting the Brussels I Regulation and Brussels Convention are as follows:
(i) The meaning of a provision should be ascertained in the light of its purpose rather than by taking its literal meaning.39 This approach was adopted under the Convention,40 and the objectives of the Brussels I Regulation and Brussels I Recast are broadly the same as those of the Convention.41 The Recitals of the Brussels I Recast are intended to serve as particularly important aids to its interpretation, including by setting out its object and purpose. The context of a provision, including its relationship with other provisions in the Brussels I Recast, may also assist in its interpretation.42
(ii) As a general principle, the terms of the Brussels I Recast should be interpreted autonomously,43 rather than by reference to national law. The reason for this is that many of the concepts in the Brussels I Recast have different meanings under the separate national laws of the Member States and reference to national law inevitably leads to a lack of uniformity in interpretation. The objectives of the Brussels I Recast therefore require that it should be given a uniform application throughout the Community where possible. A number of important changes introduced by the Brussels I Regulation replaced rules which under the Convention had been interpreted as requiring a reference to national law with autonomous definitions.44 As an implication of this interpretive principle, another source of authority for the English courts is the decisions of the courts of other Member States in relation to the Brussels I Recast, the Brussels I Regulation and the Brussels Convention. English courts should also always be prepared to consider the texts of the Brussels I Recast in other languages, which is what they have done with the Brussels I Regulation and Brussels Convention.45
Under the Lugano Convention, due account must similarly be paid by the courts of both Member States and the three EFTA States to the principles laid down by any relevant decision rendered by the national courts of the states bound by the Convention.46 A relevant decision, whether of the Court of Justice or a national court, may concern not just a provision of the Lugano Convention (2007) but also any similar provision of References(p. 197) the Brussels I Regulation, the Brussels Convention or the EC/Denmark Agreement.47 A relevant decision of a national court may also concern the 1988 Lugano Convention.48
(iii) In ascertaining the meaning of concepts used in the Brussels I Recast, regard should be had to the meaning of cognate concepts to be found in the EU Treaties or in secondary legislation.49 The need for such an interpretation, which was warranted under the Brussels Convention,50 is even more pertinent now that the Convention has been replaced by a Regulation and has therefore been integrated into the Community legal order in a more systematic and direct manner.51
(iv) As discussed in various places below, there are more specific principles where the Court of Justice has identified the purpose underlying a particular provision and has laid down policy considerations to be taken into account, in particular, whether a particular provision is to be narrowly or widely interpreted.
(iii) Aids to interpretation
The interpretation of the Brussels I Recast, Brussels I Regulation, and Brussels Convention may also be assisted by reference to various reports which form part of the negotiating or drafting history of each of these instruments. These reports may also be relied on in interpreting the Modified Regulation which is modelled on the Brussels I Regulation and allocates jurisdiction within the United Kingdom.52
As noted above, the Brussels I Recast was adopted in 2012. The Brussels I Regulation had required the Commission, no later than five years after the entry into force of the Regulation, to present a Report on the application of the Regulation,53 accompanied by proposals for such changes as thought necessary. In pursuance of this obligation, the Report on the Application of Regulation Brussels I in the Member States was prepared by the Institute of Private International Law at the University of Heidelberg (the Hess, Pfeiffer and Schlosser Report).54 This Report was an empirical study based on questionnaires sent out by the general reporters to national contributors, who, after addressing stakeholders, collecting statistical information, and conducting interviews with the profession and other interested parties, produced National Reports. In the light of these National Reports, and the research of the general reporters themselves, the Hess, Pfeiffer and Schlosser Report identified problems with the operation of the Regulation and indicated possible solutions. This Report forms part of the context for the emergence of a Recast Regulation, although a degree of caution should be exercised before relying on it to interpret the Brussels I Recast, as the changes finally References(p. 198) adopted may not reflect those proposed in the Report. The European Commission proposal for a Recast Brussels I Regulation55 may also be considered helpful interpretive context, but only to the extent that the Commission proposals were actually adopted in the final Brussels I Recast, which is certainly not true in all respects, and even then only reflects the view of the Commission which is not necessarily determinative.
An Explanatory Memorandum from the Commission of the European Communities was also produced at the time of the proposal for a Regulation to replace the Brussels Convention.56 This is, however, fairly brief and again only represents the view of the Commission.57 There was no official report accompanying the Brussels I Regulation itself. This contrasts with the position in relation to the Brussels Convention, the draft of which was accompanied by the Jenard Report.58 This is a commentary prepared by the rapporteur of the committee of experts which drew up the draft Convention. Each of the first three Accession Conventions to the Brussels Convention is also accompanied by a Report,59 as was the 1988 Lugano Convention.60 The Court of Justice has not infrequently referred to the Jenard Report and to the subsequent Reports in order to ascertain the meaning of provisions in the Brussels Convention. As noted above, these Reports are still relevant to interpreting the many provisions in the Brussels I Regulation and now Brussels I Recast which have been taken unaltered from the Convention. There is, however, no authoritative Report explaining the changes introduced by the Brussels I Regulation or the Brussels I Recast.
(a) A special definition of domicile
Extensive use is made of the concept of domicile for the purpose of deciding when the Brussels I Recast applies, and, where it does, of allocating jurisdiction to particular Member States. However, despite the importance of this concept, it is only partially defined in the Brussels I Recast. This raises a significant problem since the meaning of the concept differs in some respects from one Member State to another.
(i) Natural persons
Article 62 of the Brussels I Recast61 deals with the question of which Member State’s definition of domicile is to be used—in practice, this rule applies only for natural persons because Article 63, discussed below, covers companies and other legal persons. The first paragraph states that the courts of the Member State seised of the matter shall apply their own definition of domicile to determine whether a party is domiciled in that Member State. According to the second paragraph, in order to determine whether a party is domiciled in another Member State, a court must apply the law of that State; eg if the United Kingdom courts want to know whether the defendant is domiciled in France, they must apply the French definition of domicile used References(p. 199) for these purposes.62 For natural persons, the meaning of “domicile” for the purposes of the Brussels I Recast therefore varies for each Member State. This alone should not lead to inconsistent decisions on jurisdiction because the varied meanings are applied identically by the courts of every Member State, although it does mean that a natural person may be domiciled in more than one Member State, or even, more problematically, that a person living in several different Member States may at least in theory not be domiciled in any of them.63
What English law usually means by “domicile” is far removed from what civil law means.64 To aid in harmonisation of the law on jurisdiction, the Civil Jurisdiction and Judgments Order 200165 therefore contains special provisions on the meaning of the domicile of an individual for the purposes of the Brussels I Regulation and now Brussels I Recast. The simplest solution, which would have been to equate an individual’s habitual residence with his domicile,66 would have been problematic because of the separate references in the Brussels I Regulation to habitual residence.67 Paragraph 9 of Schedule 1 of the Civil Jurisdiction and Judgments Order 2001 adopts a complicated solution, with different rules for each of the contexts under the Brussels I Regulation and now Brussels I Recast in which an individual’s domicile has to be ascertained. Thus, the rules68 determine when an individual is domiciled: (i) in the United Kingdom, (ii) in a particular part of the United Kingdom, (iii) in a particular place in the United Kingdom and (iv) in a state other than a Brussels I Recast State. For most of these purposes69 domicile is equated with the state where (a) a person is resident70 and (b) the nature and circumstances of his residence indicate that he has a substantial connection with it.71 Under some of these rules, but not others, a rebuttable presumption of a substantial connection arises where there has been a period of residence for three months or more.72 The onus is on the claimant to show a good arguable case that the defendant is domiciled in a particular State.73 If the defendant’s current domicile is References(p. 200) unknown and cannot be determined, the defendant may be treated as domiciled at their last known place of domicile.74
(ii) Companies and other legal persons; trusts
Since the adoption of the Brussels I Regulation, a different approach has been taken towards determining the domicile of companies and other legal persons.75 In order “to make the common rules more transparent and to avoid conflicts of jurisdiction”,76 Article 63 of the Brussels I Recast77 gives an autonomous definition to the concept of the domicile of a company. It provides in paragraph (1) that, “for the purposes of this Regulation, a company or other legal person or association of natural or legal persons is domiciled at the place where it has its:
(a) statutory seat,
(b) central administration, or
(c) principal place of business.
Because these are alternatives, a company or other legal person can, in principle, be domiciled in more than one Member State.
Article 63 does not eliminate all the definitional problems that can arise in relation to the domicile of a company. What is the definition of the terms “statutory seat”, “central administration” and “principal place of business”? Given that Article 63 is concerned to give an autonomous meaning to the concept of the domicile of a company, these terms should also be given an autonomous meaning. The three alternative criteria used in Article 63(1) correspond to the three criteria (registered office, central administration or principal place of business) used in Article 54 of the Treaty on the Functioning of the European Union, which deals with the right of establishment of companies within the Community. Regard should be had to the case law on these Article 54 terms when ascertaining the meaning of the terms used in Article 63.78
One immediate difficulty is that the concept of the statutory seat of a company is well known in civil law systems,79 but would be difficult to apply to companies established in common law jurisdictions. Article 63(2) caters for this difference by stating that:
For the purposes of Ireland, Cyprus and the United Kingdom, “statutory seat” means the registered office or, where there is no such office anywhere, the place of incorporation or, where there is no such place anywhere, the place under the law of which the formation took place.
This provision only applies “For the purposes of Ireland, Cyprus and the United Kingdom.” It is somewhat unclear from the text whether “for the purposes of” is supposed to mean “when determining whether a company is domiciled in” these jurisdictions, or “when the domicile of a company is being determined by a court in” one of these jurisdictions. The former would mean, for example, that an English or German court determining whether a company is domiciled in England should apply the revised test. The latter would mean that an English court would apply the revised test when determining whether a company is domiciled in either England or Germany, but the test would never be applied by a German References(p. 201) court. The latter approach would, however, mean that different Member State courts would apply different tests for domicile for the same jurisdiction, and should be rejected. Although the drafting is not clear, this was the apparent intended effect of section 42 of the Civil Jurisdiction and Judgments Act 1982 in relation to the Brussels Convention.80 Thus the modified test should apply in the situation where an English court is determining whether it has jurisdiction on the basis of the company being domiciled in England, or where a German court is determining whether a company is domiciled in England, but not where the English courts are considering whether a company is domiciled in Germany.
As regards the meaning of “central administration”, this cannot be identified simply by looking at where important personnel, such as the chief executive officer and various departmental heads, are located.81 A court may take into account whether the activities of a company office are subject to the control of senior management located elsewhere,82 but the search should not necessarily be for the highest level of control, but rather “the place where the company concerned, through its relevant organs according to its own constitutional provisions, takes the decisions that are essential for that company’s operations” or “conducts its entrepreneurial management”.83
Central administration is a different concept from “central management and control”, which is a concept used by the United Kingdom in the context of the Brussels Convention (which did not itself contain a definition of “seat” for the purposes of common law jurisdictions).84 In ascertaining where a company has its central management and control it is relevant to look at where the directors are resident, hold meetings and decide major policy issues,85 and whether the company has just started.86 This focus on the board of directors is different from the entrepreneurial emphasis of the concept of central administration.
As regards the meaning of the “principal place of business”, this is a concept with which the English courts are already familiar. Leggatt LJ in The Rewia held, in the context of a choice of jurisdiction clause providing for trial in the principal place of business, that this referred to the “chief” or “most important” place of business, rather than the “main” place of business.87 It is not necessarily the place where most of the business is carried out. This case has been described as “an essential tool” in deciding on the principal place of business for the purposes of Article 63 of the Brussels I Recast.88 It has been suggested that the principal place of business may be identified by looking at where important personnel, such as the chief executive officer and various departmental heads, are located,89 although that may overlap extensively References(p. 202) with the meaning of “central administration”, and the better view is probably that central administration and principal place of business should be given more distinctive definitions, with the latter focusing more on the activities rather than administration of the company. The domicile of a company is tested at the time of commencement of proceedings, so a company may have no “principal place of business” if it has ceased all activities when proceedings are commenced against it.90
When it comes to the domicile of a trust, under Article 63(3) the courts seised of the matter are instructed to apply their rules of private international law to determine whether the trust is domiciled in their jurisdiction.91 The courts of a Member State must do likewise when ascertaining the seat of a company for the purposes of exclusive jurisdiction under Article 24(2) of the Brussels I Recast.92
(b) When does the Brussels I Recast apply?
(i) The matter must be within the scope of the Brussels I Recast
None of its provisions, whether on jurisdiction or on recognition and enforcement of judgments, will apply unless the matter is within the scope of the Brussels I Recast.
Article 1 is designed to deal with the scope of the Brussels I Recast. But before looking at this, various other limitations on the operation of the Brussels I Recast must be mentioned. First, the Brussels I Recast is only concerned with the international jurisdiction of Member States. This limitation was spelt out in the preamble to the Brussels Convention93 but has been held to apply also in relation to the Brussels I Regulation, even though it is not mentioned in the Recitals.94 It follows that the Brussels I Recast should not apply where a dispute involves no foreign element or where the foreign element only involves another part of the United Kingdom. It is, perhaps, unclear if a foreign element is established merely because the parties have chosen a foreign court in a jurisdiction agreement, or because the dispute could otherwise be litigated before a foreign court, although the better view is probably that this is sufficient.95 The foreign element can clearly be satisfied by connections with a non-Member State.96 Thus the Brussels I Recast will apply where there are connections with two States, one of which is a Member State and the other a non-Member State, as, for example, where both parties are domiciled in a Member State and the events at issue occurred in a non-Member References(p. 203) State.97 Despite its justification being linked to improving the functioning of the internal market, the Brussels I Recast does not require connections with two Member States.
Second, the Brussels I Recast does not affect certain other conventions on jurisdiction or recognition and enforcement which Member States have in the past entered into,98 or statutes implementing them.99 There is no provision, as there is under the Brussels Convention100 for conventions entered into by Member States in the future. The European Union does, however, have the power to enter into international agreements which may override the rules in the Brussels I Recast,101 and this power has been exercised in ratifying the Hague Convention on Choice of Court Agreements.102
In England, admiralty jurisdiction and carriage by road are examples of areas which are left largely untouched because of conventions entered into in the past.103 Nonetheless, some of the provisions in the Brussels I Recast will still apply. The application of the Brussels I Recast is precluded solely in relation to questions governed specifically by the specialised convention in question.104 In so far as the latter is silent on a jurisdictional matter, the Brussels I Recast will still apply.105 Further, the Court of Justice has suggested that prior conventions are only preserved to the extent that their rules are consistent with the principles and objectives of the Brussels I Regulation (and now Brussels I Recast),106 which may affect how those conventions can permissibly be interpreted.107
References(p. 204) Thirdly, the rules on jurisdiction and recognition and enforcement make it clear that they do not apply to proceedings, or issues arising in proceedings, in Member States concerning the recognition and enforcement of judgments given in non-Member States.108
(a) Civil and commercial matters
Article 1 of the Brussels I Recast declares that “This Regulation shall apply in civil and commercial matters whatever the nature of the court or tribunal.”
No definition is given of “civil and commercial matters”,109 although it is clear that “civil” extends coverage to non-commercial claims such as torts and employment disputes.110 Article 1 goes on to say that it does not include “revenue,111 customs112 or administrative matters”,113 or “the liability of the State for acts and omissions in the exercise of State authority (acta iure imperii)”.114 These words are there to make it clear that public law matters are excluded. The difficulty for English lawyers is that in domestic law the distinction between private and public law is not sharply drawn.115 In civil law jurisdictions there is a clearer distinction between the two, although the same criteria are not always applied when drawing the distinction. Some guidance on this definitional problem was given by the Court of Justice in the leading case of LTU v Eurocontrol116 where it was held that a Community meaning had to be given to “civil and commercial matters”, with the result that the Brussels Convention did not apply to the situation where a public authority was acting in the exercise of its powers. The public authority was an international organisation concerned with air safety; it was acting in the exercise of its powers when it sought to collect charges from an airline for the use of its services, the use of the services being obligatory and the rate of charge being fixed unilaterally.
The difficulty with requiring the public authority to be acting in the exercise of its powers, before the matter can be excluded from the Brussels I Recast, is that it is often hard to tell whether a public authority is acting in a private capacity or in the exercise of its powers.117References(p. 205) In Netherlands State v Rüffer118 the Court of Justice held that a public authority, in this case the Dutch State, was acting in the exercise of its powers in respect of a public waterway when it sought to recover from a German shipowner the costs of removing a wreck, even though under Dutch law (the Dutch courts being seised of the matter) the action was classified as one in tort. The action arose from international treaty obligations and would be regarded by many Member States as an administrative one, the common core of the national legal systems being an important consideration when giving a Community meaning to this concept. Similarly, an action in tort by Greek nationals against Germany to obtain compensation for damage caused by the German armed forces when occupying the territory of Greece was held not to constitute a civil and commercial matter, as operations conducted by armed forces are one of the characteristic emanations of state sovereignty.119
In other cases, however, the concept of civil and commercial matters appears to be interpreted expansively. A teacher, although the holder of a public office, was held not to be acting in the exercise of public authority powers when supervising a pupil who was killed in an accident, even though this was covered under a social insurance scheme.120 Nor was a public body acting in the exercise of public powers when it sought recovery under rules of civil law from a person of sums paid by the state by way of social assistance to the divorced spouse and child of that person,121 or when a public body sought, using principles of private law, to recover money inadvertently overpaid in the exercise of its public authority,122 or when a state-owned airline brought a competition law claim.123 An action brought by a consumer protection organisation against a trader was similarly held to be a civil matter.124 The former was a private body not acting in the exercise of public powers since its action was concerned with making relationships governed by private law subject to review by the courts. Likewise forfeiture proceedings for infringement of a trade mark brought by a Trading Standards Office in the Magistrates Court were a civil matter because they were for the benefit of a private individual.125 An action brought by a state by which it sought to enforce a private law guarantee contract was also similarly determined to be a civil and commercial matter.126 Where an action was brought by a guarantor (A) against an importer (F) after A had paid customs duties owed by F, the action fell within the concept of civil and commercial matters based on an examination of the legal relationship between the parties to the dispute and the basis of the action.127 A fine imposed by a court to enforce orders made in a commercial dispute was considered civil and commercial, even though not payable to a private party, because the underlying dispute concerned private rights.128 Similarly, a claim by a local authority for an References(p. 206) unpaid parking ticket was held to be civil and commercial, on the basis that the underlying relationship was contractual and the authority was not exercising public powers in pursuing the debt.129 Even a claim brought by the UK tax authorities against third parties outside the UK for conspiracy to evade UK VAT was considered to be civil and commercial (and not covered by the revenue exclusion), because the action was a claim in tort governed by private law and did not require the exercise of any special public powers.130
Article 1 states that the Brussels I Recast shall apply “whatever the nature of the court or tribunal”. It follows that a decision of a criminal court or administrative tribunal is within the Brussels I Recast provided that it relates to a civil or commercial matter.131 An example is provided by the decision where a criminal court awarded damages to the family of a pupil negligently killed by a teacher.132
Article 1 sets out a number of matters which are excluded from the scope of the Brussels I Recast, even though they are civil and commercial matters. In principle these matters should only be excluded where they are the main subject of the proceedings,133 although as discussed below this has raised particular difficulties in relation to the exclusion of arbitration.
(i) “The status or legal capacity of natural persons, rights in property arising out of a matrimonial relationship or out of a relationship deemed by the law applicable to such relationship to have comparable effects to marriage”
The Court of Justice has held that this exclusion should not apply where the relevant question arises as an incidental or preliminary matter, such as where a party contests a contractual obligation on the grounds of incapacity.134 For English lawyers there are no real problems in understanding what is meant by status135 or legal capacity of natural persons,136 although it should be noted that these must be given an autonomous EU meaning. The same cannot be said in respect of the concept of rights in property arising out of a matrimonial or comparable relationship.137 No guidance is given in the Brussels I Recast as to the meaning of this expression. According to the Schlosser Report it is designed to exclude the matrimonial regime used in civil law countries whereby special rules on separation or community of property are established in respect of family assets.138 The Court of Justice in the first De Cavel139 case held that rights in property arising out of a matrimonial relationship covered not only matrimonial regimes but also any proprietary relationship resulting directly from the marital relationship or its dissolution. It meant the exclusion of protective measures (freezing of assets) relating to References(p. 207) the property of the spouses pending divorce proceedings before a French court. The Court of Justice has also held that an action in respect of the husband’s management of his wife’s property must be considered to be closely connected with the proprietary relationship of the parties flowing from the marriage and was therefore excluded.140
There are great difficulties in applying these principles in a common law context. There is no English equivalent of the Continental matrimonial regime. In English law, a dispute concerning matrimonial property may simply be concerned with general property law principles, and the Brussels I Recast will apply, for example, where there is a dispute between a wife and a mortgagee bank in respect of a matrimonial home mortgaged by the husband.141 Prior to the exclusion of maintenance from the Brussels I Recast, difficulties also arose in determining whether a payment or transfer of property arising out of divorce proceedings was for maintenance or concerned “rights in property arising out of a matrimonial relationship”,142 but as maintenance is now also excluded143 this should no longer matter for present purposes.
(ii) “Bankruptcy, proceedings relating to the winding up of insolvent companies or other legal persons, judicial arrangements, compositions and analogous proceedings”144
It is intended that only proceedings arising directly from, and closely connected with, a bankruptcy should be excluded from the Brussels I Recast.145 In Gourdain v Nadler146 the Court of Justice held that a French provision, under which a manager of a company in liquidation could be ordered to pay money to form part of the assets of the company, came within the bankruptcy exclusion, the legal foundation of this action being the French law of bankruptcy and it being very closely connected with the winding-up proceedings. It has been said, obiter, that claims in a compulsory liquidation by a liquidator under section 238 (transactions at an undervalue) or section 239 (preferences) of the Insolvency Act 1986 would be within the exception.147
The Court of Justice has, however, emphasised the need to interpret this provision strictly. A claim by a trustee in bankruptcy to recover from a third party assets said to belong to the bankrupt’s estate did not, it was held, have bankruptcy as its principal subject matter, and thus fell outside the bankruptcy exclusion,148 as did a claim against an insolvent purchaser References(p. 208) based on a retention of title clause,149 and even proceedings brought by an assignee of a liquidator’s right to have a transaction set aside in exercise of that right.150 Likewise a claim by a trustee in bankruptcy for an order for the sale of the bankrupt’s villa did not have bankruptcy as its principal subject matter.151 It was a property claim that happened to be brought by a trustee in bankruptcy.
(iii) “Social Security”152
A claim directly relating to social security brought by or against administrative authorities would not be covered by the Brussels I Recast. A claim brought by a state authority to recover money paid as social security to a divorced person, from their former partner, was held not to be covered by this exclusion, but was still not covered by the Brussels Convention because it involved the exercise of public powers to override the settlement agreement between the partners.153
The essential purpose of the arbitration exclusion is to preserve the functioning of the New York Convention 1958, which regulates the effectiveness of arbitration agreements and the recognition and enforcement of arbitral awards.154 The exact scope of the arbitration exclusion from the Brussels Convention, Brussels I Regulation, and now Brussels I Recast has, however, been one of its most contentious issues.155 Some aspects of the exclusion are clear. It has been held that the Brussels Convention does not apply to proceedings and decisions concerning applications for the revocation, amendment, recognition and enforcement of arbitration awards.156 Also clearly excluded, according to the Court of Justice, are proceedings which are ancillary to arbitration proceedings, such as the appointment or dismissal of arbitrators, the fixing of the place of arbitration or the extension of the time limit for making awards.157 Recital (12) to the Brussels I Recast now provides, in part, that:
This Regulation should not apply to any action or ancillary proceedings relating to, in particular, the establishment of an arbitral tribunal, the powers of arbitrators, the conduct of an arbitration procedure or any other aspects of such a procedure, nor to any action or judgment concerning the annulment, review, appeal, recognition or enforcement of an arbitral award.
The English courts have similarly referred to the exclusion of judicial proceedings which are integral to the arbitration process,158 and of proceedings directed to the regulation and References(p. 209) support of arbitration proceedings and awards, such as for security for the costs of an arbitration.159 However, provisional measures granted by a court using Article 35 of the Brussels I Recast160 in support of arbitration proceedings are not ancillary to those proceedings but in parallel to them and are therefore not excluded.161 They do not concern arbitration as such but the protection of the substantive rights of the parties.
The difficult issues concern proceedings in which the validity of the arbitration agreement is itself contested. This may arise in three ways.
First, the proceedings may have as their sole object the determination of whether the arbitration agreement is valid or invalid, such as where a claim is brought for declaratory relief in the English courts, or where the English courts are asked to restrain a party from commencing or continuing foreign proceedings by way of ordering specific performance of an English arbitration agreement.162 In Marc Rich & Co v Società Italiana Impianti PA163 the Court of Justice did not decide whether, when the issue of the existence or validity of the arbitration agreement arises on its own (ie not as a preliminary issue), this comes within the arbitration exclusion,164 but the Advocate General supported the view that this is also excluded.165 In Van Uden Maritime, the Court of Justice suggested that the Brussels Convention does not apply to judgments solely focused on determining whether an arbitration agreement is valid or not or, because it is invalid, ordering the parties not to continue the arbitration proceedings,166 and this was confirmed (in relation to the Brussels I Regulation) in the West Tankers decision,167 discussed further below.
Second, the proceedings may have as their main object a matter which would fall within the scope of the arbitration exclusion, such as the appointment of an arbitrator, but the validity of the arbitration agreement must be determined as a preliminary question to that issue. In the Marc Rich case the Court of Justice held that whether a dispute is excluded from the scope of the Brussels Convention should be determined by reference solely to the subject matter of the dispute.168 The fact that, during the course of the dispute, there has to be determined a preliminary issue, whatever that issue may be, cannot affect the exclusion. It followed that References(p. 210) the entire litigation concerning the appointment of an arbitrator was excluded, even though the existence or validity of the arbitration agreement was raised as a preliminary issue in that litigation.
Third, the proceedings may have as their main object a matter which would fall within the scope of the Brussels I Recast, such as an ordinary claim for breach of contract, but the defendant claims that the court should not take jurisdiction because the proceedings would be in breach of an arbitration agreement. Here the approaches in the first two types of cases above would seem in tension with one another. Under the first, the determination of the validity of an arbitration agreement should not fall within the scope of the Brussels I Recast, while under the second, the main subject matter of the proceedings should determine that they do fall within the scope of the Brussels I Recast. It was long accepted that the mere fact that the invalidity of the arbitration clause is dealt with as a preliminary issue does not bring the judgment as to the substance of the claim within the exclusion.169 But this does not resolve the question of what status should be given to a decision by the courts of a Member State regarding the invalidity of an arbitration clause, which is made incidental to a decision on the merits which falls within the scope of the Brussels I Recast.
This precise issue arose in relation to the Brussels I Regulation in the case of Allianz SpA v West Tankers.170
West Tankers owned a ship, the Front Comor, which was chartered by Erg Petroli. The charter contract contained an English arbitration agreement. The ship was involved in a collision with a jetty in Italy owned by Erg. Erg claimed against its insurance policy with Allianz up to the limit of its insurance cover, and commenced arbitral proceedings in London against West Tankers for the excess. Allianz was also later added as a party to the English arbitration. Allianz commenced proceedings in the Italian courts against West Tankers, exercising rights of subrogation to Erg’s claims, seeking to recover the sums paid to Erg. West Tankers commenced proceedings in the English courts asking for a declaration that Allianz was bound by the arbitration agreement in the charter contract, and an injunction to require Allianz to cease the Italian proceedings.
The House of Lords confidently expressed the view that proceedings for an injunction restraining a person from commencing or continuing proceedings abroad on the ground that such proceedings are in breach of an arbitration agreement are excluded since they “are entirely to protect the contractual right to have the dispute determined by arbitration”.171 The Court of Justice determined, however, that the House of Lords had focused on the wrong set of proceedings. The key question was not whether the English proceedings fell within the scope of the Brussels I Regulation (as proceedings solely concerned with the validity of an arbitration agreement, they did not), but whether the Italian proceedings did so. The court held that the Italian proceedings fell within the scope of the Brussels I Regulation, even though they would require the Italian court to determine (as a preliminary question) whether the claim was covered by the arbitration agreement. Thus, the court determined that proceedings whose substance falls within the scope of the Brussels I Regulation do so in their entirety, even if they require determination of the validity of an arbitration agreement as a preliminary question. As discussed further elsewhere, a key consequence of this was that an anti-suit injunction could not be awarded, as it would be contrary to the principle of mutual References(p. 211) trust between the courts of Member States to interfere with the ability of the Italian courts to determine the question of their own jurisdiction under the Brussels I Regulation.172 A second consequence was that if the Italian courts did decide that the arbitration agreement was inapplicable, that decision, as a judgment under the Brussels I Regulation, would be binding on the English courts.173
The decision in West Tankers was controversial,174 principally for the reason that the second consequence undermined the effectiveness of arbitration agreements, because it gave priority to the Italian courts rather than the English courts (the courts of the seat of the arbitration) in determining this question. Parties entering into an exclusive English arbitration agreement are likely to anticipate that any judgment as to whether the arbitration can continue will be given by the English courts (although this argument does somewhat presume the validity of the arbitration agreement), and giving priority to the Italian courts could promote abusive litigation tactics designed to frustrate the effectiveness of the arbitration agreement. As a result of these criticisms, the issue was much discussed in the negotiations for the Brussels I Recast.175 The Hess, Pfeiffer and Schlosser Report and the European Commission advocated bringing at least some proceedings relating to arbitration within the scope of the Brussels I Recast, giving priority to the courts of the seat of arbitration (or the tribunal itself if established) in case of parallel proceedings.176 In the end, however, this approach was not adopted, and a new Recital (12) was added providing (in part) as follows:
This Regulation should not apply to arbitration. Nothing in this Regulation should prevent the courts of a Member State, when seised of an action in a matter in respect of which the parties have entered into an arbitration agreement, from referring the parties to arbitration, from staying or dismissing the proceedings, or from examining whether the arbitration agreement is null and void, inoperative or incapable of being performed, in accordance with their national law.
A ruling given by a court of a Member State as to whether or not an arbitration agreement is null and void, inoperative or incapable of being performed should not be subject to the rules of recognition and enforcement laid down in this Regulation, regardless of whether the court decided on this as a principal issue or as an incidental question.
Although a Recital is not the most satisfactory way of achieving this outcome,177 the clear intention here is to reverse the second consequence of the West Tankers judgment (but not the first178). Where a decision on the validity of an arbitration agreement arises as an incidental question to a claim which falls within the scope of the Brussels I Recast, it is now clear that the decision as to the validity of the arbitration agreement itself does not fall within the scope of the Brussels I Recast, and does not bind other Member State courts.
(v) “Maintenance obligations arising from a family relationship, parentage, marriage or affinity”
Maintenance obligations are (newly) excluded from the scope of the Brussels I Recast, following the adoption of Council Regulation (EC) No 4/2009 of 18 December 2008 on References(p. 212) jurisdiction, applicable law, recognition and enforcement of decisions and cooperation in matters relating to maintenance obligations.179 The Brussels I Regulation and Brussels Convention had both included rules dealing with jurisdiction over maintenance claims.180
Maintenance is not defined in the Brussels I Recast and was not defined in the Brussels I Regulation or Brussels Convention, which raised some difficulties,181 although the 2008 Maintenance Regulation and the case law arising thereunder is likely to provide greater clarity. Under the Convention, it was held that maintenance can include lump sum as well as periodical payments.182 The subject of maintenance was discussed by the Court of Justice in the second De Cavel case,183 where it was held that interim compensatory payments payable on a monthly basis by one spouse to another as part of a French judgment dissolving a marriage were in the nature of maintenance, a crucial point being that they were designed to support that spouse and were based on need. This meant that the case fell within the terms of the Brussels Convention, but would now mean that it fell outside the scope of the Brussels I Recast. The application of these criteria to the financial orders that can be made by English courts is dealt with later on in the book, where maintenance is considered in detail.184
(vi) “Wills and succession, including maintenance obligations arising by reason of death”
The concept of wills and succession is well understood in English law,185 although once again it must be noted that it should be given an autonomous meaning for the purposes of the Brussels I Recast. The exclusion of these matters from the Brussels I Recast is motivated in part by the adoption in 2012 of a Regulation dealing specifically with jurisdiction and applicable law in matters of succession,186 and the jurisprudence on the Succession Regulation should aid in interpretation.187 The United Kingdom has, however, not opted in to the Succession Regulation, and thus these matters remain governed by common law jurisdictional rules.188
(ii) Whether the defendant is domiciled in a Member State
When examining the scope of the Brussels I Recast, it is necessary to distinguish between: (a) bases of jurisdiction (Chapter II, Sections 1–7); (b) other provisions on jurisdiction in Chapter II; (c) provisions on recognition and enforcement in Chapter III. It is only in the first of these, the bases of jurisdiction under the Brussels I Recast, that an initial basic distinction is drawn between the situation where the defendant is and is not domiciled in a Member State.189 Section 1 of Chapter II notes certain exceptions where this basic distinction does not operate. The position can be summarised as follows:
(a) Where the defendant is domiciled in a Member State the bases of jurisdiction under the Brussels I Recast will apply and not the traditional rules of jurisdiction of the forum.
(b) Where the defendant is not domiciled in a Member State, in general, the traditional rules of jurisdiction of the forum will apply.
(c) There are exceptions to (b), ie some of the bases of jurisdiction under the Brussels I Recast (Articles 18(1), 21(2), 24 and 25) will apply to defendants, even though they are not domiciled in a Member State.
Each of these will be looked at in more detail.
(a) Where the defendant is domiciled in a Member State
Article 4 contains the most important basis of jurisdiction under the Brussels I Recast, that a defendant domiciled in a Member State is subject to the jurisdiction of the courts of that State. If the defendant is to be sued in the courts of a Member State other than that of his domicile, Article 5(1) provides that this can only be done by virtue of the bases of jurisdiction set out in Sections 2 to 7. This prevents national courts from using their traditional rules on jurisdiction, including their exorbitant rules, against a defendant who is domiciled in a Member State.190 In the United Kingdom’s case this means that, against such a defendant, jurisdiction can no longer be founded on presence of the defendant in the forum or through service out of the jurisdiction under rule 6.36 and Practice Direction 6B of the Civil Procedure Rules.191 (Where there is a basis of jurisdiction under the Brussels I Recast, the claim form may be served (without the permission of the court) on a defendant with a place of business in the territory under CPR rule 6.9 or outside the territory pursuant to CPR rule 6.33.)192 Article 5(1) does not refer to the domicile of the claimant. It follows that, for example, a Japanese domiciliary, although not domiciled in a Member State, would have to use the bases of jurisdiction under the Brussels I Recast if he wished to sue in a Member State a defendant who was so domiciled.
Articles 4 and 5 require courts to decide whether a defendant is domiciled in a Member State. At least for English purposes, it is the defendant’s domicile at the moment of the issue of proceedings which matters, rather than at the time of their subsequent service on the defendant.193 As discussed previously, Paragraph 9 of Schedule 1 to the Civil Jurisdiction and Judgments Order 2001194 contains a provision for determining, for the purposes of the Brussels I Recast, when an individual is domiciled in the United Kingdom.195 He is so domiciled if and only if (a) he is resident in the United Kingdom, and (b) the nature and circumstances of his residence indicate that he has a substantial connection with the United Kingdom, with a period of three months residence giving rise to a presumed substantial connection. If the individual is not domiciled in the United Kingdom it then has to be seen whether he is domiciled in another Member State. Paragraph 9 has no provisions for determining this. This is consistent with Article 62 of the Brussels I Recast, which, it will be recalled,196 provides that, in order to determine whether a party is domiciled in another Member State, the courts shall apply the law of that state.
References(p. 214) As regards the domicile of companies, recourse must be had to the autonomous definition contained in Article 63 of the Brussels I Recast. Accordingly, a company will be domiciled in the United Kingdom if it has its statutory seat, or central administration, or principal place of business there. In the situation where a court in the United Kingdom (or indeed a court in another Member State) is deciding whether a company is domiciled in the United Kingdom,197 “statutory seat” means the registered office or, where there is no such office anywhere, the place of incorporation or, where there is no such place anywhere, the place under the law of which the formation took place. Article 63 will likewise apply in order to determine whether a company is domiciled in another Member State, although the special provision equating the “statutory seat” with the registered office will only apply if the other Member State is Cyprus or Ireland. Under Article 63 a company may be domiciled in more than one State. For example, it may have its statutory seat in Panama but its central administration in Germany. In such a case the company undoubtedly has a domicile in a Member State. The bases of jurisdiction contained in the Brussels I Recast will apply and the company cannot be sued in a Member State under that State’s traditional rules on jurisdiction.198
(b) The defendant is not domiciled in a Member State
Where the defendant is not domiciled in a Member State, Article 6 states that the jurisdiction of the courts of each Member State shall, subject to Article 18(1), Article 21(2) and Articles 24 and 25, be determined by the law of that Member State. If, to take an example, an Englishman wishes to sue a Californian domiciliary in England, he would generally have to do so under the traditional English rules on jurisdiction (examined in Chapter 12), which are, by and large, more generous to the claimant than their equivalent under the Brussels I Recast, although consider jurisdiction to be discretionary. Article 6 therefore recognises the use of exorbitant jurisdiction by Member States in certain circumstances. This has far-reaching consequences when it comes to enforcing judgments and declining jurisdiction in cases of lis pendens between Member States, which are matters governed by the Brussels I Recast regardless of domicile.199
Article 6 requires the courts of Member States to ascertain when a defendant is not domiciled in any Member State. In practice, this usually does not require identifying the domicile of the defendant, but only deciding that an individual defendant is not domiciled in the United Kingdom or in any other Member State under the respective applicable definitions of domicile. In the rare situations where the particular non-Member State in which the defendant is domiciled has to be ascertained,200 this is done by applying paragraph 9(7) of Schedule 1 to the Civil Jurisdiction and Judgments Order 2001, which provides that an individual is domiciled in a state other than a Regulation State if and only if (a) he is resident in that state, and (b) the nature and circumstances of his residence indicate that he has a substantial connection with that state.201 In this particular context there is no presumption to aid in showing the required substantial connection, and it is possible, in rare cases, that an individual may not have a substantial connection with any one state at all. Where this happens one would have to be resigned to saying that the individual is domiciled in a non-Regulation References(p. 215) State but it is not clear in which particular one.202 As regards corporate defendants, Article 63 of the Brussels I Recast will be applied to determine whether a company is domiciled in a non-Member State.
The Hess, Pfeiffer and Schlosser Report identified a problem with Article 4 of the Brussels I Regulation (now Article 6 of the Brussels I Recast) in that it results in an unequal system of access to justice for European Community (now European Union) plaintiffs.203 This comes about because the national rules of jurisdiction in some Member States are open to plaintiffs, regardless of their domicile, whereas in other Member States they are only available to plaintiffs domiciled in that Member State.204 In the negotiations of the Brussels I Recast, it was decided not to extend the rules to cover claims against non-Member State domiciled defendants,205 which would have addressed this issue.
(c) The exceptions
Article 6 mentions four exceptions to the rule that national bases of jurisdiction apply where the defendant is not domiciled in a Member State: Article 18(1), Article 21(2) and Articles 24 and 25. Article 18(1) gives jurisdiction to the courts of the domicile of a consumer in certain circumstances, regardless of the domicile of the defendant.206 Article 21(2) may similarly give jurisdiction to the courts of the place of work of an employee regardless of the domicile of the defendant.207 Article 24 gives exclusive jurisdiction in certain circumstances, regardless of the defendant’s domicile, based on subject matter connections between the dispute and a particular Member State. Article 25 is concerned with agreements on jurisdiction, and since the Brussels I Recast does not require either party to be domiciled in a Member State—previously, at least one party had to be so domiciled for the rule to apply.208 It may be noted in addition that some other provisions—in particular, Articles 11(2), 17(2) and 20(2)—deem a defendant to be domiciled in a Member State in circumstances which would ordinarily not satisfy the relevant requirements.209
(d) Claimant’s domicile
There is no requirement for the application of Chapter II of the Brussels I Recast that the claimant is domiciled in a Member State.210 Thus the Brussels I Recast will apply in a dispute between a claimant domiciled in a non-Member State and a defendant domiciled in a Member State.211 There are some bases of jurisdiction which presuppose that the claimant is domiciled in a Member State, because they permit a claimant to sue in the Member State court of their own domicile.212 If the claimant is not so domiciled these bases cannot be used. But it remains open to the claimant to use other bases of jurisdiction.
References(p. 216) (c) Bases of jurisdiction
The first seven Sections of Chapter II set out the bases of jurisdiction under the Brussels I Recast, with each Section containing one or more bases of jurisdiction. The division into Sections emphasises that different types of jurisdiction are being dealt with. The Brussels I Recast provides for: (i) general jurisdiction (Section 1, Article 4); (ii) special jurisdiction (Section 2, Articles 7–9); (iii) jurisdiction in matters relating to insurance (Section 3, Articles 10–16); (iv) jurisdiction over consumer contracts (Section 4, Articles 17–19); (v) jurisdiction over individual contracts of employment (Section 5, Articles 20–23); (vi) exclusive jurisdiction (Section 6, Article 24); and (vii) prorogation of jurisdiction (Section 7, Articles 25–26).
In this Chapter the various grounds of jurisdiction will be dealt with in order of hierarchy (based on precedence and generality) rather than in the order of the Brussels I Recast itself. First, the most powerful grounds of jurisdiction, those of exclusive jurisdiction, will be examined. Second, the rules on prorogation of jurisdiction, which are the next most powerful rules, will be considered. Third, the rules on general jurisdiction, based on the domicile of the defendant, will be set out. Fourth, the rules on special jurisdiction, permitting claims to be brought in other Member States based on subject matter connections, will be examined. Finally, the special rules on matters relating to insurance, consumer contracts, and individual contracts of employment will be considered.
In some situations, the claimant will have to sue the defendant in the courts of a Member State which is allocated exclusive jurisdiction under the Brussels I Recast. In other situations, the courts of more than one Member State will have jurisdiction and the claimant will be able to choose the Member State in which to sue the defendant. With the harmonisation of rules on jurisdiction in the different Member States, lawyers in the United Kingdom can now advise many clients on whether they can sue or be sued not only in the United Kingdom but also in other Member States.
When the issue comes to trial in England under the Brussels I Recast, it is well established that the claimant has to show a good arguable case that the terms of the relevant jurisdictional rule is satisfied, whether under Article 4,213 7 or 8,214 25,215 or any other basis of jurisdiction.216 A good arguable case has a certain flexibility and suggests that one party has a much better argument on the evidence available.217 The References(p. 217) requirement of a good arguable case is intended to encapsulate the rule that the court must be as satisfied as it can be, having regard to the limitations of the interlocutory process, that factors exist which allow the court to take jurisdiction.218 The application of the test may vary from case to case, both in order to take account of any relevant policy underlying the Brussels I Recast and in order to take account of the limitations imposed by the interlocutory process.219 Moreover, there is a threshold requirement, at least in cases of special jurisdiction, which the claimant has to satisfy before the defendant can be subjected to jurisdiction. The claimant’s case must establish that there is a serious issue on the merits to be tried.220 Common sense would suggest that the same requirement should apply in respect of the other bases of jurisdiction.221
If a defendant domiciled in one Member State is sued in the court of another Member State and does not enter an appearance,222 the court is required to examine its own jurisdiction and declare of its own motion that it has no jurisdiction unless its jurisdiction is derived from the provisions of the Brussels I Recast.223 This is a fundamental change of procedure for English courts, which had, in the past, only acted after submissions from the parties.224
(i) Exclusive subject-matter jurisdiction
Article 24225 allocates jurisdiction to the courts of a Member State226 which is thought to be uniquely well placed to deal with the subject matter listed in that Article. So strong is this connection that Article 24 expressly provides that it applies regardless of domicile. Despite Court of Appeal authority to the contrary,227 it is clearly therefore an exception to the normal rule that the bases of jurisdiction under the Brussels I Recast only apply where the defendant is domiciled in a Member State.228 Where jurisdiction is assigned to the United Kingdom References(p. 218) under Article 24, the Modified Regulation will apply to allocate jurisdiction to a part of the United Kingdom. For example, where the proceedings concern the ownership of land in England, the English courts will have exclusive jurisdiction.
The jurisdiction under Article 24 is exclusive in the sense that a Member State other than the one which has been allocated jurisdiction under it is deprived of jurisdiction, even though it would otherwise have had it under one of the other bases of jurisdiction such as the domicile of the defendant. Article 24 therefore trumps other bases of jurisdiction, even jurisdiction based on the agreement of the parties.229 Exceptionally, jurisdiction under Article 24 is not subject to the lis pendens rules in the Brussels I Recast, because breach of Article 24 operates as a defence to the recognition and enforcement of foreign judgments.230 The courts of Member States are required by Article 27 to declare of their own motion that they do not have jurisdiction where they are seised of a claim which is “principally concerned” with a matter over which the courts of another Member State have exclusive jurisdiction by virtue of Article 24. This perhaps suggests that Article 24 should also only apply where the proceedings are “principally concerned” with one of the identified matters,231 an approach which is generally supported by the case law. The requirement under Article 27 applies to Member States regardless of their own rules on procedure, and regardless of what steps have been taken by the defendant.232 Where more than one Member State is allocated jurisdiction under Article 24, Article 31 provides that any court other than the one first seised shall decline jurisdiction.233
Article 24 has five heads: (i) immovable property; (ii) certain company law matters; (iii) validity of entries in public registers; (iv) certain matters involving intellectual property; (v) enforcement of judgments. The reported cases on the corresponding provisions in the Brussels I Regulation (Article 22) and Brussels Convention (Article 16), have given a Community meaning to its terms and have interpreted the heads in the light of their purpose and their place within the scheme of the Convention. It has repeatedly been emphasised that this provision must not be given a wider interpretation than is required by its objective.234 This has often led to what is now Article 24 of the Brussels I Recast being given a narrow interpretation (because it is an exception to the general rules on jurisdiction and restricts party autonomy), but on some occasions a wide interpretation has been adopted to give effect to the purposes of Article 24 and to avoid splitting closely related proceedings.235 The head which has the most contentious repercussions is the first one and this will be examined in detail; the remaining four heads will be set out more briefly.
References(p. 219) Article 24 provides that the following courts shall have exclusive jurisdiction, regardless of domicile:
Article 24(1) in proceedings which have as their object rights in rem in immovable property or tenancies of immovable property, the courts of the Member State in which the property is situated.236
This rule is comparable to the common law rule that disputes concerning title to foreign immovable property are non-justiciable.237 For Article 24(1) to apply (at least directly), the immovable property must be situated in a Member State or States. It is somewhat unclear whether the common law rule is compatible with the Brussels I Recast;238 if not, this raises difficulties when dealing with claims against Member State domiciled defendants concerning title to immovable property in a non-Member State.239
If the dispute relates to property situated in two Member States (eg it concerns the existence of a lease over such property) the Court of Justice in Scherrens v Maenhout240 has held that normally each Member State has exclusive jurisdiction over the property situated in the territory of the state. Nonetheless, in certain exceptional circumstances one State may be given exclusive jurisdiction over the entire property. An example given of where this might happen would be where property is subject to a single lease, the land in one Member State is adjacent to the land in the other Member State and the property is situated almost entirely in one of those two Member States. In cases where the property is situated in the United Kingdom, the Modified Regulation will apply to allocate jurisdiction to a part of the United Kingdom. Article 24(1) covers two sorts of proceedings: ones which have as their object (ie are based upon) rights in rem in immovable property and ones which have as their object tenancies of immovable property.
(a) Rights in rem
The proceedings must have as their object a right which is enforceable against the whole world (a right in rem), not a right which is merely enforceable against a particular person (a right in personam). Thus proceedings involving a claim to legal ownership of one-half of a villa in Minorca, together with an order that steps be taken to rectify the Minorcan property register and an order for the sale of the villa and division of proceeds, had as their object a right in rem.241 The essence of the proceedings was an attempt by the trustee to establish, protect and perfect his title.242 Proceedings involving the disputed exercise of a right of pre-emption attached to property and effective against third parties have also been considered to fall within this rule.243
In contrast, the following have as their object a right in personam, and are accordingly outside the scope of Article 24(1):244 proceedings for rescission of a contract of sale of land and for consequential damages;245 proceedings to determine the validity of a contract for the References(p. 220) transfer of land;246 proceedings for a declaration that the defendant holds property on trust for the claimant and for an order requiring him to execute documents vesting legal title in the claimant;247 proceedings for a declaration that a person is an equal owner in equity of property;248 proceedings brought by a trustee in bankruptcy for an order for the sale of a villa with vacant possession (which did not involve establishing, protecting or perfecting his title to the land);249 proceedings for compensation for the use of a flat, otherwise than under a tenancy and the ownership of which was not in dispute;250 proceedings to determine the existence or scope of an easement;251 proceedings for the restoration of property to its original condition;252 and an action to terminate the appointment of a manager of a timeshare development in Spain and eject him from the property.253
According to the Court of Justice in Reichert v Dresdner Bank254 Article 16(1) of the Brussels Convention (Article 24(1) of the Brussels I Recast) is only concerned with actions which determine “the extent, content, ownership or possession of immovable property or the existence of other rights in rem therein and to provide the holders of those rights with the protection of the powers which attach to their interest”. Applying this narrow Community definition the Court held that an action whereby a creditor sought to have set aside a gift of the legal ownership of immovable property which he alleged was made by the debtor to defraud his creditors (an action paulienne) did not come within the scope of Article 16(1) of the Brussels Convention. This action did not concern the rules and customs of the situs and accordingly there was no reason why it should come within the exclusive jurisdiction of the courts of the situs.
Likewise, applying this narrow Community definition, the Court of Justice held in Land Oberosterreich v CEZ AS that Article 16(1) of the Brussels Convention does not apply to an action, possibly preventative, for cessation of a nuisance.255 Although the basis of such an action was the interference with a right in rem in immovable property, the real and immovable nature of that right was, in that context, of only marginal significance.256 Moreover, considerations of the sound administration of justice which underlie exclusive jurisdiction under Article 16(1) (now Article 24(1)) did not apply to this particular case of nuisance, which involved a claimant and defendant with land in different states, requiring an assessment of facts relating to both States.257 Finally, this narrow definition would exclude actions for damages based on infringement of rights in rem or on damage to property in which rights in rem exist, since the existence and content of such rights in rem, usually rights of ownership, are of only marginal significance.258
References(p. 221) (b) Tenancies
Article 24(1) also applies to proceedings which have as their object tenancies of immovable property. Leases involve complex social legislation and the courts of the Member State where this is in force are best able to apply their own law and are accordingly given exclusive jurisdiction.259 A tenancy does not include a claim for compensation for the use of a property, where a transfer in ownership has been annulled.260 The difficulty with including tenancies under Article 24(1) is that in some cases a dispute between a landlord and a tenant may relate essentially to the land itself (this is within Article 24(1)); whereas, in other cases, the issue may relate more obviously to the contractual rights and obligations between the parties (which are less obviously within the ambit of Article 24(1)).
In Sanders v Van der Putte261 the Court of Justice held that, where the dispute relates to the existence or interpretation of the lease, compensation for damage caused by the tenant262 or for giving up possession of the premises, it was within Article 16(1) of the Brussels Convention (the corresponding provision to Article 24(1) of the Brussels I Recast). The effect of including disputes relating to the existence of the lease is that a court’s jurisdiction under Article 16(1) of the Brussels Convention cannot be defeated by an allegation that the lease is void.263 The Court of Justice, which was not prepared to give Article 16(1) of the Brussels Convention a wider ambit than was required by its objectives, went on to hold that Article 16(1) of the Brussels Convention did not apply to a dispute between an original tenant and a sub-lessee as to the existence of an agreement under which the sub-lessee agreed to rent and run the original tenant’s retail business, the emphasis in the agreement being on this latter aspect.264
By analogy with this decision, the Court of Justice in Hacker v Euro-Relais265 held that there was no tenancy agreement within Article 16(1) of the Brussels Convention (Article 24(1) of the Brussels I Recast) where a travel agent and a client entered into a contract for a travel package involving the provision of a number of different services, including making reservations for the journey, for an inclusive price, even where one of these services was the use of holiday accommodation. Likewise the Court of Justice has held that there was no tenancy agreement where there was a type of timeshare involving a membership contract enabling the member to acquire, for a user fee, the right to use an apartment (within a complex but not individually designated) but also enabling the member to exchange their holiday accommodation (plus the right to further services at the complex). There was a separate membership fee and user fee, the former costing nearly five times the latter.266 By contrast, Article 24(1) of the Brussels I Recast will apply where there are services, such as insurance in the event of cancellation or a guarantee of reimbursement in the event of the tour operator’s insolvency, which are merely ancillary to a contract’s principal status as a tenancy agreement.267 Such References(p. 222) services cannot alter the status of the tenancy agreement, especially when these are not in issue before the court.268 Moreover Article 24(1) is not rendered inapplicable because the dispute is between a professional tour operator who is subrogated to the rights of the owner and the tenant who had rented the accommodation from the tour operator.269
Sanders only dealt with a limited range of the issues that can arise in disputes between a landlord and a tenant. For example, the Court of Justice gave no answer as to whether claims for the payment of rent and other outgoings were within Article 16(1) of the Brussels Convention. Subsequently, the Court of Justice in Rösler v Rottwinkel270 departed from the spirit of narrow interpretation in Sanders by holding that Article 16(1) of the Brussels Convention (Article 24(1) of the Brussels I Recast) applies to disputes concerning the respective obligations of the landlord and tenant under the agreement.271 This would cover, for instance, a simple action for unpaid rent or other outgoings, an action in respect of repairs and decoration of property, and an action in respect of damage to movable property caused by the tenant.272
Such disputes are accordingly subject to the exclusive jurisdiction of the Member State in which the immovable property is situated. In favour of this, it can be said that one Member State will be allocated jurisdiction in respect of most of the disputes that can arise between a landlord and a tenant. This is preferable to having an action which involves, for example, a claim for possession and for unpaid rent split up between different Member States. Also the rationale of Article 24(1) of the Brussels I Recast may suggest a wide interpretation, since many Member States have social legislation in respect of rents and therefore ought to be able to hear a case which involves a claim for rent in respect of property situated in their territory.
The Rösler case also establishes, by way of contrast, that proceedings which only indirectly concern the use of the property, such as a claim by a landlord for damages for lost enjoyment of a holiday in the property let (and for travel expenses) following the alleged breach by a tenant of a user clause in the lease, do not have as their object the tenancy of immovable property and accordingly fall outside the scope of Article 24(1). A dispute concerning a contract to rent storage space has similarly been viewed as falling outside this provision.273
The Hess, Pfeiffer and Schlosser Report voiced concern over the necessity for exclusive jurisdiction in contracts relating to the rental of office space and recommended making Article 24(1) narrower and more flexible,274 but the provision was not amended in the adoption of the Brussels I Recast.
(c) Short-term holiday lets
The Rösler case involved a short-term holiday let. Such lets (ie ones for a maximum period of six months) are now subject to the second paragraph of Article 24(1),275 which provides as follows:
However, in proceedings which have as their object tenancies of immovable property concluded for temporary private use for a maximum period of six consecutive months, the courts of the Member State in which the defendant is domiciled shall also have jurisdiction, provided that the tenant is a natural person and that the landlord and the tenant are domiciled in the same Member State
This provision276 is designed to deal with criticisms levelled at Rösler v Rottwinkel. In this case the Court of Justice held, inter alia, that a claim by a plaintiff landlord against a defendant tenant in respect of outgoings, such as water and gas, in relation to the short-term holiday let of a villa in Italy, had to be tried in Italy where the property was situated. This was despite the fact that both parties were resident in Germany and that therefore trial in Italy would be very inconvenient to them. Moreover, the drafters of the Brussels Convention did not intend to give exclusive jurisdiction to the Contracting State in which the property was situated in cases involving short-term holiday lets.277
The second paragraph of Article 24(1) meets these criticisms by providing that in a case like this the Member State in which the defendant is domiciled shall also have jurisdiction. The plaintiff in the Rösler case could now therefore, if he wanted to, sue in Germany. On the other hand, if he preferred, he could still sue in Italy under the first paragraph of Article 24(1). Both the Member State in which the defendant is domiciled and the Member State in which the property is situated have exclusive jurisdiction under Article 24(1). This could result in concurrent proceedings in two different Member States; eg one party may sue in Italy and the other party in Germany. In such a situation Article 31 will operate so that the court other than the one first seised must decline jurisdiction.278
The first requirement that has to be satisfied before jurisdiction is given to the Member State in which the defendant is domiciled is that the proceedings have as their object tenancies of immovable property. The meaning of this has been examined above in relation to the first paragraph of Article 24(1). The other requirements are largely, but not exclusively, geared to the facts of the Rösler case. The second requirement is that it must be a short-term let (for a maximum period of six consecutive months). The third requirement is that the tenant must be a natural person. Legal persons, such as companies, are excluded on the basis that they are generally engaged in commercial transactions. This involves a relaxation from the predecessor wording under the Brussels Convention,279 which required that the landlord must also be a natural person,280 a requirement based on the facts of the Rösler case. Fourthly, both parties must be domiciled in the same Member State.281
At the same time, the second paragraph of Article 24(1) is wide enough to cover a dispute between the landlord and tenant that relates (unlike in the Rösler case) to the land itself, so that inspection of the land may be necessary. The most appropriate place for trial in such a case is the Member State in which the land is situated; nonetheless, the Member State in References(p. 224) which the defendant is domiciled also has jurisdiction, provided that the above requirements are met, and will have priority if first seised. It was again suggested in the Hess, Pfeiffer and Schlosser Report that this might justify a more flexible approach,282 but no changes were adopted in the Brussels I Recast.
Article 24(2) in proceedings which have as their object the validity of the constitution, the nullity or the dissolution of companies283 or other legal persons or associations of natural or legal persons,284 or the validity of the decisions of their organs,285 the courts of the Member State in which the company, legal person or association has its seat. In order to determine that seat, the court shall apply its rules of private international law;
The Brussels I Recast (and previously Brussels I Regulation) differs from the Brussels Convention (at least in its drafting) in making it clear that this provision is only concerned with the validity of the decisions of organs, etc. It covers proceedings principally concerned with the validity of directors’ exercise of their powers,286 but not an action concerning misappropriation of the company’s money by the directors287 or contractual claims.288 In the United Kingdom there is a special statutory definition of the seat of a company for the purposes of this rule.289 Like the other rules in Article 24 of the Brussels I Recast, this rule gives exclusive jurisdiction to the designated courts regardless of any jurisdiction agreement between the disputing parties, including as set out in a shareholders agreement.290 In practice, this rule has been interpreted narrowly,291 thus excluding a dispute over whether a power of a legal person had been exercised properly (which did not challenge the existence of the power).292 If in a contractual dispute one party (a company) argues that it should not be bound by the contract because the decision of its directors was ultra vires, that on its own should not be sufficient to bring the dispute within this rule, unless the ultra vires issue is the main subject matter of the dispute.293
Article 24(3) in proceedings which have as their object the validity of entries in public registers, the courts of the Member State in which the register is kept.294
References(p. 225) This is properly a matter of exclusive jurisdiction because public registers are, like immovable property, a matter within the sovereign control of a single state.
Article 24(4) in proceedings concerned with the registration or validity of patents, trade marks, designs, or other similar rights required to be deposited or registered, irrespective of whether the issue is raised by way of an action or as a defence, the courts of the Member State in which the deposit or registration has been applied for, has taken place or is under the terms of an instrument of the Union or an international convention deemed to have taken place.
Without prejudice to the jurisdiction of the European Patent Office under the Convention on the Grant of European Patents, signed at Munich on 5 October 1973, the courts of each Member State shall have exclusive jurisdiction in proceedings concerned with the registration or validity of any European patent granted for that Member State.295
This provision covers only questions of registration or validity, such as proceedings for revocation of a patent,296 but not issues concerning ownership of a patent involving an invention of an employee.297 Actions for infringement or a declaration of non-infringement are governed by the general rules in the Brussels I Recast, including Articles 4 and 7(2), not by Article 24(4).298 However, where invalidity is raised as a defence to infringement or a declaration is sought of non-infringement on the basis of invalidity the Court of Justice in GAT has ruled that Article 16(4) of the Brussels Convention (Article 24(4) of the Brussels I Recast) will apply.299 The court hearing an infringement action will not have the power to determine validity as an incidental question—an interpretation which appears at odds with the approach to other provisions under the Regulation. The words “irrespective of whether the issue is raised by way of an action or as a defence”, which were added in the Brussels I Recast (and Lugano Convention 2007), confirm this result.
As enforcement proceedings involve the potential exercise of powers to seise assets, they are territorially limited. The provision does not cover a set-off between the right whose enforcement is being sought and a claim over which the courts of the Member State would have no jurisdiction if it were raised independently,302 nor does it cover equitable References(p. 226) orders which may lead to enforcement,303 but it does apply to a third party debt (garnishee) order.304
(ii) Prorogation of jurisdiction
Jurisdiction selected by the parties may take the form of either an agreement on jurisdiction (Article 25), or the defendant’s submission to the forum by appearing before its courts (Article 26). In both cases the Brussels I Recast respects the wishes of the parties, subject to exclusive jurisdiction under Article 24 which trumps the jurisdiction under Articles 25 and 26.305 Article 26 is in practice hierarchically superior to Article 25, because submission essentially constitutes a waiver of any prior rights under a jurisdiction agreement,306 and so will be considered first.
(a) Submission to the forum
Article 26307 provides that “a court of a Member State before which a defendant enters an appearance shall have jurisdiction”. This means that where the defendant submits to the courts of a Member State he will give those courts jurisdiction even though they would not otherwise have had it under the Brussels I Recast, and regardless of whether there is any connection between the parties or their dispute and that Member State. Once the defendant has submitted, this covers the whole of the proceedings, including any earlier orders or decisions in the proceedings.308 Because of the lis pendens rules under the Brussels I Recast,309 the effect of submission to a particular court is to give that court exclusive jurisdiction—once a Member State court has been seized of the dispute, no other Member State court may hear it.
Where the appearance is before a court in the United Kingdom the familiar problem of allocating jurisdiction within the United Kingdom arises.310 Where the Modified Regulation applies, this will allocate jurisdiction to a part of the United Kingdom. Where it does not, the Brussels I Recast itself can be regarded as allocating jurisdiction to the courts of England and Wales, Scotland or Northern Ireland, depending on in which court the defendant actually appears.
For Article 26 to apply there are two conditions. First, it is strongly arguable that in principle the defendant must be domiciled in a Member State.311 There is nothing in the wording of Article 26 to indicate that it is intended to apply regardless of domicile. The wording of this References(p. 227) provision can be contrasted with that of Article 25 which does indicate that it is intended to apply regardless of the parties’ domicile. It is true that the fact that Article 25 applies regardless of domicile might be a basis for arguing that Article 26 also should, since both articles are dealing with prorogation of jurisdiction;312 indeed (as noted above) Article 26 can override Article 25. A strong counter-argument to this is that Article 26 must be read in the light of Article 6, and Article 6(1) expressly spells out that the application of traditional national jurisdictional rules to non-Member State domiciled defendants is subject to Articles 24 and 25, but omits Article 26.
Secondly, the defendant must enter an appearance before a court of a Member State. The Brussels I Recast does not define the meaning of entering an appearance. According to the Jenard Report, referring to the Brussels Convention, it will be for the court seised of the proceedings to determine this in accordance with its own rules of procedure,313 although the Court of Justice has suggested that this is subject to EU limitations.314 Article 26 also only refers to the defendant entering an appearance; it would not appear to cover the case where a claimant enters an appearance to contest a set-off sought by the defendant in response to the claimant’s original claim. However, the Court of Justice in Spitzley v Sommer Exploitation SA315 held that a court of a Member State, which would not otherwise have had jurisdiction in respect of the set-off, had it under Article 18 of the Brussels Convention (corresponding to Article 26 of the Brussels I Recast) because of the plaintiff’s appearance before the court. Whilst this interpretation flies in the face of the wording of Article 18 (Article 26 of the Brussels I Recast), it is not unfair to the parties who have both (one by seeking the original claim, the other by seeking a set-off) elected for trial in that Member State. There is also economy of procedure if both the claim and set-off are dealt with in the same Member State.316
There are two limits on the application of Article 26.
First, Article 26 does not apply where the appearance was entered to contest jurisdiction. The defendant must be extremely careful as to how he conducts his defence where proceedings are commenced against him in a Member State. Where the defendant enters an appearance and fights the action on its merits (eg denies he is in breach of contract), the court of the Member State before which he appears will have jurisdiction.317 Where the defendant merely denies that the court of a Member State has jurisdiction over him (eg he points out that it is using a traditional exorbitant basis of jurisdiction against him and that this is prohibited by the Brussels I Recast), the court of the Member State before which he appears will not have jurisdiction. A defendant does not submit to the jurisdiction of the English courts merely by acknowledging References(p. 228) service and applying to stay the action.318 The distinction between fighting on the merits and contesting jurisdiction is well known to English lawyers,319 and is easy to apply where the defendant acts in only one of these ways. What if the defendant appears before the courts of a Member State and argues in the alternative, that there is no jurisdiction over him and that, even if there is, he did not, for instance, break the contract?
The corresponding provision under the Brussels Convention (Article 18) refers (in the English language version) to the submission rule not applying where appearance was entered solely to contest jurisdiction. A literal interpretation of Article 18 of the Brussels Convention would therefore suggest that the court before which the defendant has appeared is given jurisdiction in this situation, because the defendant has not appeared solely to contest jurisdiction. This interpretation of Article 18 of the Brussels Convention was rejected by the Court of Justice in Elefanten Schuh v Jacqmain.320 The Court held that one of the objectives of the Convention is to give the defendant the right to defend himself, and he should not be handicapped from going into matters of substance by this having the effect of destroying his arguments as to jurisdiction. It may actually be necessary for him to go into matters of substance in order to protect his property from seizure. The defendant, therefore, does not submit if he argues in the alternative. This result is, if anything, strengthened under the Brussels I Recast because Article 26 now omits the word “solely”. A defendant cannot, therefore, contest a default judgment on the basis that he was unable to argue on the merits for fear of submission (even if jurisdiction was being contested separately in an appellate court).321
There can be no objections to this principle when it is applied in the situation where the primary purpose of the defence is to challenge the jurisdiction.322 But the principle would also appear to cover the situation where the primary purpose of the defence is to fight the action on its merits. Spurious arguments as to a lack of jurisdiction may be added on to what is, in essence, a defence based on substance, in order to avoid the application of Article 26 of the Brussels I Recast. The Court of Justice has stopped the defendant from tacking on arguments as to jurisdiction at a late stage,323 holding that it must be clear to the claimant and the court from the time of the defendant’s first defence on the merits that it is intended to contest the court’s jurisdiction; if not, Article 26 will give jurisdiction to the courts of the Member State before which the defendant has appeared.324 In other words, the challenge to jurisdiction must be made before or at the same time as the defendant’s appearance or argument on References(p. 229) the merits.325 This does nothing to stop the well-advised defendant who, at an early stage of the proceedings, includes a specious defence which contests jurisdiction. A defendant who contests jurisdiction at the right stage can (if no preliminary trial on jurisdiction is ordered) participate in a full trial on the merits and still maintain his objection to jurisdiction.326
Secondly, Article 26 also does not apply where another court has exclusive jurisdiction by virtue of Article 24. The Court of Justice has confirmed that Article 26 is not, however, subject to Article 25 by holding that an appearance under Article 18 of the Brussels Convention (Article 26 of the Brussels I Recast) overrides an agreement conferring jurisdiction under Article 17 of the Convention (Article 25 of the Brussels I Recast).327 This is only right and proper; both Articles 25 and 26 are dealing with selection of jurisdiction by the parties and a later selection by appearance should take precedence over an earlier selection by agreement. Submission under Article 26 thus equally establishes jurisdiction even if there is an exclusive jurisdiction agreement in favour of the courts of a non-Member State.328 Similarly, because Article 26 only mentions that it is subject to Article 24, a weaker party protected by the special jurisdictional rules relating to consumers, employees and insurance may nevertheless submit to the courts of another Member State.329 But where the policyholder, the insured, a beneficiary of the insurance contract, the injured party, the consumer or the employee is the defendant, the court shall, before assuming jurisdiction on the basis of submission by entering an appearance, ensure that the defendant is informed of his right to contest the jurisdiction of the court and of the consequences of entering or not entering an appearance.330
(b) An agreement on jurisdiction
Article 25331 is concerned with jurisdiction agreements, also known as choice of court agreements or forum selection clauses, in favour of the courts of Member States. (An agreement in favour of the courts of a Member State is, however, covered by the Hague Convention on Choice of Court Agreements 2005 (discussed below)332 if one party to the agreement is resident in a Hague Convention contracting state which is not a Member State.)333 This section considers (i) the relevance of the domicile of the parties; (ii) the requirements in relation to the agreement, both substantive and formal; (iii) the potential effect of jurisdiction agreements on third parties; and (iv) the limitations on the effectiveness of jurisdiction agreements.
Where there is an agreement conferring jurisdiction under Article 25, the courts of the Member State selected by the parties have jurisdiction (without any discretionary power to refuse to take jurisdiction334). There is no requirement for any connection between the parties or their dispute and the chosen court.335 As discussed further below, such jurisdiction shall be exclusive unless the parties have agreed otherwise.336 The consequence of the courts of a Member State being allocated exclusive jurisdiction is that the courts of other References(p. 230) Member States337 are deprived of jurisdiction.338 The consequence of a non-exclusive jurisdiction agreement is that jurisdiction is conferred on the chosen court, but the courts of other Member States are not deprived of jurisdiction. In this case, Article 25 operates as a non-exclusive basis of jurisdiction (alongside, generally, Articles 4, 7 and 8) giving a claimant an additional choice of where to commence proceedings. Some jurisdiction agreements may not be clearly either exclusive or non-exclusive, or may combine elements of both.339
(i) The domicile of the parties
Under the Brussels I Recast, Article 25 applies regardless of the domicile of the parties.340 This is an extension of the scope of the rule, which previously (under the Brussels I Regulation and Brussels Convention) had a different effect depending on whether one or more parties was domiciled in a Member State.
Under Article 23 of the Brussels I Regulation (Article 17 of the Brussels Convention), an agreement could only confer jurisdiction if one or more of the parties was domiciled in a Member State (Contracting State).341 It was clear from Article 4 of the Regulation that it did not matter whether this was the defendant or claimant, because it specified that Article 23 applied regardless of the domicile of the defendant. The omission of Article 17 from mention in Article 4 of the Convention had previously left the point slightly uncertain.
Under the Brussels I Regulation (and the Brussels Convention), whether the courts of a Member State could or would take jurisdiction under a jurisdiction agreement between two non-EU Member State domiciled parties was thus a matter for the residual national jurisdictional rules of that Member State. However, Article 23(3) of the Regulation (and Article 17 of the Brussels Convention)342 provided that where neither party343 is domiciled in a Member State “the courts of other Member States shall have no jurisdiction over their disputes unless the court or courts chosen have declined jurisdiction”. Thus, under the Regulation (and the Brussels Convention), an exclusive jurisdiction agreement between two non-EU Member State domiciled parties in favour of the courts of a Member State did, at least provisionally, preclude the courts of other Member States from having jurisdiction.344 The extension of Article 25 of the Brussels I Recast to apply regardless of the domicile of the parties has made this provision unnecessary, and thus there is no equivalent in the Brussels I Recast.
(ii) The requirements in relation to the agreement
For an agreement to come within Article 25 two requirements, dealt with in turn below, must be satisfied: (a) the parties must, substantively, have agreed that a court or the courts of a Member State are to have jurisdiction to settle any disputes which have arisen or which may arise in connection with a particular legal relationship; (b) the agreement must satisfy certain requirements as to form.
References(p. 231) A claimant who seeks to establish the jurisdiction of the English courts under Article 25 must show a good arguable case that its terms have been met.345 However, if the defendant claims that an English court, which would otherwise have jurisdiction, has no jurisdiction because of a clause providing for the exclusive jurisdiction of the courts of another Member State (or on some other similar basis),346 it has been suggested that the burden lies on the defendant.347
(a) The parties348 must have agreed that a court or the courts of a Member State349 are to have jurisdiction to settle any disputes which have arisen or which may arise in connection with a particular legal relationship
The concept of an “agreement” is to be given an autonomous meaning.350 Normally, the parties will have agreed contractually on the court which is to have jurisdiction; however, it can also be conferred by a trust instrument.351 A choice of jurisdiction clause contained in the statutes of a company can constitute an agreement for the purposes of Article 25, which is binding on all the shareholders.352 It does not matter that the shareholder has not specifically agreed to the clause; by becoming and remaining a shareholder he agrees to be bound by the contents of the statutes of the company.353 This takes a relaxed view of the concept of an “agreement”. Formal requirements for jurisdiction agreements are discussed further below.
References(p. 232) A question may arise as to the material validity of the “agreement” (ie the jurisdiction clause).354 Material validity encompasses issues of formation and consent to the agreement.355 For example, there may be a jurisdiction clause in writing but it is alleged that this is not incorporated into the contract between the parties or that the “contract” containing the jurisdiction clause was never concluded.356 It might be alleged that, as a result of mistake, misrepresentation, duress or undue influence, there was no consent to the clause.
Under the Brussels I Regulation and Brussels Convention, the authorities were split on whether the material validity of the “agreement” was to be determined by reference to national substantive law as identified by the relevant private international law rules for determining the applicable law,357 or by developing the autonomous concept of an “agreement” to identify when genuine consent arises.358 The weight of authority favoured the latter view, although it would have appeared to necessitate the Court of Justice essentially developing principles of European contract law on a case-by-case basis, purely for the purposes of jurisdiction agreements, which would have meant significant uncertainty for the foreseeable future.359
Happily, the issue has been addressed directly in the Brussels I Recast,360 which specifies that an agreement on the jurisdiction of the courts of a Member State is effective “unless the agreement is null and void as to its substantive validity under the law of that Member State”. Recital (20) further clarifies that:
Where a question arises as to whether a choice-of-court agreement in favour of a court or the courts of a Member State is null and void as to its substantive validity, that question should be decided in accordance with the law of the Member State of the court or courts designated in the agreement, including the conflict-of-laws rules of that Member State.
References(p. 233) Thus, if the English courts are determining the validity of a jurisdiction agreement in favour of the French courts, they should apply French choice of law rules to determine which law governs that issue. Jurisdiction agreements are notably excluded from the scope of the Rome I Regulation, and so these will be national choice of law rules rather than harmonised EU rules.361 This approach should ensure that, for any given jurisdiction agreement, the same test for validity is applied in the courts of each Member State, while leaving the question of the choice of law rules for jurisdiction agreements as well as the applicable substantive contract law standards to national law. The disadvantages of this approach are first, that jurisdiction agreements in favour of the courts of different Member States may have different standards of material validity; and second, that an English court deciding on jurisdiction may have to receive evidence of both foreign choice of law rules and also foreign substantive contract law, which is likely to add time and expense to jurisdictional hearings.
Where national laws go beyond matters of form and consensus and, as a matter of public policy, have a rule prohibiting agreements conferring jurisdiction in certain cases, for example, in contracts of employment, this national law is overridden by the Brussels I Recast and the agreement will have full effect provided, of course, that it complies with all the other requirements under Article 25.362
It may be alleged that under national law the contract containing the jurisdiction clause is void. Consistently with the prior jurisprudence of the courts, Article 25(5) of the Brussels I Recast now expressly states that:
An agreement conferring jurisdiction which forms part of a contract shall be treated as an agreement independent of the other terms of the contract.
The validity of the agreement conferring jurisdiction cannot be contested solely on the ground that the contract is not valid.
The courts of the Member State with exclusive jurisdiction under Article 25 thus also have exclusive jurisdiction in relation to disputes covering the validity of the contract as a whole,363 provided that, according to the national court, the jurisdiction clause covers this dispute.364 Only if the jurisdiction clause is specifically challenged by allegations of, for example, duress or mistake, will this affect whether the court has jurisdiction under Article 25.365 This solution is consistent with that adopted in relation to Articles 7(1) and 24(1).366 According to the Court of Justice, any other solution would mean that a party could frustrate the operation of what is now Article 25 simply by claiming that the whole of the contract was void. References(p. 234) A jurisdiction agreement may similarly survive the rescission of the substantive terms of an initially valid contract,367 unless the jurisdiction agreement itself is repudiated.368
It is possible for a jurisdiction clause to be incorporated by reference to another document or contract.369 For example, a contract may refer to general conditions of trading, a reinsurance contract may incorporate the terms of an insurance contract and a bill of lading may incorporate the terms of a charter-party. Issues may arise concerning whether the body of terms to be incorporated is sufficiently clearly identified to establish a consensus. The law governing these questions should, in accordance with Article 25, be determined by the choice of law rules of the Member State whose court has been chosen.
The agreement must confer jurisdiction on the courts of a Member State. It is not necessary for the jurisdiction clause to be phrased in such a way that the competent court can be identified on its wording alone.370 It is sufficient that the clause states the objective factors on the basis of which the parties have agreed to choose a court to which they wish to submit disputes.
In general, Article 25 does not apply where the parties merely specify the Member State which is the place of performance of a contractual obligation, even though the effect of this is to give a Member State jurisdiction under Article 7(1).371 However, the requirements of Article 25 cannot be evaded by an agreement on a fictitious place of performance. If the agreement on the place of performance is designed solely to establish jurisdiction, not to determine the place where the person liable is actually to perform the obligations incumbent on him, then the requirements of Article 25 must be met.372
Non-exclusive jurisdiction agreements
The parties may agree to confer either exclusive or non-exclusive jurisdiction on the courts of a Member State. Under the Brussels I Recast, Article 25 provides that the jurisdiction allocated “shall be exclusive unless the parties have agreed otherwise”. This clarifies that non-exclusive jurisdiction agreements are also covered by Article 25 (the point was not entirely clear under the Brussels Convention373), and will be given their intended effect. The fact that the jurisdiction conferred is exclusive unless agreed otherwise means that the effect of a jurisdiction agreement is determined not only by its governing law, but also in part by Article 25 itself.374
References(p. 235) Under the Brussels Convention, by contrast, it was a matter for national law to determine whether a jurisdiction agreement was exclusive or non-exclusive. As far as English law was concerned, the law governing the jurisdiction agreement, rather than the agreement as a whole, determined as a matter of construction375 whether the clause was “exclusive” or not.376 The burden of proving that a clause was exclusive was said to rest on the party who relied on it.377
On the courts of a Member State
Article 25 only refers to an agreement that the courts of a “Member State”, in the singular, are to have jurisdiction. However, the Court of Justice in Meeth v Glacetal Sarl378 held that an agreement giving jurisdiction to the courts of two Member States was within what is now Article 25. The agreement provided that the parties, who were domiciled in different Member States, could only be sued in the courts of their respective domiciles. This could result in two Member States having exclusive jurisdiction under Article 25 if each party decided to sue the other. Article 31 would then apply and the court seised of the matter second would defer to the court first seised.
Another form of asymmetrical jurisdiction agreement is one entered into for the benefit of only one party—thus regulating only the possible forum selection of the other party. Article 17 of the Brussels Convention specified that “If the agreement conferring jurisdiction was concluded for the benefit of only one of the parties, that party shall retain the right to bring proceedings in any other court which has jurisdiction by virtue of this Convention.” Although this wording is not part of the Brussels I Recast, there is little doubt that such agreements would continue to be given effect.379
A further form of asymmetrical jurisdiction clause, commonly used in loan agreements, is exclusive for one party (the borrower) but non-exclusive for the other (the lender). This also comes within Article 25.380 Recent French case law,381 which has held that such jurisdiction References(p. 236) agreements are contrary to the object and purpose of Article 25 and thus invalid, is unlikely to be approved by the Court of Justice and has been doubted by the English courts.382 The object and purpose of Article 25 is to give effect to agreements as to jurisdiction freely entered into by the parties, not to protect the equality of rights of the parties.
The contractual clause in Meeth did not give the parties a choice of forum in which to sue. Nonetheless, it is clear that a clause providing, for example, that “the courts of England and Germany are to have exclusive jurisdiction in any proceedings brought by either party” comes within Article 25.383 Such a clause is exclusive in the sense that it precludes the jurisdiction of the courts of other Member States, but non-exclusive in preserving a degree of choice for the claimant.
Allocating jurisdiction within the United Kingdom
Where the Member State whose courts are given jurisdiction under Article 25 is the United Kingdom, there is the usual problem of allocating jurisdiction within the United Kingdom. Where the Modified Regulation applies384—ie (a) the subject matter of the proceedings is within the scope of the Brussels I Recast and (b) the defendant is domiciled in the United Kingdom or the proceedings are of a kind mentioned in Article 24 (exclusive jurisdiction regardless of domicile)—this will provide the answer.385 Where the Modified Regulation does not apply, the position is less straightforward. It will be necessary to interpret Article 25 as giving jurisdiction not merely to the courts of the United Kingdom, but to the courts of a part of the United Kingdom. This is easy enough where the parties have specifically agreed on trial in England and Wales, Scotland, or Northern Ireland. It is not so easy in the unlikely event of the parties merely agreeing on trial in “the United Kingdom”, without any further specification.386 The courts of England and Wales have, however, on occasion presumed that a reference to “British courts” was a reference to themselves.387
Conferring jurisdiction on the courts of a non-Member State
Where the parties confer jurisdiction on the courts of a non-Member State, Article 25 will not apply.388 Other bases of jurisdiction under the Brussels I Recast may, however, still be applicable, eg Article 4. A court in a Member State must assess the validity of such a jurisdiction clause according to its own rules for determining the applicable law.389 The effect to be given to such a clause, if it is valid, is less clear. In particular, can such a clause be used as a ground for declining jurisdiction under the Regulation? This raises the question of whether the exercise of jurisdiction under the Regulation is mandatory, which is considered in Chapter 13.390
To settle any disputes which have arisen or which may arise in connection with a particular legal relationship The agreement must be to settle any disputes “which have arisen or which may arise”.391 It follows that an agreement as to jurisdiction may be made after the dispute References(p. 237) has arisen, as well as beforehand. It is for the national court to interpret the clause conferring jurisdiction invoked before it in order to determine whether the dispute in question comes within its scope.392 This raises a question of construction of the clause, which must be determined by its governing law.393 In English law, this means the law applicable to the clause, which is not necessarily the law applicable to the agreement as a whole. Where English law governs, the relevant English principles of construction will apply,394 under which jurisdiction clauses are construed expansively (and are thus likely to include, for example, non-contractual claims relating to the contract).395 Complex issues of interpretation may also arise where related contracts contain inconsistent jurisdiction agreements, and the court must determine which prevails.396
The disputes which the agreement is dealing with must be “in connection with a particular legal relationship”.397 This has not been interpreted strictly—for example, it has been held that if the courts of a Member State have exclusive jurisdiction under what is now Article 25, the same courts are not precluded from considering a set-off by the defendant against the plaintiff, thereby cutting out superfluous procedure.398 It is not clear, however, whether it imposes other limitations on the scope of a jurisdiction agreement, so that it may not, for example, encompass non-contractual claims which are not connected to the contractual relationship between the parties as part of which the jurisdiction clause was agreed.399
(b) The form of the agreement
Article 25 stipulates the form which a choice of court agreement must take, and the Court of Justice has held that requirements as to form under national law are no longer applicable.400References(p. 238) The purpose of these formal requirements is to establish the genuine consensus of the parties.401 The agreement must be:
(a) in writing402 or evidenced in writing;
(b) in a form which accords with practices which the parties have established between themselves; or
(c) in international trade or commerce, in a form which accords with a usage of which the parties are or ought to have been aware and which in such trade or commerce is widely known to, and regularly observed by, parties to contracts of the type involved in the particular trade or commerce concerned.
The attitude of the Court of Justice towards the interpretation of these provisions has not always been a model of clarity. On the one hand, the Court of Justice has considered that the purpose of the requirements as to form and the place of Article 25 in the Brussels I Recast should lead to a strict interpretation. On the other hand, the Court of Justice has also noted that the need to uphold normal commercial practices necessitates that the formal requirements be not unduly onerous.
In writing or evidenced in writing
The in writing requirement is clearly satisfied where there is a written contract which contains a choice of jurisdiction clause in the text and the contract is signed by both parties. Any variant of this causes problems. Where the choice of jurisdiction clause is contained in general conditions on the back of a written and signed contract there is a danger that, although it is in writing, it will still go unnoticed. Accordingly, the Court of Justice has held that the text of the contract must contain an express reference to these general conditions.403 The text of the contract404 does not have to contain an express reference to the jurisdiction clause, it is enough that it refers to the general conditions containing this clause.405 The fact that the other party does not have a copy of these general conditions is not necessarily decisive.406 Similarly, where the contract refers to earlier offers which had general conditions on the back, the text of the contract must refer expressly to the earlier offers.407 Where the written contract contains the choice of jurisdiction clause in the text but has only been signed by one party, there is, again, a danger of it going unnoticed by the other party. The Court of Justice has held that the consent of the other party has also to be in writing, either in the document itself or in a separate document.408
References(p. 239) The effect of these cases is that not only must the choice of jurisdiction clause be in writing but also the consensus on its application must be in writing. Although this strict approach remains good law,409 subsequent cases raising different issues have taken a more liberal line. The mere fact that a written agreement containing a choice of jurisdiction clause has expired is not fatal if it can be shown that under the relevant applicable law the parties can validly extend the initial contract without observing the requirements of writing.410 In the case of a shareholder, the requirement of form is complied with if the statutes containing the jurisdiction clause are lodged in a place to which the shareholder may have access or in a public register.411
Article 25(2) provides that: “Any communication by electronic means which provides a durable record of the agreement shall be equivalent to ‘writing’.” This provision (added in the Brussels I Regulation) ensures that the need for the agreement to be in writing or evidenced in writing does not invalidate a jurisdiction agreement that is not written on paper but is accessible in an electronic form.412 To provide a “durable record” it is sufficient if the electronic display of terms and conditions could potentially be saved or printed.413
The evidenced in writing alternative is designed to deal with the situation where there is an oral contract which is confirmed in writing.414 In Galeries Segoura Sprl v Firma Rahim Bonakdarian415 the Court of Justice held that, where an oral agreement is made subject to general conditions of sale, the confirmation in writing (accompanied in that case by notification of the general conditions of sale which contained a clause conferring jurisdiction) must be accepted in writing by the other party. It was reasoned that in such a case there is no initial oral agreement as to a clause conferring jurisdiction which is capable of being evidenced by the confirmation in writing. Subsequently, the Court of Justice has shown a concern that the requirements as to form should not be so onerous as to impede normal commercial practices, and has adopted a rather more liberal line. In Partenreederi MS Tilly Russ v Haven and Vervaebedriff Nova NV416 it held that where the choice of jurisdiction clause is in writing (in the instant case, in printed conditions in a bill of lading417) this can be regarded as written confirmation of an earlier communicated oral agreement between the parties expressly referring to that clause.
The same willingness to recognise that there has been confirmation in writing is evident in the decision of the Court of Justice in F Berghoefer GmbH and Co Kg v ASA SA.418 Here it was held that, in the situation where there is an oral agreement expressly dealing with References(p. 240) jurisdiction,419 the formal requirements of Article 17 of the Brussels Convention (the corresponding provision to Article 25 of the Brussels I Recast) were satisfied if written confirmation of the agreement by one of the parties was received by the other and the latter raised no objection.420 It was not required that the confirmation comes from the party who stands to lose from the clause. Thus in the instant case it was a German plaintiff who confirmed the oral agreement that the German courts should have exclusive jurisdiction.
In a form which accords with practices which the parties have established between themselves
This provision gives effect to the idea developed by the Court of Justice that the consensus of the parties may be shown by a continuous business relationship between them which was subject to the general conditions containing the jurisdiction clause.421
In international trade or commerce, in a form which accords with a usage of which the parties are or ought to have been aware and which in such trade or commerce is widely known to, and regularly observed by, parties to contracts of the type involved in the particular trade or commerce concerned422
This provision on trade usage was introduced423 because of fears that the Court of Justice had interpreted the original requirements on writing or evidenced in writing so restrictively that businessmen would find it hard to meet them.424 This relaxation of the formal requirements has repercussions on the issue of the reality of the consensus of the parties to the jurisdiction clause. Consensus is presumed to exist where there are commercial usages in the relevant branch of international trade or commerce of which the parties are or ought to have been aware.425 An established usage in international trade or commerce must be shown to exist and to have been followed.426 This is assessed solely in the light of commercial usages, not by national requirements.427 No independent requirements are laid down for this, such as that the jurisdiction clause is contained References(p. 241) in a written document. The parties must have been or ought to have been aware of the usage.428 There is an additional requirement429 that this usage must, on the one hand, be widely known to, and, on the other hand, regularly observed by, parties to contracts of the type involved in the particular trade or commerce concerned.430
Which party can allege that the requirements relating to form have not been met? Clearly the party who did not have notice of the choice of jurisdiction clause can do so. This was the position in the Colzani and Segoura cases. But if this party wishes to rely on the clause, can the other party, who knew about it from the outset, challenge the clause on the basis of lack of compliance with the requirements as to form? Since the purpose of these requirements is to prevent choice of jurisdiction clauses going unnoticed by one of the parties, it is arguable that only the party who did not have notice of the clause should be able to challenge it. On the other hand, if, as the Schlosser Report suggested in relation to the Brussels Convention,431 the courts of Member States must of their own motion determine whether Article 17 (Article 25 of the Brussels I Recast) operates to prevent them from having jurisdiction, these are requirements which apply regardless of the arguments of the parties, and it should be irrelevant which party raises the issue.
(iii) Third parties and jurisdiction agreements
Difficult questions can arise concerning when jurisdiction agreements may be enforced by or against third parties. In Gerling v Italian Treasury432 the Court of Justice held that a third party beneficiary would be entitled to rely on a choice of jurisdiction clause inserted for his benefit in a contract (which satisfied Article 17 of the Brussels Convention requirements) between an insurer and a policyholder, even though the third party had not satisfied the requirements as to form. The Court pointed out that the provisions on insurance in the Convention were designed to protect the policyholder. It would be pointless to require a third party to go through these formalities; and in those cases where the beneficiary was not told of the jurisdiction clause, impossible for him to do so. Consistent with this, in the later Tilly Russ433 case it was held that a third party who, under the applicable national law, stood in the shoes of an original shipper, succeeding to his rights and obligations under a bill of lading (which did comply with Article 17 of the Brussels Convention, corresponding to Article 25 of the Brussels I Recast), could not avoid the obligations in respect of jurisdiction under this by arguing that he did not consent to the jurisdiction clause.434 Similarly, according to the Court of Justice in Coreck Maritime GmbH v Handelsveem BV,435 a jurisdiction clause is References(p. 242) valid as against a third party who succeeded by virtue of the applicable national law to the shipper’s rights and obligations. If the third party bearer of the bill of lading, succeeded by virtue of the applicable law to the shipper’s rights and obligations when he acquired the bill of lading there is no need to ascertain whether he accepted the jurisdiction clause in the original contract.436 However, if, under the applicable national law, the party not privy to the original contract did not succeed to the rights and obligations of one of the original parties, the court seised must ascertain, having regard to the requirements laid down in the first paragraph of Article 17 of the Brussels Convention, whether he actually accepted the jurisdiction clause relied on against him.437
Coreck suggests that the crucial question whether a party not privy to the original contract has succeeded to the rights and obligations of one of the original parties (so that it is not necessary to demonstrate the consent of the third party) must be determined according to the applicable national law.438 However, in Refcomp SpA v Axa Corporate Solutions Assurance SA439 the Court of Justice suggested that the rule in Coreck was based on “the very specific nature of bills of lading”,440 which are internationally accepted as establishing a substitution of one party for another in a legal relationship. In Refcomp, the French doctrine under which a sub-buyer replaces the original buyer of goods in a chain of contracts was considered not to establish such a substitution, in part because the contractual terms may vary, and in part because this was not a matter on which there was agreement between Member States. As a result, the court held that the issue should not be governed by national law, which would introduce different outcomes among the Member States, and it would be necessary to demonstrate that the third party (sub-buyer) has actually consented to the jurisdiction agreement in accordance with the requirements of Article 25 of the Brussels I Recast.
The principles set out above apply equally to the situation where neither party is privy to the original contract.441 The original contracting parties must have consented to the jurisdiction clause (which includes satisfying the formal requirements) and each new party must have succeeded to the rights and obligations of an original party.
(iv) Limitations on the effectiveness of the agreement
First, Article 25(4) provides that the courts which have exclusive jurisdiction under Article 24 cannot be deprived of it by an agreement under Article 25, and any agreement which purports to do so shall have no legal force. It also provides that agreements conferring jurisdiction are of no legal force if they are contrary to either Article 15, Article 19 or Article 23.442 This means that in matters relating to insurance, in consumer contracts and in individual References(p. 243) contracts of employment, any agreement conferring jurisdiction must comply with both the requirements of Article 25 and of Article 15, Article 19 or Article 23.
Secondly, there is another limitation on the effectiveness of the agreement, which is not mentioned in Article 25. As noted previously, the Court of Justice has held that the defendant’s submission to the courts of a Member State under Article 18 of the Brussels Convention (Article 26 of the Brussels I Recast) overrides an agreement conferring jurisdiction under Article 17 of the Convention (Article 25 of the Brussels I Recast).443 Equally, submission to the courts of a Member State by a non-Member State domiciled party (which would not strictly be covered by Article 26, assuming that this provision only applies to Member State domiciled parties) should override Article 25.444
Under the Brussels I Regulation and Brussels Convention, the rules on lis pendens operated as a third limitation on the effectiveness of an agreement on jurisdiction. A party who did not wish to be bound by an agreement providing, for example, for the exclusive jurisdiction of the English courts could bring pre-emptive proceedings before the courts of another Member State (known colloquially as an “Italian torpedo” action), and the court chosen in the agreement could not take jurisdiction until (and unless) the court first seised determined that it did not have jurisdiction.445 The Brussels I Recast has introduced an amendment to the lis pendens rules (Article 31(2)) which strengthens the position of jurisdiction agreements, giving priority to the court chosen by the parties in the case of parallel proceedings concerning the validity of a jurisdiction agreement.446
(iii) General jurisdiction
Article 4 provides that “persons domiciled in a Member State shall, whatever their nationality, be sued in the courts of that Member State”. Article 4 is concerned with the domicile of the defendant at the time of commencement of proceedings, which in England means the issue of proceedings rather than the time of their subsequent service on the defendant.447
The Brussels I Recast adopts the principle that, in general, persons should be sued448 in the courts of the Member State where they are domiciled.449 The words “shall . . . be sued” must not be taken literally.450 The defendant may, and, in some circumstances, must, be sued in the courts of a Member State other than that of his domicile.451 Article 4 is thus a basis of References(p. 244) non-exclusive jurisdiction, unlike, for example, Article 24, or Article 25 where the parties have entered into an exclusive jurisdiction agreement. Where Article 4 applies, other Articles under the Brussels I Recast may give the claimant alternative places in which to commence proceedings, but according to Recital (15), the Brussels I Recast is “founded on the principle that jurisdiction is generally based on the defendant’s domicile”, which means that other grounds of jurisdiction tend to be interpreted restrictively. Article 4 is, by contrast, a basis of general jurisdiction—there is no requirement for the dispute to have any connection with the Member State in which the defendant is domiciled (or indeed with any other Member State).
In order to ascertain whether the defendant is domiciled in a Member State under Article 4, reference must be made (if an individual) to Article 62 of the Brussels I Recast and paragraph 9 of Schedule 1 to the Civil Jurisdiction and Judgments Order 2001, and (if a company) to Article 63 of the Brussels I Recast, which have already been discussed.452 Where the Member State in which the defendant is domiciled is the United Kingdom, the Modified Regulation will apply to allocate jurisdiction between the courts of England and Wales, Scotland and Northern Ireland.453
(iv) Special jurisdiction
In some cases trial is permitted in the courts of a Member State other than the one in which the defendant is domiciled; this is known as special jurisdiction and the relevant provisions are found in Section 2 of Chapter II of the Brussels I Recast. This alternative form of jurisdiction is justified on the basis of a close connection between the court and the action or in order to facilitate the sound administration of justice.454 It is left to the claimant to decide whether he wishes to sue the defendant in the latter’s domicile under Article 4 or whether he wishes to sue him in another Member State under Section 2. Where the Member State given special jurisdiction is the United Kingdom, the claimant will want to know whether he is to sue in England, Scotland or Northern Ireland or has the choice of suing in any of these. The modified version of the Brussels I Regulation will not apply455 to allocate jurisdiction within the United Kingdom. It has no need to. The provisions on special jurisdiction are designed to give local as well as international jurisdiction456 and can be regarded as giving jurisdiction to the courts of a part of the United Kingdom and not merely to the courts of the United Kingdom as a whole. Many of the provisions give jurisdiction to the courts of a place in a Member State, and the place in the United Kingdom would be in England, Scotland or Northern Ireland, as indicated by the particular provisions. Other provisions give jurisdiction to the courts or a court of a Member State, but the context readily identifies which part of the United Kingdom is the appropriate one to have jurisdiction.
(a) Special jurisdiction under Article 7
This is the most important of the three articles in Section 2. Article 7 provides that a person domiciled in a Member State may be sued in another Member State in seven specified situations. Before looking at these, it is important to realise that the use of the words “may be sued” is not intended to confer on courts a discretion to refuse to take jurisdiction.457References(p. 245) Rather it emphasises that the claimant is allowed (but not required) to sue the defendant in a Member State other than where the defendant is domiciled. Nonetheless, the defendant’s domicile is the normal place for trial. Article 7 is an exception to this general rule,458 and its provisions must not be given an interpretation going beyond the situations envisaged by the Brussels I Recast.459 It is less clear whether this means that all its provisions should be given a restrictive interpretation.460
The seven situations where the defendant can be sued in a Member State other than that of his domicile are set out in Article 7(1) to (7) as follows:
(a) in matters relating to a contract, in the courts for the place of performance of the obligation in question;
(b) for the purpose of this provision and unless otherwise agreed, the place of performance of the obligation in question shall be:
• in the case of the sale of goods, the place in a Member State where, under the contract, the goods were delivered or should have been delivered,
(c) if point (b) does not apply then point (a) applies.
(i) What are matters relating to a contract?
In order for Article 7(1) to apply there must be a matter relating to a contract. The Court of Justice has given an autonomous meaning to this concept, rather than applying the classification adopted under the national law of a Member State.462
A contractual relationship
There must be a contractual relationship between the parties.463 In certain circumstances this can present a problem, with no consensus under the substantive law of the Member States over whether there is such a relationship, and the Court of Justice has had to resolve the question. In the Peters case464 the Court has had to consider the relationship between an association and its members. Not all Member States regard this as a contractual relationship. Nonetheless, the Court held that this came within Article 5(1) of the Brussels Convention, the predecessor of Article 7(1) of the Brussels I Recast. The References(p. 246) autonomous definition of matters relating to a contract includes relationships which involve close links of the same kind as are created between the parties to a contract.465 In Jakob Handte & Co GmbH v Traitements Mecano-Chimiques des Surfaces SA (TMCS)466 the Court of Justice had to consider the relationship between a manufacturer and a sub-buyer who brings a claim in respect of damage to the product itself. Under French law there was liability in contract, whereas under English law, and that of many other Member States, usually there is no liability at all, either in contract or tort. The Court held that it was irrelevant how the relevant national court classified the matter or how it was classified under the applicable law; “matters relating to a contract” had to be given an independent meaning. The action did not relate to a contractual matter since there was no contractual relationship between the parties467 because the manufacturer had not undertaken any contractual obligation towards the sub-buyer,468 and the nature of the manufacturer’s liability was not regarded by the overwhelming majority of Contracting States to the Brussels Convention as being contractual. However, such liability (ie that imposed under French law) should be regarded as falling within the scope of Article 7(2) of the Brussels I Recast,469 even though such liability is not regarded in Member States as being tortious in the strict sense.470 In Česká spořitelna as v Feichter471 the Court of Justice held that the relationship between the payee of a promissory note and the giver of a guarantee (an aval) is contractual in nature. But the relationship between the issuer of a bearer bond and the person who has acquired the bond from a third party, where the issuer has not freely assumed an obligation towards the acquirer, is not.472 In Schmidt v Schmidt473 the Court of Justice assumed that a contract of gift of immoveable property falls within Article 7(1). A contractual relationship between the parties can be tacit, as in the case of a long-standing business relationship which has formed without a contract in writing.474 The existence of a tacit contractual relationship must be demonstrated by a body of consistent evidence such as the existence of a long-standing business relationship, good faith between the parties, regularity of transactions and their development over time in terms of quantity and value, any agreements as to prices and discounts, and the correspondence exchanged.475
An identifiable obligation
The Court of Justice in Fonderie Officine Meccaniche Tacconi SpA v Heinrich Wagner Sinto Maschinenfabrik GmbH (HWS)476 has said that “while Article 5(1) of the Brussels Convention does not require a contract to have been concluded, it is nevertheless essential, for that provision to apply, to identify an obligation, since the jurisdiction of the national court is determined, in matters relating to a contract, by the place of performance References(p. 247) of the obligation in question”.477 In that particular case there were negotiations that gave rise to expectations but the stage had not yet been reached when there were obligations.478 The House of Lords in Agnew v Lansforsakringsbolagens AB479 has held that the requirement of an identifiable obligation480 is separate from the requirement that there be a matter relating to a contract.481 The nature of this obligation has been examined by the House of Lords in both the Agnew case and in the earlier case of Kleinwort Benson Ltd v Glasgow City Council.482
In Kleinwort Benson a majority of the House of Lords, influenced by the allocation of jurisdiction to the place of performance of the obligation in question, adopted a principle that a claim can only come within Article 5(1) of the Modified Convention (now the Modified Regulation),483 allocating jurisdiction within the United Kingdom, if it is based on a particular contractual obligation, ie the obligation whose performance is sought in the judicial proceedings.484 This suggests that the obligation must be a contractual one and that it must also be a performance obligation. Support for both propositions can be found in terminology used by the Court of Justice in a number of cases.485 The Kleinwort Benson case concerned a claim for restitution of money paid under a purported contract subsequently accepted by both parties, in the light of an earlier judgment,486 as being void ab initio. This claim was based on the concept of unjust enrichment, not on a particular contractual obligation and, accordingly, fell outside the scope of Article 5(1) of the Modified Convention (now Modified Regulation).487 Moreover, since it was accepted that the contract was void ab initio, there was no obligation and Article 5(1) could not apply.488 This does not mean that all claims for restitution would fall outside what is now Article 7(1) of the Brussels I Recast. A restitutionary References(p. 248) claim that is based on a contractual obligation will not do so.489 A claim to recover money paid under a valid contract, on the ground of a failure of consideration following a breach of contract by the defendant, is capable of being classified under some systems as contractual and the concept of a contractual obligation is broad enough to encompass this.490 In Profit Investment SIM SpA v Stefano Ossi491 the Court of Justice has held that actions seeking the annulment of a contract and the restitution of sums paid but not due under the contract fall within Article 7(1). This is because, if there had not been a contractual relationship freely assumed between the parties, the obligation would not have been performed and there would have been no right to restitution. It is this causal link between the right to restitution and the contractual relationship that brings the action for restitution within Article 7(1).492 The Kleinwort Benson case can be reconciled with Profit Investment by confining it to its exceptional set of facts where the parties accepted that the contract was void ab initio.
The requirement that the claim has to be based on the performance of a particular contractual obligation raised concerns that what is now Article 7(1) might not apply where the claim arises out of a pre-contractual obligation. However, these concerns were put to rest493 by the House of Lords in Agnew v Lansforsakringsbolagens AB,494 which held by a majority495 that a claim for a declaration that the plaintiffs were entitled to avoid (ie rescind) insurance contracts on the basis of misrepresentations and non-disclosure fell within Article 5(1) of the Lugano Convention. In other words, an “obligation”, which in this case could variously be described as being to make a fair presentation of the risk, not to misrepresent the risk, or to disclose facts material to the risk,496 included a pre-contractual obligation which if not fulfilled gave the plaintiffs the right to set aside the contract.497 Doubts were expressed in the Agnew case as to whether it would be appropriate to refer to an “obligation” not to be guilty of duress, or undue influence or inducing a contract by mistake in a case of a person seeking to rely on duress, etc.498 Moreover, there could be no place of performance of such a negative obligation.499 In contrast, where the negative obligation was not to commit yourself to other partners this was regarded by the Court of Justice as an obligation but the problem was that there was a multiplicity of References(p. 249) places of performance in different Member States and therefore what is now Article 7(1)(a) could not be used.500
We must turn now to the statement in the Fonderie case that no contract need have been concluded.501 This makes clear that what is now Article 7(1) can apply where there is agreement on the main parts of the contract but not on all terms and conditions and there is no signed contract.502 At this late stage, when there is almost a complete contract, it can be inferred from the circumstances that obligations have been assumed by the parties.
An obligation that is freely assumed
The Court of Justice has repeatedly held that, in order for there to be a matter relating to a contract, there must be an obligation freely assumed by one party towards another.503 This requirement has come into play in three different situations.
The first is where there is no direct contractual relationship between the parties. This is illustrated by the Jakob Handte case504 where, although there was no direct contractual relationship between a sub-buyer and the manufacturer, under French law the sub-buyer had a contractual claim against the manufacturer.505 The Court of Justice said that the manufacturer “undertakes no contractual obligation to that [sub]buyer whose identity and domicile may, quite reasonably, be unknown to him”.506 Neither was this requirement met where a guarantor (A), who paid customs duties under a guarantee obtained by the forwarding agent (V), sought reimbursement from the owner of goods (F), who was not a party to the contract of guarantee.507 It would, however, be met if F authorised the conclusion of the contract of guarantee.508 There was also no contractual relationship freely entered into between the consignee of goods and a sub-carrier which was a third party to a transport contract between the consignee and another company which issued the bill of lading.509
References(p. 250) The second situation where this requirement came into play arose in the Fonderie case.510 There was no identifiable contractual obligation, the negotiations not having reached the stage where contractual obligations arose. The obligation in that case to make good the damage allegedly caused by the unjustified breaking off of negotiations could derive only from rules of law, in particular the rule which requires the parties to act in good faith in negotiations with a view to the formation of a contract.511 Accordingly, there was no obligation freely assumed by one party towards another.512
The third situation where this requirement came into play arose in Česká spořitelna as v Feichter513 where the Court of Justice held that the giver of an aval (a kind of guarantee), by signing a promissory note, voluntarily consents to act as the guarantor of the obligations of the issuer of the promissory note. This is even if the promissory note was incomplete at the date of its signature and was subsequently completed by the payee, pursuant to an agreement on the right to complete the note which was also signed by the giver of the aval. By contrast, in Harald Kolassa v Barclays Bank plc514 the Court found that, if there were no obligations freely assumed in the relationship between the issuer of a bearer bond and the person who has acquired the bond from a third party, Article 7(1) was not engaged.
Where there are contractual obligations, these can arise both by virtue of the terms of the contract and under the general law (such as the obligations imposed on the seller by the Sale of Goods Act 1979). Contractual obligations arising by virtue of the terms of the contract are undeniably freely assumed by one party towards another. As regards obligations that arise by virtue of the general law, it can be said that by voluntarily entering into a contract the parties freely assume the legal incidents of the contract.515 This means that the source of the obligation, whether it is the general law or the express terms of the contract, does not matter.516 Neither is there any problem in meeting this requirement where there is a unilateral undertaking by a commercial body to award a prize.517
An identifiable place of performance
Not only must there be an identifiable obligation, there must also be an identifiable place of performance.518 This, like the requirement of an identifiable obligation, was regarded by the majority of Law Lords in the Agnew case as a separate requirement from there being a matter relating to a contract.519
References(p. 251) (ii) Disputes relating to the existence of the agreement
In Effer v Kantner520 the Court of Justice held that jurisdiction under what is now Article 7(1) may be invoked by the plaintiff even where there is a dispute between the parties over the existence of the contract on which the claim is based. Courts would be too easily deprived of jurisdiction if an allegation by the defendant that no contract existed was sufficient to prevent the dispute falling within Article 7(1). The court seised of the matter may end up deciding that no contract exists but this is neither here nor there. All that matters is that this court is satisfied that the requirements of Article 7(1) are satisfied, including that it is a matter relating to a contract. When it comes to trial in England it has to be shown that there is a good arguable case, ie a better or much better argument on the material available, that a contract exists, which may well involve going into the merits of the case.521 Where a negative declaration is sought denying the existence of the contract the claimant can rely upon the fact that the defendant is seeking to enforce a contract against him.522 The court whose jurisdiction is invoked under Article 7(1) may, of its own motion, examine its jurisdiction,523 including the question of the existence of the contract, and decide that it does not have jurisdiction.
The Effer case involved an action for the enforcement of the performance of a contractual obligation, during the course of which the question of the existence of the contract arose as a preliminary issue.524 Similarly, in Boss Group Ltd v Boss France SA525 the Court of Appeal used what is now Article 7(1) to take jurisdiction to grant the plaintiff a negative declaration that no contract existed in circumstances where the defendant was seeking to enforce a contractual obligation against the plaintiff. What would happen though if the question of the existence of the contract is the only matter in issue between the parties? This question arose in Profit Investment SIM SpA v Stefano Ossi526 which concerned actions seeking the annulment of a contract and the restitution of sums paid but not due under the contract. The Court of Justice held that the national court’s jurisdiction to determine questions relating to a contract includes the power to consider the existence of the constituent parts of the contract itself.527
References(p. 252) (iii) The general rule
Article 7(1)(a) lays down the general rule of jurisdiction for matters relating to a contract, according to which jurisdiction is given to the courts for the place of performance of the obligation in question. This rule is based on Article 5(1) of the Brussels Convention, although there is one difference between the two provisions: employment contracts, which were dealt with in Article 5(1) of the Brussels Convention, are now the subject of a separate section.528 In order to avoid the problems of interpretation surrounding this general rule, the Brussels I Regulation introduced, in what is now Article 7(1)(b), special rules of jurisdiction for two most important types of contract, namely contracts for the sale of goods and the provision of services.529 All other contracts are subject to the general rule.
The obligation in question
A multiplicity of obligations (which may have different places of performance) can arise in complex contractual cases, yet the Brussels I Recast gives no indication in Article 7(1)(a) as to which obligation is being referred to.
In De Bloos v Bouyer530 the Court of Justice went some way towards an autonomous definition for the obligation in question. It held that Article 5(1) of the Brussels Convention is referring not to any obligation under the contract but to the contractual obligation forming the basis of the legal proceedings, the one which the contract imposes on the defendant, the non-performance of which is relied upon by the plaintiff. Thus an English court had jurisdiction in a case where German defendants broke their obligation to give reasonable notice of termination of an exclusive distribution agreement to an English company in England.531 There is a problem in identifying the obligation in question in cases where the claimant is seeking a negative declaration, ie a declaration that he is not liable to perform an obligation under the contract, on the basis that the other party has not performed a term of the contract. It has been suggested that the obligation in question is that term and not the claimant’s obligation to perform the contract.532 With certain contracts it is by no means easy to ascertain precisely what the obligations of the parties are.533 It may also be necessary to ascertain whether an agreement has been superseded by a further agreement imposing separate contractual obligations, one of which is being relied upon.534 Moreover, if the claimant is seeking compensation References(p. 253) a decision then has to be made as to whether this claim involves an independent contractual obligation (and therefore falls within Article 7(1)(a)), or whether it involves a new obligation replacing the unperformed contractual obligation (which would be outside Article 7(1)(a)). There is no consensus among the legal systems of the different Member States as to which of these two is the source of the right to claim compensation. The national court where trial is sought is therefore left to decide this in the light of the law applicable to the contract under its private international law rules. If English law applies, an obligation to pay unliquidated damages cannot form the basis of jurisdiction under Article 7(1)(a) since this obligation is remedial in character, not an independent contractual obligation.535
A particular difficulty with the De Bloos approach is that the claimant may make several claims involving different obligations to be performed in different states. This problem was solved by the Court of Justice in Shenavai v Kreischer.536 The judge dealing with the case is to be guided by the maxim accessorium sequitur principale and is to identify the principal obligation on which the claimant’s action is based and jurisdiction is to be determined in accordance with this. Thus, if the defendant shipowners are in breach of obligations under a charter-party to, first, nominate a vessel (this obligation to be performed in London) and, secondly, provide a vessel for the carriage of cargo (this obligation to be performed in Florida) the first obligation is the principal one, since it is the performance of this obligation that triggers other obligations.537 The plaintiff is not allowed to camouflage the principal obligation by relegating it to a subordinate role by the way he chooses to express his claim.538 If all the obligations are to be performed in the same country, there is no need to identify the principal obligation.539 In the situation where the action is founded on two obligations of equal rank arising from the same contract, one obligation to be performed in one Member State and the other in another Member State, the same court does not have jurisdiction to hear the whole of an action.540 For the purposes of Article 7(1)(a) the claims are split up and tried before the courts of different Member States. However, the claimant can avoid this by bringing the whole of the action in the Member State in which the defendant is domiciled.
References(p. 254) The place of performance of the obligation in question
Article 7(1)(a) does not contain an autonomous definition of the place of performance of the obligation in question, and the Court of Justice has not been prepared to provide one. Instead, the place of performance of the obligation in question under Article 7(1)(a) is determined by the forum applying its rules of private international law. In Tessili v Dunlop541 the Court of Justice held that the national court before which the matter is brought “must determine in accordance with its own rules of conflict of laws what is the law applicable to the legal relationship in question and define in accordance with that law the place of performance of the contractual obligation in question”.542 The shortcomings in the Tessili approach were criticised by academics543 and by Advocates General.544 Criticisms include the fact that it leads to a lack of harmonisation in the law of jurisdiction545 and that the process that has to be gone through is undeniably complex and difficult to apply.546 The Court of Justice has accepted that this approach can lead to jurisdiction being allocated to a forum which is not the one that has the closest connection with the dispute.547
In Besix SA v Wasserreinigungsbau Alfred Kretzschmar GmbH & Co KG (WABAG),548 the Court of Justice held that Article 5(1) of the Brussels Convention (now Article 7(1)(a) of the Brussels I Recast) had to be interpreted as meaning that, in the event that the relevant contractual obligation under the law applicable to the contract has been, or is to be, performed in a number of places, jurisdiction to hear and determine the case cannot be conferred on the court within whose jurisdiction any one of those places of performance happens to be located.549 Instead, jurisdiction had to be based on the rule of general jurisdiction. It was clear from the wording of the provision, which is in the singular (the place of performance), that a single place of performance for the obligation in question must be identified.550 The Court was concerned to avoid a multiplicity of competent courts and the risk that the plaintiff is able to choose the place of performance which he judges to be most favourable to his interests. The Besix case concerned the situation where the place of performance of the obligation in question could not be determined because it consisted of an undertaking by the defendants not to do something (not to commit themselves to other partners) which was not subject to any geographical limit and was therefore characterised by a multiplicity of places of its References(p. 255) performance.551 The place of performance, in effect, was in any place in the world, including all the Contracting States to the Convention.
(iv) Special rule for sales and services contracts
The Brussels I Regulation introduced two major innovations in the rule of jurisdiction for contractual matters. First, what is now Article 7(1)(b) provides that for the contracts for the sale of goods and the provision of services the obligation in question is the obligation to deliver the goods and perform the service, regardless of the obligation on which the claim is based. Second, there is now an autonomous definition of the place of performance of the obligation in question for these two types of contract.552 These innovations were introduced to remedy the shortcomings in the De Bloos/Tessili approach.553 They are designed to reinforce the unification of the rules of jurisdiction whilst ensuring their predictability.554 Article 7(1)(b) represents a compromise between the Member States, some of which wanted to retain the existing rule and others to abolish Article 7(1) altogether.555
The scope of Article 7(1)(b)
There are two clear limitations on the scope of Article 7(1)(b).556 First, it is explicitly provided that the case must be one of the “sale of goods” or the “provision of services”. Neither concept is defined in the Brussels I Recast. It is easier to say what each concept does not cover than what it does. We know from other provisions in the Brussels I Recast that “sale of goods” and “provision of services” do not cover insurance contracts, individual contracts of employment and consumer contracts. Neither, when working out the meaning of “sale of goods”, does this cover the provision of services and vice versa.
Turning to what “sale of goods” does cover, it is important to note that twenty-three of the twenty-seven European Union Member States subject to the Brussels I Recast are parties to the UN Convention on the International Sale of Goods (CISG) of 1980 (the Vienna Convention). The concept of sale of goods under that Convention represents the corpus of most of the legal systems of the Member States. One should therefore turn to the meaning of “sale of goods” under the Vienna Convention to answer the question of what is covered by the words “sale of goods” in Article 7(1)(b). This is helpful in determining whether a contract for the supply of goods to be manufactured is one for the “sale of goods”. It also tells us that “goods” should be given a broad meaning to include minerals and crops and should also encompass the sale of software, whether contained on a disk or transferred over the internet.557 On the other hand, “sale of goods” should not cover the sale of things that are excluded from the Vienna Convention. The leading case on the concept of the “sale of goods” is the Car Trim case.558
A German supplier of components used in the manufacture of airbag systems entered into several contracts with an Italian manufacturer of those systems. The German company was to manufacture or produce airbags following precise requirements and individual specifications of the purchaser.
References(p. 256) The contracts between the parties involved both the sale of goods and the provision of services. But, for the purposes of what is now Article 7(1)(b), the Court of Justice held that it was necessary to classify the contracts as falling within either the former or the latter category. The Court stated that, since what is now Article 7(1)(b) identifies as a connecting factor the obligation which characterises the contract in question, the classification of the contract depends on the nature of its characteristic obligation. Classification should be performed by reference to the Vienna Convention559 and other relevant instruments of EU law and international law, namely the Directive on certain aspects of the sale of consumer goods and associated guarantees560 and the UN Convention on the Limitation Period in the International Sale of Goods of 1974.561 These instruments indicate that the key factors to be taken into account are the origin of the raw materials, ie whether or not those materials have been supplied by the purchaser, and the responsibilities of the supplier. The fact that all the raw materials, or most of them, have been supplied by the purchaser is an indication that the contract should be classified as one for the provision of services. The fact that the supplier is responsible only for the correct implementation of the purchaser’s requirements and instructions, as opposed to being responsible for the quality of the goods and their compliance with the contract, is another indication that the contract is one for the provision of services. In a subsequent case, the Court of Justice held that a long-standing business relationship between two parties can be classified as a relationship for the sale of goods where that relationship is limited to successive agreements each having the object of the delivery and collection of goods.562
The concept of the “provision of services” should also be given an autonomous meaning. The starting point in this respect is Falco Privatstiftung, Thomas Rabitsch v Gisela Weller-Lindhorst,563 which concerned the classification of a contract for the assignment of intellectual property rights. The Court of Justice held that the concept of service implies, at the least, that the party who provides the service carries out a particular activity in return for remuneration. Since no such activity is involved in a contract for the assignment of intellectual property rights, such contract falls outside the scope of Article 7(1)(b) and within the scope of the general rule of jurisdiction for contractual matters in Article 7(1)(a). The Court also held that this analysis could not be called into question by arguments based on the concept of services within the meaning of other secondary EU law or the freedom to provide services set out in Article 50 EC (now Article 57 TFEU) because the Brussels I Regulation and these other instruments of EU law pursue different aims and objectives. The Court refined the definition of the concept of service for the purposes of Article 7(1)(b) of the Brussels I Recast in a number of subsequent cases. With regard to the existence of an activity, this criterion requires the performance of positive acts, to the exclusion of mere omissions.564 With regard to the provision of remuneration as consideration for an activity, this criterion covers not only the payment of a sum of money but also any other economic benefit.565 The Court has thus held that an exclusive distribution agreement,566References(p. 257) a contract for the warehouse storage of goods567 and a contract between a company and its former manager568 may satisfy these two requirements and should therefore be regarded as contracts for the provision of services. The concept of service covers not only professional services such as contracts for accountancy advice,569 to restructure one’s business interests,570 to design a website,571 devising advertising material,572 or contracts to act as commercial agent for someone,573 but also the separate autonomous contracts under a letter of credit,574 reinsurance contracts,575 contracts of carriage, contracts for the inspection of goods, and franchise contracts.576 However, the “provision of services” should be interpreted as not covering contracts relating to a right in rem or a tenancy of immovable property.577 Further guidance on the meaning of services can be found by looking at examples of contracts held to fall outside Article 7(1)(b) generally.578
The second clear limitation on the scope of Article 7(1)(b) is implicit from the part of Article 7(1)(b) that allocates jurisdiction. This is that the goods were delivered or should have been delivered/services were provided or should have been provided in a place in a Member State.
One final observation that should be made about the scope of Article 7(1)(b) relates to its width. It “applies regardless of the obligation in question, even where this obligation is the payment of the financial consideration for the contract. It also applies where the claim relates to several obligations”.579 This means that if goods are delivered in England the English courts will have jurisdiction under Article 7(1), even though the claim is for payment for the goods.580 The width of the rule can be justified on the basis that delivery characterises the contract of sale,581 and providing the service characterises the contract for the provision of services. At first sight this might suggest that it is no longer necessary to identify the obligation in question in cases of sale of goods or the provision of services. However, this is still necessary because of the possibility of displacement of the place of delivery/provision of services rule.582
References(p. 258) The place in a Member State where, under the contract, the goods were delivered or should have been delivered
Article 7(1)(b) allocates jurisdiction to the place where, “under the contract”, the goods were delivered or should have been delivered. This means that, when ascertaining this place, recourse must be had to all the relevant terms and clauses of the contract. The sales contract may, for example, expressly provide for delivery ex works or for delivery at frontier or contain other terms and clauses which are capable of clearly identifying the place of delivery of the goods. Of particular importance in this respect are the international commercial terms known as Incoterms drawn up by the International Chamber of Commerce, which reflect the usages of international trade and commerce.583 The parties, by agreeing on the place of delivery, are effectively choosing the place to be allocated jurisdiction. Nonetheless there is no requirement that the formalities under Article 25 have to be met. In the absence of such an express agreement by the parties on the place of delivery, it may be possible to imply an agreement from the terms of the contract. It should also be possible to imply an agreement from the circumstances of the case, such as from the fact that the parties have contracted before and delivery has always been to one particular place. In the absence of an express or implied agreement as to the place of delivery, this place is to be determined without reference to the substantive law applicable to the contract584 and is considered to be the place where the physical transfer of the goods took place, as a result of which the purchaser obtained, or should have obtained, actual power of disposal over those goods at the final destination of the sales transaction.585
Numerous problems arise with the place of delivery rule.586 Two of the most obvious are as follows. First, what happens if goods are delivered to more than one place and these are in different Member States?587
For example, assume that there is a contract for the sale of 10,000 tons of grain, 3,000 tons to be delivered to England and 7,000 tons to Germany. All 10,000 tons are rendered defective by contact with a previous cargo. The claimant wishes to sue in one Member State in respect of the whole 10,000 tons.
It will be remembered that in Besix SA v Wasserreinigungsbau Alfred Kretzschmar GmbH & Co KG (WABAG),588 the Court of Justice held that Article 5(1) of the Brussels Convention had to be interpreted as meaning that, in the event that the relevant contractual obligation has been, or is to be, performed in a number of places, jurisdiction to hear and determine the case cannot be conferred on the court within whose jurisdiction any one of those places of performance happens to be located. Instead, jurisdiction had to be based on the rule of general jurisdiction. The Court was concerned to avoid a multiplicity of competent courts and the risk that the plaintiff is able to choose the place of performance which he judges to be most favourable to his interests. But it is questionable whether the Besix case should be References(p. 259) applied in cases falling within what is now Article 7(1)(b) of the Brussels I Recast. An alternative way of achieving a single court with jurisdiction over the whole of the goods would be to allocate jurisdiction to the court of the principal place of delivery, determined on the basis of economic criteria. This was the solution adopted by the Court of Justice in the Color Drack case, which involved several places of delivery within the same Member State.589 Although the Court has not had the opportunity to extend the solution from Color Drack to cases involving delivery in several Member States, it has applied this case by analogy in cases concerning provision of services in several Member States.590 It would appear that consistent interpretation of the two indents of Article 7(1)(b) requires the extension of the solution from the Color Drack case to cases involving delivery in several Member States. The position is more difficult in the situation where the claim relates to all the deliveries and economic criteria do not disclose a principal place of delivery,591 or where the claimant wishes to sue in England for merely the 3,000 tons delivered there, or in cases involving delivery partly within and partly outside the EU. One will have to wait for further clarifications from the Court of Justice before definitive answers can be given.
Secondly, what happens if there is a fictitious place of delivery, ie the contract provides for delivery in a place when this is designed not to determine where delivery will actually take place, but solely to establish that the courts for a particular place have jurisdiction? That this is the aim can be shown by the fact that a place of delivery has been designated which has no connection with the reality of the contract and the obligations under the contract, obligations which, because of their very nature or because of geographical fact, can only be performed in some other country.592 Goods may then be delivered to this other country (Member State A), rather than to the fictitious place of delivery (Member State B). An attempt may be made to bring an action in the fictitious place of delivery (Member State B) on the basis that, under the contract, goods “should have been delivered” there within the wording of Article 7(1)(b). The Court of Justice has held that where there is a fictitious place of performance, this is governed not by Article 5(1) of the Brussels Convention but by Article 17 (Article 25 of the Brussels I Recast) and the requirements of that provision must be met.593 In other words, the fictitious place of performance is treated as an attempted jurisdiction clause. The same approach should be adopted towards a fictitious place of delivery, given that the place of delivery rule is being used to determine the place of performance of the obligation in question.
There are also problems where there is: delivery to alternative places; a deemed place of delivery; constructive delivery; a floating place of delivery; an agreement on the place of delivery entered into after the contract was made; a refusal to accept delivery; and identifying the place of delivery in cases of e-commerce.594
Jurisdiction is allocated to the place where the goods were delivered or should have been delivered. This deals with cases of non-delivery and mis-delivery. Thus if goods are delivered to References(p. 260) England when, under the contract, they should have been delivered to France, the place of performance of the obligation in question under Article 7(1)(b) will be France, rather than England.595
The place in a Member State where, under the contract, the services were provided or should have been provided
Everything said in the previous section about the meaning of “under the contract” applies equally to this provision. Likewise the reference to the place where services should have been provided deals with cases of non-provision of services and mis-provision in the sense of a party providing services in the wrong place. When it comes to identification of the place in a Member State where, under the contract, the services were provided or should have been provided, the situation is analogous to that of identification of the place in a Member State where, under the contract, the goods were delivered or should have been delivered. Analogous problems can arise. For example, services may be provided in more than one place and these are in different Member States. The Court of Justice dealt with this situation in two cases. The Rehder case596 concerned a claim for compensation597 under a contract for the provision of air transport services from one Member State to another. The Court referred to the Color Drack case and held that, since the services in the case at hand were provided in an identical and indivisible manner in both the place of departure and the place of arrival of the aircraft and, therefore, no place of the main provision of services existed, the claimant could choose to commence proceedings in the courts for either the place of departure or the place of arrival of the aircraft. In the Wood Floor case598 the Court of Justice dealt with the place of performance of a commercial agency contract. It confirmed that the court which has jurisdiction to hear and determine all the claims arising from the contract is the court in whose jurisdiction the place of the main provision of services is situated. For a commercial agency contract, that place is the place of the main provision of services by the agent, as it appears from the provisions of the contract or, in the absence of such provisions, the actual performance of that contract or, where it cannot be established on that basis, the place where the agent is domiciled. The operation of the rule of jurisdiction for services contracts may throw up certain problems that may not arise or are less likely to arise under the sale of goods rule. A letter of credit, payment under which should be regarded as the provision of a service, may provide that “we shall pay you as per your instructions”. This is a floating place of payment; there is no identifiable place of payment as at the time the contract is concluded but there is a mechanism for identifying this place and this place will crystallise later, when the beneficiary gives his instructions. Effect References(p. 261) has been given by the Court of Appeal to a floating place of payment in a letter of credit for the purposes of identifying the place of performance of the obligation in question under Article 5(1) of the Brussels Convention.599
Displacement where it is otherwise agreed
The special rule that operates in the case of the sale of goods and in the case of the provision of services is subject to the proviso that it applies “unless otherwise agreed”. Let us assume that goods have been delivered in Spain but it has been agreed that payment shall be made in England. The claimant wishes to sue in England for non-payment. The question arises whether the place of performance of the obligation to pay will be in England by virtue of the displacement rule. It seems that the answer is in the negative and that the “unless otherwise agreed” proviso requires an agreement specifically on the displacement of Article 7(1)(b) and, therefore, on the application of Article 7(1)(a) and the De Bloos/Tessili approach to a contract for the sale of goods or the provision of services. Admittedly, rational parties are unlikely to agree to such a clause, especially in the light of the availability of jurisdiction agreements under Article 25. Nevertheless, the interpretation under which a mere agreement on the place of payment would lead to the displacement of Article 7(1)(b) and would implicitly allocate jurisdiction to the place of payment would threaten to undermine the objectives pursued by this provision.600
Cases falling outside the scope of Article 7(1)(b)
Article 7(1)(c) is concerned with the situation where Article 7(1)(b) does not apply. Examples of contracts which are neither for the sale of goods nor the provision of services are a contract for the assignment of intellectual property rights,601 a relationship between the payee of a promissory note and the giver of a guarantee (an aval),602 a contract of gift of immoveable property,603 a licensing agreement, an agreement to provide a joint tender for a construction project,604 a contract for the payment of a prize,605 a contract whereby a person received a percentage participation in an oil concession,606 a contract in the form of a guarantee,607 a contract for the purchase of capacity on a fiber optic submarine cable network,608 a contract whereby an employer agrees to make payments to a sub-contractor provided that the latter continues to perform its obligations under the sub-contract,609 a contract whereby an investor in a company agreed to support a share-placing on an investments market in exchange for commitments given by the company to make changes to its corporate structure and to review its strategy and business.610 It has been assumed that Article 7(1)(c) will apply to an average guarantee entered into between References(p. 262) shipowners and cargo insurers,611 and a loan agreement under a salvage agreement.612 A further example is a contract relating to a right in rem or to a tenancy of immovable property.613 Moreover, a contract for the sale of goods or provision of services would fall outside the scope of Article 7(1)(b) in the situation where the performance of the characteristic obligation is made or should have been made in a non-Member State.614
Article 7(1)(c) provides that if 7(1)(b) does not apply then Article 7(1)(a) applies, including the De Bloos/Tessili approach.615 This approach requires the national court: first, to determine the contractual obligation in question;616 secondly, to determine in accordance with its own rules of conflict of laws617 what is the law applicable to the legal relationship in question; and, thirdly, to define in accordance with that law the place of performance of the obligation in question.618 Examination of the substantive domestic law of Member States shows that the same general approach towards determining the place of performance is applied throughout the European Union.619 First, effect is given to an express stipulation as to the place of performance in the contract. It is common to find such an express stipulation. This can be done in an informal way without the formalities required for an agreement as to jurisdiction under Article 25,620 even though the effect of such a contractual provision is to lead indirectly, by reason of Article 7(1)(a), to a particular court having jurisdiction.621 However, there is a qualification to this in the case of a fictitious place of performance.622 If the agreement on the place of performance is designed not to determine the place where the person liable is actually to perform the obligations incumbent on him, but solely to establish that the courts for a particular place have jurisdiction, this is governed not by Article 7(1) but by Article 25, and the requirements of that provision must be met.623 The only other proviso is that the clause specifying the place of performance must be valid under the law applicable to the contract.624 Secondly, in the absence of an express stipulation, it may be possible to imply a choice by the parties. This is a question of contractual interpretation. Thirdly, if this does not produce an answer each Member State has residual rules which determine the place of performance. It is at this stage that the question of the applicable law may become crucial, since these national rules sometimes provide different solutions.625 For example, Member States differ on whether, in the absence of a stipulation on the due place of payment, the obligation to pay must be performed in the creditor’s place of business References(p. 263) or in the debtor’s.626 If the obligation in question under the law applicable to the contract has been, or is to be, performed in a number of places, jurisdiction to hear and determine the case cannot be conferred on the court within whose jurisdiction any of those places of performance happens to be located.627 A single place of performance for the obligation in question must be identified.
(i) What are matters relating to tort, delict or quasi-delict?
The Court of Justice in Kalfelis v Schröder629 has held that the concept of “matters relating to tort, delict or quasi-delict” must be given an autonomous definition. The question then arises of how widely or narrowly this concept is to be interpreted. In many cases this has not been regarded as problematic. So, for example, it has been held that actions for infringement of “personality rights” (defamation and privacy),630 negligent misstatement,631 negligent and fraudulent misrepresentation;632 negligence,633 product liability,634 conversion,635References(p. 264) infringement of intellectual property rights,636 passing off,637 unfair competition,638 and actionable breaches of EU law giving rise to a claim for damages639 come within Article 7(2). The crucial question is whether the concept of “tort, delict or quasi-delict” extends to cover an action in respect of a non-contractual obligation which is not characterised in the substantive domestic law of Member States as one in tort, such as one in unjust enrichment or non-contractual breach of confidence.640
The Court of Justice in Kalfelis also held that the term matters relating to tort, delict or quasi-delict “must be regarded as an independent concept covering all actions which seek to establish the liability of a defendant and which are not related to a ‘contract’ within the meaning of [Article 7(1)]”.641 This statement has been repeated and approved in numerous subsequent decisions of that Court642 and has been followed in national courts.643 The Court of Justice in these subsequent cases has interpreted this statement as setting out the scope of Article 7(2). The technique adopted by the Court of Justice for determining whether Article 7(2) applies is as follows.644 The first question asked is whether there is a matter relating to a contract under Article 7(1).645 If there is, that is the end of the matter and Article 7(2) cannot apply.646 Once it has been decided that there is not, the question arises of whether it must be held that it is a matter relating to tort, delict or quasi-delict. Some cases, especially older ones, seem to suggest that Article 7(2) is a residual category literally covering all cases which seek to establish the liability of a defendant and which are not related to a “contract” within References(p. 265) the meaning of Article 7(1).647 This seems to go too far.648 In some recent cases, the Court of Justice has asked whether there is a “harmful event” and a causal connection between the damage and the event in which that damage originates.649 There are therefore Article 7 cases falling outside both Article 7(1) and 7(2), such as non-contractual cases where the requirement that there is a harmful event has not been met.650 One such example, according to AG Wahl in Gazdasági Versenyhivatal v Siemens Aktiengesellschaft Österreich,651 are claims for restitution on the ground of unjust enrichment.
Nevertheless, Article 7(2) is given a very wide scope. The Court of Justice has not inquired into whether under the law of the various Member States there was a tort in the substantive domestic law sense and it has applied Article 7(2) in the situation where there was no such tort. This is shown most graphically in Fonderie Officine Meccaniche Tacconi SpA v Heinrich Wagner Sinto Maschinenfabrik GmbH (HWS).652 The Court of Justice held that a claim based on pre-contractual liability under Article 1337 of the Italian Civil Code, which provides that, in the context of the negotiation and formation of a contract, the parties must act in good faith, did not relate to a contract and in the light of this was a matter relating to tort, delict or quasi-delict within what is now Article 7(2).653 Article 1337 sets out a non-contractual obligation which is not regarded under Italian law as delictual.654 There was no evidence that it was regarded as being delictual under the law of other Member States. Another example is provided by ÖFAB, Östergötlands Fastigheter AB v Frank Koot and Evergreen Investments BV,655 where the Court of Justice held that what is now Article 7(2) covered actions brought by the creditors of a limited company seeking to hold liable for its debts a director and a shareholder of the company. This means that other non-contractual obligations which are not characterised as tortious in the substantive domestic law sense may fall within the scope of Article 7(2),656 provided, of course, that the other requirements (set out below) for coming within this provision are met.
References(p. 266) A leading English authority on the issue is Kleinwort Benson Ltd v Glasgow City Council,657 in which the House of Lords has given a narrow interpretation to what is now Article 7(2), holding unanimously that a claim for restitution based on unjust enrichment did not fall within this provision.658 Reliance was placed on another passage in the Kalfelis case659 which states that “a court which has jurisdiction under [Article 7(2)] over an action in so far as it is based on tort or delict does not have jurisdiction over that action in so far as it is not so based”. The House of Lords interpreted the first key passage, which has been relied upon so much by the Court of Justice, as merely being concerned with whether an independent meaning should be given to the term “tort”, not with the question of scope, which in their Lordships’ view was dealt with in the second passage.660 This may have been a tenable interpretation at the time the Kleinwort case was decided but it cannot be reconciled with the more recent decision in the Fonderie case, nor with other later decisions of that Court which have not asked whether there is a tort in the substantive domestic law sense. In any event, as far as a claim for restitution based on unjust enrichment is concerned there was another reason given for excluding this from the scope of what is now Article 7(2), namely there was no harmful event.661
An action which seeks to establish the liability of a defendant
According to the Court of Justice in Kalfelis, to come within Article 7(2) the action must seek to establish the liability of a defendant.662 In Reichert v Dresdner Bank (No 2),663 the Court of Justice held that an action whereby a creditor sought to set aside a gift of property made by a debtor, which allegedly defrauded him of his rights (an action paulienne under French law) did not seek to establish the liability of a defendant in the sense understood in what is now Article 7(2). There was no question of making good the damage done to the creditor by the debtor’s fraudulent act and the action was not just directed at the defendant debtor but also at the third party beneficiary of the disposition by the debtor.664 “Liability” has been widely defined to encompass types of legal liability other than the obligation to make financial reparation, such as refraining from certain types of unlawful conduct.665 Thus a claimant may seek to establish liability not just by claiming compensation. He could equally do so by seeking an injunction to prevent damage666 or by seeking a declaration that certain conduct References(p. 267) is unlawful as an essential precursor to an action for damages.667 Each of these has been held to come within the scope of Article 7(2). It has also been held that an action for a declaration that that person is under no liability because no tort has been committed falls within Article 7(2).668 The liability can be in respect of a non-contractual obligation, ie one that is not in a strict sense tortious or delictual.669
A harmful event
There must be a “harmful event” for an action to come within Article 7(2).670 Other than in exceptional circumstances, a claim based on unjust enrichment does not presuppose such an event. This was the second line of reasoning used by the House of Lords in Kleinwort Benson to explain their decision that the action did not come within Article 5(3) of the Modified Convention (now the Modified Regulation).671 The same line of reasoning has recently been adopted by AG Wahl in Gazdasági Versenyhivatal v Siemens Aktiengesellschaft Österreich,672 adding further that non-contractual liability, unlike restitution on the basis of unjust enrichment, requires that there is some ground for holding the defendant responsible for the damage or loss sustained by the claimant, be it in the form of intent, negligence or strict liability673 and referring to the treatment of unjust enrichment under the Rome II Regulation.