Posts Tagged Article 25

X v I: The Austrian Supreme Court on due diligence in choice of court under Brussels I Recast.

Thank you Klaus Oblin for flagging OGH 7 Ob 183/17p X SE v I SpA (yet again I am happy to grumble that there is really no need to keep B2B litigation anonymous) at the Austrian Supreme Court. At issue is the application of Article 25 Brussels I Recast: when can consent to choice of court be established.

The facts of the case reflect repeated business practice: offers are made and accepted; a business relationship ensues on the basis of which further offers and orders are made; somewhere along the lines reference is made to general terms and conditions – GTCs which include choice of court. Can defendant be considered to have consented?

The Supreme Court, justifiably, lays the burden of proof with the claimant /plaintiff: if the contract is concluded through different offer and acceptance documents, the offer need only reference the terms and conditions containing the agreement conferring jurisdiction only if the other party: can follow-up on this with reasonable diligence; and actually receives the terms and conditions.

I am happy to refer to Klaus’ excellent overview (which also discussed the absence of established business practice between parties: one of the alternatives for showing choice of court). Yet again, the first and foremost quality required of lawyers (here: in-house counsel) emerges: ensure proper filing and compliance with simple procedure. Here: a clear flag of the GTCs in correspondence, and simple follow-up would have sufficed.

Geert.

(Handbook of) EU private international law, 2nd ed. 2016, Chapter 2, Heading 2.2.9.

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Saey Home: The CJEU on choice of court and invoices, and place of performance of concession contracts.

C‑64/17 Saey Home, is yet another illustration of, mercifully for us conflicts lawyers, even fairly sophisticated businesses often fail properly to conclude commercial agreements. Here: what is said to be a semi-exclusive concession agreement, was concluded verbally only.

Saey Home & Garden is a company with its registered office in Kortrijk (Belgium), which specialises in the manufacture and sale, inter alia, of kitchen equipment and utensils bearing the trademark ‘Barbecook’. That company does not have a branch or establishment in Spain. Lusavouga has its registered office in Cacia, Aveiro (Portugal). Its premises are in Portugal. Its network covers Spain, inter alia, where it has no branch or establishment. Parties to the main proceedings concluded a commercial concession agreement concerning the exclusive promotion and distribution (with the exception of one client) in Spain.

First up, has choice of court in favour of the courts at Kortrijk (referred to by its French synonym Courtrai, but then without the ‘r’ in referral documents and by the CJEU) been validly made if this choice was only included in the general terms and conditions included in the invoices? Hoszig (where a jurisdiction clause is stipulated in the general conditions, such a clause is lawful where the text of the contract signed by both parties itself contains an express reference to general conditions which include a jurisdiction clause) and Leventis (the purpose of the requirements as to form imposed by Article 25(1) is to ensure that consensus between the parties is in fact established) are the most recent CJEU precedent referred to. Both of them build on standing CJEU principle: one must not be overly formalistic when assessing the existence of agreement, but one must be certain that such agreement exists. While it is up to the national court to assess this in fact, the Court does indicate it is unlikely to be the case when no written agreement has been made (neither initially nor subsequently confirming an earlier verbal agreement) and all one has are the invoices.

Choice of court being unlikely, next up is the application of Article 7(1) to determine which court has jurisdiction to hear an application for damages relating to the termination of a commercial concession agreement concluded between two companies, each established and operating in a different Member State, for the marketing of goods on the domestic market of a third Member State in which neither of those companies has a branch or establishment.

Referring to Corman-Collins, the Court classifies concession agreements as being service contracts, which per Article 7(1) second indent, leaves to be determined the ‘place in
a Member State where, under the contract, the services were provided or should have been provided;’. Note: the place in a Member State. Not different places. Per Wood Floor Solutions, when there are several places of performance of the obligation characteristic of a contract for the supply of services the ‘place of performance’ must be understood as the place with the closest linking factor, which, as a general rule, will be at the place of the main provision of services. This place of ‘main provision’ follows from the provisions of the contract and, in the absence of such provision, of the actual performance of that contract and, where it cannot be determined on that basis, the place where the agent is domiciled (still per Wood Floor Solutions). This specific determination is left to the referring court.

One imagines different national courts may have treated all of this as acte clair – except perhaps for the peculiarity of Spain being a Member State where neither of the parties has either domicile or branch.

Geert.

(Handbook of) EU Private International Law, 2nd ed. 2016, Chapter 2, Heading 2.2.11.1.

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Kaifer Aislimientos: the limits of Brussels I’s rules on choice of court.

[2017] EWHC 2598 (Comm) Kaifer Aislimientos, is a good illustration of the limits of Article 25 juncto recital 20’s lex fori prorogati rule.

Claimant argues that the Court has jurisdiction pursuant to Article 25 Brussels I Recast because the relevant contract contains an English exclusive jurisdiction clause and further contends that the relevant contract was concluded by AMS Mexico and/or AMS on behalf of AT1 and Ezion as undisclosed principals and that, as undisclosed principals, the contract – together with the jurisdiction agreement – was binding on AT1 and Ezion.

That is the only part of the judgment to feature the Brussels Regulation at all. Peter MacDonald Eggers DJ could have referred to CJEU precedent pro inspiratio, including Refcomp for instance. He could certainly also have referred to recital 20, and equally failed to do so.

In substance he applies the Brussels I Recast rule by applying lex fori prorogati (here: English law) to all but the formation of consent questions relevant to the validity of choice of court (here: under what circumstance undisclosed principals are subject to choice of court).

Geert.

(Handbook of) EU private international law, 2nd ed. 2016, Chapter 2, Heading 2.2.9.4.

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Bestolov v Povarenkin. On the determination of domicile (and yes, Owusu strikes again).

Many thanks to Andrew Savage and Nick Payne for flagging [2017] EWHC 1968 (Comm) Bestolov v Povarenkin a little while ago, and for sending me copy of the judgment at the time. Apologies for late reporting: frustratingly even at gavclaw we cannot always devote the amount of time to the blog we would wish. Dr Maganaris in the meantime also has summary here.

As readers no doubt are aware, the Brussels I Recast Regulation (Article 62) does not define ‘domicile’: it defers to national private international law on the issue. The Civil Jurisdiction and Judgments Order 2001 establishes that a person is domiciled in England for the purpose of the Brussels Regulation (recast) if: the person is “resident” in England; and (cumulatively) the person has a “substantial connection” to England. Bryan DJ takes us through the relevant (and often colourful) precedent and notes, importantly, at 28 that the consequence of the English rules is that the same person can be resident in two different jurisdictions at the same time. At 44, he summarises with a list of criteria, and decides on the facts of the case that Mr Povarenkin is indeed domiciled in England (the substantial connection test having been more easy to determine than that of residence).

Subsequently the High Court reviews at length whether there was a valid choice of court agreement under Article 25 of the Regulation – which at this jurisdictional stage of the proceedings Bryan DJ decides there was not (choice of law for the relevant contracts being English law, was justifiably not considered definitive in this respect), at least not clearly. Obiter, the judge reviews forum non conveniens, at lenght in fact (and in a very clear way with a keen eye on relevant precedent as well as court practice in England) however he holds both before and after the obiter that evidently given Owusu, forum non conveniens has no calling.

A well written judgment, the approach of which on domicile evidently goes beyond having relevance merely for the English courts: for under the Regulation, courts in other Member States, too, may have to consider whether parties are domiciled in an EU Member State other than their own including, for the time being, the United Kingdom.

Geert.

(Handbook of) EU private international law, 2nd ed. 2016, Chapter 2, Heading 2.2.3, Heading 2.2.14.5.

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Algeco: Scheme of arrangements tourism continues, with tenacious questions still outstanding.

Thank you Tom Whitton and Helen Kavanagh  for flagging Algeco Scotsman PIK SA [2017] EWHC 2236 (Ch). Algeco has COMI in Luxembourg.  This was clear when the relevant scheme of arrangement (‘SAR’) was being discussed. To manage potential problems at the jurisdictional stage, Hildyard J at 22 lists the precautions the company and the majority of the lenders took:

‘Accepted by the relevant 75 per cent or more, was first, the amendment of the governing law clause in the PIK Loan Agreement to change the governing law from New York law to English law; secondly, the amendment of the jurisdiction clause to submit the parties to the non-exclusive jurisdiction to the courts of England; and thirdly, a waiver of any restrictions under the PIK loan agreement so as to permit the company to take all steps necessary to confirm or establish sufficient connection with England including, if appropriate, to take steps to ensure that its COMI is in England.’

When the unsuspected reader sees ‘COMI’ of course (s)he is forgiven for immediately pondering application of the EU’s Insolvency Regulation – quod certe non: for it is clear (ia as a result of schemes of arrangement not being included in relevant Annex) that SARs fall under company law. Hildyard J’s jurisdictional kick-off at 43 is telling: ‘Dealing first with jurisdiction, the primary question is whether this Luxembourg company, the subject of the scheme, is a qualifying company so to be subject to section 895 of the Companies Act’. Idem at 45.

At 47 the High Court then applies the jurisdictional test viz the Brussels I Recast Regulation arguendo: if it were to apply (which the English Courts have taken no definitive stance on), would an English court have jurisdiction? Yes, it is held: under Article 8 (anchor defendants) and under Article 25 (choice of court).

Yet this in my view is where recourse to SARS in the English courts continues to be exposed: loan agreements and facilities agreements now routinely adopt choice of court and law in favour of English courts and ditto law. Yet where they do not, or did not, the ‘willing’ creditors consent to a change in the agreement in favour of the English courts, with the unwilling creditors left behind. Whether this holds scrutiny under Rome I is far from certain. As for Article 8, its use here may be seen as a form of abuse, disciplined under the Regulation.

Hildyard J considers the case one of ‘good forum shopping’ (at 57-58), with reference to Apcoa which I review here. The concerns above continue in my view to highlight weaknesses in the construction, which so far have not led to any collapse of this restructuring tourism. At 58 the High Court emphasises that there are cases of inappropriate forum shopping in this context (one of that includes haste) yet the role of Rome I in this context has so far played little of a role.

It is noteworthy that in my view (and I so testified in re Apcoa) even a wrong view of the English courts on Rome I’s impact, would not suffice for jurisdictions outside of the UK to refuse to recognise the scheme under Brussels I – all with the huge Brexit caveat evidently.

Geert.

(Handbook of) EU Private International Law, 2nd edition 2016, Chapter 5.

 

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Choice of court (in tender file) under Brussels I. CJEU confirms Szpunar AG in Hőszig /Hoszig – keeps schtum on Brussels I Recast.

The CJEU has confirmed the views of Szpunar AG in C-222/15 Hőszig /Hoszig, without (much as expected) entertaining the lex fori prorogati rule of the Brussels I Recast.

Can choice of court made in underlying documentation in the context of a tender, for which Hőszig entered a winning bid, be considered valid under Article 23 of the Brussels I Regulation (now: Article 25 Brussels I Recast)? Yes, the Court said, with explicit reference to the AG. Crucial point in the consideration is whether per Case 24/76 Colzani an explicit reference to the choice has been made, reference which can be controlled by a party applying normal diligence and where it is established that the general conditions containing the jurisdiction clause was actually communicated to the other contracting party (at 40 in Hoszig). This was so in the case at issue. The court points out that Article 23 (and now Article 25) includes mostly formal requirements (expression of consent, see the references in my posting on the AG’s Opinion) and only one substantial requirement (choice of court needs to relate to an identified legal relationship between the parties). The remainder of discussion on the substantive requirements with respect to the choice of court agreement, is subject to the lex causae of that separate choice of court agreement (exactly why the current Regulation now includes the lex fori prorogati rule; Szpunar AG’s discussion of this clause however was not required to settle the issue and therefore the Court does not look into it).

‘(T)he Paris Courts [have exclusive and final jurisdiction]’ is sufficient for the CJEU to determine the choice of court with precision: it is perfectly acceptable that it will subsequently be French civil procedure laws that will determine precisely which court will have jurisdiction.

A sensible judgment following clear Opinion of the Advocate General, together further completing the choice of court provisions of Brussels I.

Geert.

(Handbook of) European Private International Law, 2nd ed. 2016, Chapter 2, Heading 2.2.9 Heading 2.2.9.4. Chapter 3, Heading 3.2.2 .

 

 

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Once again: Choice of court (this time in tender docs) under Brussels I. Szpunar AG takes the sensible route in Hőszig /Hoszig.

In C-222/15 Hőszig /Hoszig, Advocate General Szpunar opined using the sensible route, on the application of Article 23 of Regulation 44/2001 . His excursus though on Article 25 of the Brussels I Recast and the new lex fori prorogati rule is the part of his judgment which I read with most interest.

First things first: can choice of court made in underlying documentation in the context of a tender, for which Hőszig entered a winning bid, be considered valid under Article 23 of the Brussels I Regulation (now: Article 25 Brussels I Recast). Pursuant to Clause 23.1 of these ‘general conditions of purchase’, headed ‘applicable law and settlement of disputes’, ‘[t]he Order shall be governed by and interpreted in accordance with French law. The application of the United Nations Convention on the International Sale of Goods dated April 11, 1980 is excluded. Any dispute arising out of or in connection with the validity, construction, performance or termination of the Order, which the parties are unable to settle amicably shall be finally and exclusively settled by the courts of Paris, including in the case of a summary procedure, injunctions or conservatory measure.’

Hőszig tried to sue instead in what it considered to be the place of performance of the contract, per Article 5(1) (now 7(1) in the Recast). Its torpedo of the choice of court included in the general conditions of purchase, was based on recourse to Article 10(2) Rome I, which holds that the putative law of the contract does not apply to consider a party’s consent if it would not be reasonable to do so. In such case the law of the habitual residence of said party applies. Here this would lead to Hungarian law rather than French law and Hungarian law, it is argued, would not accept such incorporation of general terms and conditions. Szpunar AG however simply refers to the fact that choice of court agreements are excluded from the Rome I Regulation. Recourse to Article 10(2) is barred by that exclusion.

What needs to be considered under Article 23 Brussels I is whether parties have reached consensus, ‘clearly and precisely demonstrated’, the AG suggests. This wording is typically associated with choice of law under Rome I however I would support its use in the context of the Brussels I (and Recast) Regulation, too, for that is what the Court’s case-law on the Article amounts to. Applying Case 24/76 Colzani mutatis mutandis, and taking into account that express reference to the general terms and conditions in documents exchanged between the parties prior to the tender being awarded, the AG concludes that agreement had been reached.

Now, is the expression ‘courts of Paris’ sufficiently precise? Szpunar AG suggests it is and I would concur, albeit that the last word on  that is probably not yet said. The Advocate General refers to Capotorti AG in Case 23/78 Meeth, who had advised that a clause worded such as here, refers by implication to the system of rules of territorial jurisdiction (typically on the basis of a combination of value and subject-matter) to determine precisely at which court proceedings must be instituted. The Court itself did not at all elaborate in the eventual judgment. Szpunar AG suggests it must have taken Capororti’s suggestion for granted. Therefore (at 44 of the Opinion) it is French procedural law which governs the question of precisely which Paris court is competent.

This leaves open the question, though (which I understand is not sub judice here) whether parties can employ choice of court to trump national rules of civil procedure. What if they agree that the courts of say province X in Member State A are preferable to settle the issue, e.g. because of perceived know-how, even if national civil procedure would ordinarily assign the case to province Y? Not an issue which to my knowledge has been settled by EU case-law.

By way of sign-off, the Advocate General then reviews whether the new text, Regulation 1215/2012, has in any way altered or added to the discussion on choice of court agreements. Readers will be aware (via this blog or the Handbook or otherwise) that the new Regulation refers to the lex fori prorogati to determine the validity of the choice of court agreement:  ‘[i]f the parties, regardless of their domicile, 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, that court or those courts shall have jurisdiction, unless the agreement is null and void as to its substantive validity under the law of that Member State’ (emphasis added by Szpunar AG).

Under Brussels I, various options were defended. Szpunar AG refers to Slynn AG having defended lex fori prorogati in Case 150/80 Elefanten Schuh,  and Szpunar AH himself suggest (at 47 in fine) lex fori additi under the former Brussels I Regulation (44/2001).

The AG is most certainly correct in my view that the lex fori prorogati is not meant to cover all aspects of the validity of the agreement. In my Handbook I distinguish between the expression of consent (harmonised by Article 25), and the formation of consent (not touched upon by Brussels I and now subject to the lex fori prorogati). He then suggests that the insertion of lex fori prorogati was meant to align the Brussels I (Recast) with the 2005 Hague Convention on Choice of Court Agreements, to which the EU have now acceded. I do not recall any such reference in the travaux preparatoires of Regulation 1215/2012 – however it has been a while since I consulted them extensively and the AG presumably has.

The Court of course will be much more succinct than its AG.

Geert.

(Handbook of) European Private International Law, 2nd ed. 2016, Chapter 2, Heading 2.2.9 Heading 2.2.9.4. Chapter 3, Heading 3.2.2 .

 

 

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