Posts Tagged article 7(1)
Dinant Bar v maître JN. Bar membership fees. Saugmansdgaard ØE on whether they are at all ‘civil and commercial’ and if so, whether they are ‘contractual’.
In C-421/18 Saugmansdgaard ØE opined (Opinion a yet available in a handful of languages only, not including English) on the issue of ‘civil and commercial’ (last reviewed by the Court in Buak) and ‘contract’ (within Article 7(1) Brussels Ia.
At issue was the relationship between a France-domiciled practising lawyer, registered with the Dinant (Belgium) Bar, and that Bar. Maître JN, now a very occasional practitioner it seems, had been refusing to pay his Bar Membership fees even after the Bar council had reduced them to the level of insurance premiums paid by it to the insurance company running the collective professional insurance scheme.
The referring court at Namur had not in fact asked the CJEU about the interpretation of ‘civil and commercial’. It was the EC’s comments which triggered Saugmansdgaard ØE’s review of that issue (albeit he insists the final call is up to the referring court). He refers to the public interest duties carried out by the Bar Council (in particular, ensuring the public’s trust in the proper representation before the judicial authorities), and the authority entrusted to the Council by Belgian’s code of civil procedure (particularly at 34). At 35 ff he then considers whether in its collection of the Bar fees set by and due to it by the registered lawyers, the Council acts in the exercise of that authority, and decides it does not: the fees are determined by the general council of the Bar and in the main represent the professional insurance fees. That is all the more made clear by the fact that in the case of maître JN the Bar had reduced the fees to the exact amount paid to the insurance company.
The dispute therefore he advices is about pennies, not power.
Turning to the issue of ‘contract’ reference is made ia to the recent CJEU decision in Kerr. Particularly at 81 ff the Advocate General emphasises the specificities of the case: the solicitor in question had effectively retired yet chose to continue to pay Bar membership fees. In contrast to for instance Austro-Mecana and more in line with Kerr (and in contrast also one could argue with fully practising lawyers) the voluntary character of the relationship is core.
LIC Telecommunications et al v VTB Capital et al. High Court suggests autonomous EU approach to asymmetric choice of court. Also discusses contract and tort distinction, and abuse of process.
In  EWHC 1747 (Comm) LIC Telecommunications et al v VTB Capital et al Moulder J suggests an unorthodox interpretations of Article 25 of the Brussels Ia Regulation. (Note also her very critical view at 22 of one of the experts, whom she found having confused his role as expert with a role as advocate). Much of the lengthy judgment is devoted to intricate discussions of Luxembourgish corporate law (hence the need for expert evidence) and the jurisdictional issues are, somewhat illogically, discussed towards the end of the judgment, at 245 ff.
Maze, one of the defendants, acts as a manager of V2 pursuant to a directorship agreement dated 26 May 2015 (the “Directorship Agreement”). It relies on the effect of clause 19 of the Directorship Agreement and submitted that claims against it are subject to the exclusive jurisdiction of the courts of Luxembourg pursuant to Article 25 Brussels Ia. Clause 19 provides:
“for the benefit of the Manager, the Shareholder and the Company hereby irrevocably, specially and expressly agree that the courts of Luxembourg city have jurisdiction to settle any disputes in connection with this Agreement and accordingly submits to the jurisdiction of the courts of Luxembourg city. Nothing in this clause limits however the rights of the Manager to bring proceedings against the Company in connection with this Agreement in any other court of competent jurisdiction or concurrently in more than one jurisdiction.”
The clause is asymmetric aka hybrid aka unilateral. (See e.g. my discussion of Rothschild etc.). These clauses as I have noted elsewhere highlight the clear insufficiency of Brussels Ia’s new lex fori prorogati (including renvoi) rule for choice of court. Which court has been prorogated, hence also lex fori prorogati, is not clear when the clause is asymmetric.
Moulder J discusses  EWHC 161 (Comm) Commerzbank v Liquimar Tankers as precedent: I reviewed it here and signalled at the time that it would not be the last we would hear of the issue. In that case Cranston J held ‘There is nothing in Article 25 that a valid jurisdiction agreement has to exclude any courts, in particular non EU Courts. Article 17, penultimate paragraph, of the Brussels Convention recognised asymmetric jurisdiction clauses. To my mind it would need a strong indication that Brussels 1 Recast somehow renders what is a regular feature of financial documentation in the EU ineffective.‘ I was never taken by that conclusion viz the Brussels Convention: its Article 17 reference to a party having ‘benefit’ from choice of court does not relate entirely to the same discussion on asymmetric clauses (Peralla v Codere  EWHC 1182 (Comm) which I discussed here illustrates that difference).
At any rate I disagree with Moulder J’s statement at 254 that
It is now common ground that it is a question of autonomous EU law and not a question of national law. (It was I believe accepted that the proviso “unless the agreement is null and void as to its substantive validity” refers to issues such as capacity, fraud and mistake, not whether particular kinds of “choice of court” agreements are permitted under the Regulation).
Asymmetric clauses are the first example often given when highlighting the limited cover of Article 25 Brussels I a (and the need for certainty on the lex causae for choice of court). There is no autonomous interpretation there at all. I do agree however with the conclusion at 261: that Luxembourg courts, applying EU law, would not uphold such clauses was not made out on the evidence. Luxembourgish courts at least when they apply Luxembourgish law, generally uphold the validity of asymmetric choice of court.
At 263 ff then follows discussion of Article 7(1) and 7(2). Much of the authority discussed has been reviewed on this blog. (Including Bosworth (Arcadia) which in the meantime has been held by the CJEU but without the contract /tort element – the CJEU found against a contract of employment). Moulder J holds that Article 7(2) is engaged, not 7(1), and on the former discusses locus delicti commissi with reference to JSC BTA Bank v Khrapunov. At 295: it is not sufficient that there are meetings in England to implement the conspiracy, it is the making of the agreement in England which is to be regarded as the harmful event. Claimants have not supplied a plausible evidential basis that the agreement was made in England. Their evidence is consistent with a case that the conspiracy was implemented in England but that is not sufficient.
As for locus damni, at 298: Even though the share purchase agreement was under English law, it is the loss of the shares in the Luxembourg company which is the pleaded damage not the agreement to sell or the auction. The Vivacom group consists of Bulgarian telecommunications companies which were held by InterV through Viva Luxembourg Bulgaria EOOD (paragraph 3 of the Agreed List of Agreed Issues). Locus damni is Bulgaria, perhaps Luxembourg. But not England.
Finally, abuse of process considerations are linked to English procedural law (whether claims should have been brought sooner).
(Handbook of) EU Private International Law, 2nd ed. 2016, Chapter 2, Heading 2.2.9, Heading 220.127.116.11, Heading 18.104.22.168 .
Reitbauer: contract, pauliana and exclusive jurisdictional rules. CJEU simply applies Feniks, its forum contractus view remains unconvincing.
Update 18 July 2019 for an alternative view, see Michael McParland QC here. Michael’s point of view is that of the construction sector, and avoiding ‘debt dodging’. Ours (mine, below, and Michiel Poesen’s here) is the excessive stretch of the notion of contract.
Tanchev AG’s focus on fraus arguable reconciles both – but the Court did not follow.
I reviewed Tanchev AG’s Opinion in C‑722/17 Reitbauer here. Readers best refer to it to get insight into the complex factual matrix. The CJEU held on Wednesday last week- no English version of the judgment is as yet available.
In essence applicants are attempting to anchor their pauliana unto A24(5)’s enforcement jurisdiction. Failing that, the anchor might be A24(1)’s locus rei sitae exclusive jurisdictional rule.
The Court like the AG rejects jurisdiction on the basis of Article 24(5). They are right: A25(5) must not resurrect merits claims on much wider issues (claim for compensation of applicants’ debt, objections concerning the non-existence of a claim underlying a judicially ordered auction, and concerning the invalidity of the creation of the pledge for that claim under a loan agreement).
Court and AG are also right in rejecting Article 24(1) jurisdiction. The issues at stake are far removed from the reasons which justify exclusive jurisdiction. (The Court refers to Komu, Schmidt, Weber).
Then, surprisingly (for it was not part of the questions asked; the AG entertained it but that is what AGs do) the Court completes the analysis proprio motu with consideration of Article 7(1)’s forum contractus rule, with respect to claimants’ argument that the acknowledgement of debt by Isabel, cannot be used against them. Tanchev AG as I noted essentially suggested a limitation of Feniks to cases of fraus – arguably present here. At 59-60 the Court simply notes that all creditors were ‘contractually’ linked to Isabel C, and then applies Feniks to come to a finding of contractual relation between claimants and Mr Casamassima: without any reference to the fraus element (I had indeed suspected the Court would not so quickly vary its own case-law).
The AG did not discuss the place of performance of the contract (between Reitbauer et al and Mr Casamassima – this was exactly one of the sticky points signalled by Bobek AG in Feniks). The CJEU however does, and at 61 simply identifies that as the place where the underlying contract, between Isabel C and the building contractors, had to be performed: that is, the place of the renovation works in Austria.
That an Article 7(1) forum was answered at all, is surprising. That the place of performance of that contract is straightforwardly assimilated with the underlying contractual arrangement, is not necessarily convincing. That Feniks would not so soon be varied (if at all), was to be expected.
Forum contractus is surely stretching to forum abundantum.
(Handbook of) EU Private International Law, 2nd ed. 2016, Chapter 2, Heading 22.214.171.124
Judgment in Kerr v Postnov(a): a surprisingly swift conclusion on Article 24 and ‘services’ in Brussels Ia /Rome I.
My review of Kokott AG’s Opinion C-25/18 Brian Andrew Kerr v Pavlo Postnov and Natalia Postnova (Kerr v Postnov(a)) discussed, as did the AG, the application of Brussels I Recast’s Articles 24(1) and (2) exclusive jurisdictional rules, cq the application of Article 7(1) jurisdictional rules on contracts, and applicable law consequences of same. The Court ruled on 8 May.
Coming to the first issue: Article 24(1) – this is not properly answered by the Court.
I signalled the potential for engineering even in Article 24 cases: particularly here, the prospect of adding an enforcement claim to an otherwise contractual action. At 37-38 the Court deals most succinctly with this issue: ‘in so far as the action which gave rise to the dispute in the main proceedings does not fall within the scope of any of those actions, but is based on the rights of the association of property owners to payment of contributions relating to the maintenance of the communal areas of a building, that action must not be regarded as relating to a contract for a right in rem in immovable property, within the meaning of Article 4(1)(c) of Regulation No 593/2008.’: ‘in so far as’ – ‘dans la mesure où’: the Court would seem to dodge the issues here which the AG did discuss, in particular vis-a-vis the enforcement accessory: that discussion I feel is not over.
Note also the straight parallel which the Court makes between lex contractus under Rome I and Article 24.
The discussion of Article 24(2) does lead to a clear conclusion: the forum societatis is not engaged. However on Rome I the Court does not follow the AG, with specific reference to the Lagarde report (at 33-34). Unlike its AG if finds that Rome I’s lex societatis exception is not engaged.
As for Article 7(1) forum contractus: at 27 usual authority going back to Handte assists the Court in its conclusion that ‘even if membership of an association of property owners is prescribed by law, the fact remains that the detailed arrangements for management of the communal areas of the building concerned are, as the case may be, governed by contract and the association is joined through voluntary acquisition of an apartment together with ownership shares of the communal areas of the property, so that an obligation of the co-owners towards the association of owners, such as that at issue in the main proceedings, must be regarded as a legal obligation freely consented to’ (at 27). At 28: ‘the fact that that obligation results exclusively from that act of purchase or derives from that act in conjunction with a decision adopted by the general assembly of the association of the owners of property in that building has no effect on the application of Article 7(1)(a)’.
At 39-40 the Court then swiftly comes to the conclusion of ‘services’ under Article 4(1)(c) Rome I, without much ado at all. The AG had opined that the non-uniform nature of the contributions leads to non-application of the service rule of Article 7(1)b BruIa and therefore a resurrection of the classic Tessili formula: the CJEU itself went for the acte clair route.
(Handbook of) EU private international law, 2nd ed. 2016, Chapter 2, Heading 2.2.6, 126.96.36.199
Tanchev AG in Reitbauer: contract, pauliana and exclusive jurisdictional rules. Suggests restriction of CJEU Feniks to cases of fraus.
A little bit of factual background (and imagination; I shall let readers’ imagination run their course) is needed to appreciate Tanchev AG’s Opinion last week in C‑722/17 Reitbauer, which engages Articles 24(1) and (5), and Article 7(1).
It is alleged in the ‘opposition proceedings’ at issue that the claim of creditor A (the defendant in the CJEU proceeding, Mr Casamassima), which arises from a loan agreement secured by a pledge, and which competes with a counterclaim of creditors B (the applicants at the CJEU: Reitbauer and Others) is invalid due to the (wrongful) preferential treatment of creditor A. This objection is similar to what is known under Austrian law as an action for avoidance (Anfechtungsklage).
The defendant, Mr Casamassima and Isabel C. (‘the debtor’) are resident in Rome and lived together, at least until the spring of 2014. In 2010, they purchased a house in Villach, Austria; and the debtor, Isabel C, was registered in the land register as being the sole owner.
Contracts for extensive renovation work of the house were entered into between Isabel and the CJEU applicants, contracts which were entered into with the ‘participation’ of Mr Casamassima. Because the costs of the renovation work far exceeded the original budget, payments to Reitbauer et al were suspended. From 2013 onwards, Reitbauer et al were therefore involved in judicial proceedings in Austria against Isabel. Early 2014, the first judgment was handed down in favour of the applicants, and others followed. Isabel appealed against those judgments.
On 7 May 2014 before a court in Rome, Isabel acknowledged Mr Casamassima’s claim against her with respect to a loan agreement, amounting to EUR 349 772.95. She undertook to pay this amount to the latter within five years under a court settlement. In addition, Isabel undertook to have a mortgage registered on the house in Villach (Austria) in order to secure Mr Casamassima’s claim [the amount of the claim is the result of compensation between the original claim and a counterclaim. Isabel requested Mr C to pay her for overtime work. Mr C requested approximately EUR 380 000 for the purchase of the house and the works. According to him the house belonged formally only to the debtor, who was registered as the sole owner, but the funds were provided by the defendant. Finally, the two parties reached an agreement, leading to the sum at issue].
Now we come to the issues sub judice: at 17 ff (footnotes omitted):
On 13 June 2014 a (further) certificate of indebtedness and pledge certificate was drawn up under Austrian law in Vienna by an Austrian notary to guarantee the above arrangement (pledge 1). With this certificate, the pledge on the house in Villach was created on 18 June 2014.
The judgments in favour of the applicants did not become enforceable until after this date. The pledges on the house of the debtor held by the applicants, obtained by way of legal enforcement proceedings (pledge 2), therefore rank behind the contractual pledge 1 in favour of the defendant.
On 3 September 2015, the court in Rome confirmed that the court settlement of 7 May 2014 constituted a European Enforcement Order.
In order to realise the pledge, the defendant applied in February 2016 to the referring court (Bezirksgericht Villach (District Court, Villach, Austria)) for an order against the debtor, requiring a compulsory auction of the house in Villach. The house was auctioned off in the autumn of 2016 for EUR 280 000. The order of entries in the land register shows that the proceeds would go more or less entirely to the defendant because of pledge 1 (registered under Austrian law in June 2014).
With a view to preventing this, the applicants brought an action for avoidance (Anfechtungsklage) in June 2016 before the Landesgericht Klagenfurt (Regional Court, Klagenfurt, Austria) against the defendant and the debtor. The action was dismissed by that court ‘due to a lack of international jurisdiction in view of the [debtor’s and the defendant’s] domicile’ outside of Austria. In July 2017, that decision became final.
At the same time the applicants filed an opposition before the referring court (Bezirksgericht Villach (District Court, Villach)) at the hearing of 10 May 2017 regarding the distribution of the proceeds from the compulsory auction, and subsequently brought opposition proceedings, as provided for in the EO, against the defendant.
In these opposition proceedings, the applicants seek a declaration that the decision regarding the distribution to the defendant of EUR 279 980.43 was not legally valid in so far as: (i) the debtor had damages claims against the defendant of at least the same amount as the claim arising from the loan agreement, with the result that a claim no longer existed (they claim that the debtor confirmed that the defendant had placed orders with the applicants without her knowledge and consent); and (ii) the certificate of indebtedness and pledge certificate of June 2014 were drawn up merely as a formality and for the purpose of pre-empting and preventing the applicants from bringing any enforcement proceedings in relation to the house.
There we are. In essence applicants are attempting to anchor their pauliana unto A24(5)’s enforcement jurisdiction, in which case Mr C’s enforcement action has acted as a Trojan horse. (Note a similar potential in Kerr v Postnov(a)). Failing that, the anchor might be A24(1)’s locus rei sitae exclusive jurisdictional rule.
Mr C contends in substance that A24(5) B1a does not apply. He argues that the action lacks a direct connection to official enforcement measures: what is being sought is a substantive examination of the pledge entered into in his favour. By its nature, the action lodged is equivalent to an action for avoidance; and in Reichert the CJEU has already ruled that this jurisdiction is not applicable to actions for avoidance. This must therefore also apply if the action for avoidance is exercised by way of an opposition against the distribution and ensuing opposition proceedings. Moreover, he argues A24(1) B1a is not applicable, as in the opposition proceedings the connection with the location of the house at issue is lacking (the opposition proceedings took place only after the immovable property had been auctioned off by the court).
The AG first of all at 39 ff rejects jurisdiction on the basis of Article 24(5). I believe he is right: see my Trojan horse suggestion above. A25(5) must not resurrect merits claims on much wider issues (claim for compensation of applicants’ debt, objections concerning the non-existence of a claim underlying a judicially ordered auction, and concerning the invalidity of the creation of the pledge for that claim under a loan agreement ) for which the enforcement court does not have original jurisdiction. Neither does A24(1) ground jurisdiction: parallel with Reichert is obvious.
Then however the AG, sensing perhaps the suggestions of fraudulent construction, suggests Article 7(1)’s’ forum contractus as a way out – not something which the referring court had enquired about hence quite possible the CJEU might not entertain it. Clearly per Handte there is a contract between applicants and Isabel. However is Mr C involved, too?: the AG draws on Feniks: at 72 ff: in Feniks the CJEU does not require knowledge by the defendant of the first contract, nor does it require an intention to defraud. However in casu it looks like there might be both (subject to factual review by the referring court). At 84: ‘Given the fact that in the judgment in Feniks the jurisdiction in contractual matters in disputes brought against a third party was extended to an actio pauliana even though there was no contractual relationship between the applicant and the defendant, knowledge of a third party should act as a limiting factor: as in the present case, the third party needs to know that the legal act binds the defendant to the debtor and that that causes harm to the contractual rights of another creditor of the debtor (the applicants).’
And at 92: ‘the defendant’s knowledge of the existence of the contract(s) at issue is important.’
The AG is essentially suggesting a limitation of Feniks to cases of fraus – it is unlikely that the CJEU will follow (and vary Feniks so soon). However it is clear that knowledge of the contract between the other parties, particularly where supported by elements of fraus, will increase the potential for application of the (in my view problematic) Feniks route. Note the AG does not discuss the place of performance of the contract (between Reitbauer et al and Mr C – this was exactly one of the sticky points signalled by Bobek AG in Feniks).
(Handbook of) EU Private International Law, 2nd ed. 2016, Chapter 2, Heading 188.8.131.52
Kokott AG in Kerr v Postnov(a): How house association meetings turn into a jurisdictional and applicable law potpourri.
Advocate General Kokott opined end of January in C-25/18 Brian Andrew Kerr v Pavlo Postnov and Natalia Postnova (let’s call the case Kerr v Postnov(a)). The case concerns the application of Brussels I Recast’s Articles 24(1) and (2) exclusive jurisdictional rules, cq the application of Article 7(1) jurisdictional rules on contracts, and applicable law consequences of same.
Incidentally, Ms Kokott’s use of ‘Brussels Ia’ instead of the Brussels I Recast Regulation adds to the growing chorus to employ Brussels Ia (lower case, no space between I and a) instead of Brussels I Recast, Brussels bis, or as recently seen at the High Court, BIR (BrusselsIRecast).
The Advocate General’s Opinion is a useful and succinct reminder of CJEU authority, suggesting the issue is acte clair really, except there are one or two specific issues (e.g. the enforcement issue, discussed below) which justify clarification.
The case concerns proceedings concerning claims for payment arising from resolutions made by an association of property owners without legal personality in connection with the management of the property in question. Mr Kerr, appellant in the proceedings before the referring court, is a manager of an association of owners of a property situated in the town of Bansko (Bulgaria). He brought proceedings before the Razlog District Court, Bulgaria against two property owners, Mr Postnov and Ms Postnova, concerning payment of contributions that were owed by them wholly or in part for the maintenance of communal parts of the building on the basis of resolutions made by the general meeting of the property owners in the period from 2013 to 2017. According to the appellant in the main proceedings, an action to secure enforcement of the claim pursued was brought with the application.
Address of the defendants used by the court at first instance is in the Republic of Ireland. (As the AG notes, whether service was properly given is relevant for the recognition of the eventual judgment; this however is not the subject of the current proceedings neither is it detailed in the file.)
Coming to the first issue: Article 24(1) requires strict and autonomous interpretation. The main proceedings have as their object the payment of outstanding contributions purportedly owed by two co-owners for the management and maintenance of the property concerned. At 34: It is thus a matter of obligations — to use the words of the referring court — arising from ownership of shares in the commonhold as rights in rem in immovable property. At 38: to be covered by 24(1) the right in question must have effect erga omnes and that the content or extent of that right is the object of the proceedings (reference ex multi to Schmidt and Komu).
Prima facie this would mean that Article 24(1) must be ruled out: at 39: in the main proceedings, the action brought by the manager is based on claims in personam of the association of owners for payment of contributions for the maintenance of communal areas of the property. The rights in rem of the defendant co-owners of the commonhold — in the form of intangible ownership shares — initially remain unaffected. However, at 40 Ms Kokott signals the enforcement issue: that action could affect the defendants’ rights in rem arising from their ownership shares, for example by restricting their powers of disposal – an assessment subject to the applicable law, which is for the referring court to make. In footnote the Advocate General suggests the potential involvement in that case of Article 8(4)’s combined actio in rem and in personam.
The case therefore illustrates the potential for engineering even in Article 24 cases: firstly, by varying the claim (the content or extent of the rights contained in Article 24 has to be the ‘object’ of the proceedings; claimant can manipulate the claim to that effect); second, the prospect of adding an enforcement claim to an otherwise contractual action. This engineering evidently clashes with the objective and forum-shopping averse interpretation of Article 24, however as I have repeatedly discussed on this blog, abusive forum shopping is a difficult call for the CJEU and indeed national courts to make.
The discussion of Article 24(2) does lead to a clear conclusion: the forum societatis is not engaged. Article 24(2) covers only proceedings which have as their object the legal validity of a decision, not proceedings which have as their object the enforcement of such decisions, like the action at issue seeking payment of contributions based on such a decision (at 44).
As for Article 7(1) forum contractus the usual Handte et al suspects feature in the Opinion as does Case 34/82 Peters Bauunternehmung. The association is joined through voluntary acquisition of an apartment together with ownership shares of the communal areas of the property (at 54): there is a ‘contract’. [Advocate General Kokott already pre-empts similar discussion in Case C‑421/18, where the Court will have to clarify whether these considerations can also be applied to a case in which a bar association is taking legal action to assert claims for payment of fees against one of its members].
The AG makes a brief outing into Rome I to point out that Rome I has a lex societatis exception. Under the conflict-of-law rules, claims for payment made by a legal association against its members are not to be assessed on the basis of the Rome I Regulation, even though such claims are to be regarded as ‘matters relating to a contract’ within the meaning of Article 7(1) of the Brussels Ia Regulation (at 60).
However for the purposes of Article 7(1), where the CJEU to find that it is engaged, place of performance needs to be decided. If none of the default categories of Article 7(1) apply, the conflicts method kicks in and Rome I’s lex societatis exception is triggered (residual conflict of laws will determine the applicable law which in turn will determine place of obligation; see also at 74 and the reference to the Tessili rule).
Is the management activity itself is carried out for remuneration (as required per Falco Privatstiftung and also Granarolo) or at least an economic value per Cormans-Collins? The facts of the case do not clearly lay out that they are but even if that were the case (appointment of a specialist commercial party to carry out maintenance etc.), the contributions to be paid to the association by the co-owners are intended in no small part to cover taxes and duties, and not therefore to fulfil contractual obligations towards third parties which were entered into on behalf of and for the account of the association of owners (at 71). All in all, the AG opines, the non-uniform nature of these contributions leads to non-application of the service rule of Article 7(1)b and therefore a resurrection of the classic Tessili formula.
Not so acte clair perhaps after all.
(Handbook of) EU private international law, 2nd ed. 2016, Chapter 2, Heading 2.2.6, 184.108.40.206
flightright. The extensive CJEU notion of ‘contract’. Mumbles on effet utile and residual private international law.
One of my PhD students, Michiel Poesen, has an extensive case-note coming up on C-274/16 flightright – when it is out I shall include a link here. For the time being therefore I shall be very brief. In summary, the Court held
First of all that the special jurisdictional rules of the Brussels I Recast do not apply to defendants domiciled outside of the EU.
That was as such an obvious finding: these suits are subject to residual national rules on jurisdiction. However the Court makes a point, at 54, to emphasise that in accordance with the principle of effectiveness (effet utile), rules under national law cannot make it impossible or excessively difficult to exercise the rights conferred by EU law. Here: the rights of passengers under the flight delay compensation rules, Regulation 261/2004. Is that CJEU shorthand for suggesting that if a Member State were not to allow claimants based in the EU, to claim compensation against third-country defendants, it would contravene EU law?
Second, where an operating air carrier which has no contract with the passenger performs obligations under Regulation 261/2004, it is to be regarded as doing so on behalf of the person having a contract with that passenger. (At 64) that carrier must be regarded as fulfilling the freely consented obligations (a reference to the Handte formula) vis-à-vis the contracting partner of the passengers concerned. Those obligations arise under the contract for carriage by air. Consequently, an application for compensation for the long delay of a flight carried out by an operating air carrier such as (here) Air Nostrum, with which the passengers concerned do not have contractual relations, must be considered to have been introduced in respect of contracts for carriage by air concluded between those passengers and the carrier with whom they bought tickets. (Per the first bullet-point above, provided that carrier does have domicile in the EU).
Of note is that this finding of a jurisdictional trigger under the rule of contracts (7(1), does not necessarily imply that at the substantive level, the court with jurisdiction will eventually decide that there is a contract on the basis of the lex causae.
Finally, to determine per Article 7(1)b second -, the court of ‘the place in a Member State where, under the contract, the goods were delivered or should have been delivered’, a contract for carriage by air, such as the contracts at issue in the cases in the main proceedings consisting of a single booking for the entire journey, establishes the obligation, for an air carrier, to carry a passenger from a point A to a point C. Such a carriage operation constitutes a service of which one of the principal places of provision is at point C. That finding is not called into question by the fact that the operating operates only the carriage on a flight which does not finish at the place of arrival of the second leg of a connecting flight in so far as the contract for carriage by air relating to the connecting flight covers the carriage of those passengers to the place of arrival of the second leg.
(Handbook of) EU Private International Law, 2nd ed. 2016, Chapter 2, Heading 220.127.116.11.