Bot AG on negative conflicts of jurisdiction in Gothaer

Plenty of recognition and enforcement issues to ponder in Case C-456/11 Gothaer.

Krones AG, a German company whose transport insurers are Gothaer and others, had sold a brewing installation to a Mexican undertaking. Krones engaged Samskip GmbH, the German subsidiary of Samskip Holding BV, a transport and logistics undertaking founded in Iceland and established in Rotterdam (Netherlands), to organise and perform the transport of that equipment from Belgium to Mexico under a bill of lading which contained a term conferring jurisdiction on the courts of Iceland. The consignee and Gothaer and Others brought proceedings against Samskip GmbH in the Belgian courts, alleging that the consignment had been damaged during transport.

The Antwerp Court of Appeal (the actual judgment has not been published, however I do have a copy should you be interested) declared, in the operative part of its judgment, that it had ‘no authority to hear and decide the case’ after finding, in the grounds of the judgment, that the term in the bill of lading conferring jurisdiction on the courts of Iceland was valid and that, while Gothaer and Others could sue as successors in title to Krones AG, they were bound by that term. Antwerp did not, incidentally, clarify whether it found the choice of court clause (again: away from the EU) to be covered by the Jurisdiction Regulation or not. The validity of the clause was not sub judice: only the applicability to the insurers was.

Krones AG and Gothaer and Others brought a fresh action for compensation before the German courts: on what grounds is not mentioned in the documents before the ECJ – one assumes Article 2’s general proviso for domicile of the defendant. The Landgericht Bremen (thanks go to Piotr Stenko for a copy of that judgment) stayed the proceedings and referred to the European Court of Justice, raising the question of the legal effects of the judgment given in Belgium.

Bremen’s questions (reformulated by the AG) essentially were

– whether the term ‘judgment’ within the meaning of Article 32 of Regulation No 44/2001 covers a judgment by which a court of a Member State declines jurisdiction on the ground of an agreement on jurisdiction, even though that judgment is classified as a ‘procedural judgment’ by the law of the Member State addressed.

– If the answer to the first two questions is in the affirmative, it has to be determined whether Articles 32 and 33 of Regulation No 44/2001 must be interpreted as meaning that the court before which recognition is pleaded of a judgment by which a court of an other Member State has declined jurisdiction on the basis of an agreement on jurisdiction is bound by the finding relating to the validity and scope of that agreement which appears in the grounds of the judgment.

Article 32 prima facie is a definitional article (as an aside, I have often found it poor legislative technique not to include all definitions in one of the very first articles of the Regulation but rather scattered throughout ). However given that courts of other Member States have no or very little room for manoeuvre not to recognise and enforce ‘judgments’ given in other Member States, what exactly a ‘judgment’ is, evidently is very relevant.

In Gothaer Bot AG summarises the Court’s case law into three criteria: organic, procedural (closely related to organic), and substantive. Most definitely an attractive way to appreciate Article 32 JR.

The first criterion is organic. The judgment must emanate from a court or tribunal, that is to say, a body which acted independently of the other institutions of the State and impartially.  (…) The second criterion, which cannot be separated from the first, is procedural. It requires that the rights of the defence were observed in the procedure which led up to the adoption of the judgment.(…)  The third criterion is substantive. The judgment is characterised by the exercise of a power of assessment by the judicial body from which it emanates. That criterion means that a distinction must be drawn depending on whether the authority has a decision-making role or restricts itself to a more passive function, consisting for example in receiving the intentions of the parties to the proceedings. (…)’ (at 36 ff)

Consequently, in the AG’s view, a judgment by a court in a Member State, finding that it does not have jurisdiction because of a choice of forum clause pointing away from the EU (in the case at issue: Iceland), is a ‘judgment’ within the meaning of Article 32 JR.

The AG then refers to the usual suspects to underline the consequences of that finding: the principle of mutual trust per Gasser and Turner; the strict lis alibi pendens rule; the high degree of predictability built into the Regulation. Consequently (at 53 of the Opinion) the Regulation in the AG’s view includes among judgments that are capable of being recognised judgments by which the court first seised has ruled on its jurisdiction, whether it has declared itself to have jurisdiction or, on the contrary, has declined jurisdiction.

This is clear, the AG suggests where the court declares that it has jurisdiction. However Bot AG suggests it also ought to be the case where the court declines jurisdiction. The court asked to recognise and enforce the judgment, in doing so in cases of the first court refusing recognition, in the AG’s reasoning regains its freedom to review its own jurisdiction under the Regulation. The AG in this respect refers to the need to help avoid negative conflicts: ie one where no court is happy to entertain the claim. As the AG writes at 58,  ‘A conflict of that kind could arise if the court second seised refused to acknowledge the judgment previously given and declined jurisdiction on the ground that the court first seised had jurisdiction.

However in the case at issue, of course, the ‘negativity’ of the conflict is such only between EU courts: an Icelandic court may be happy to (indeed feel itself obliged to) take the case, on the basis of the choice of court clause. I researched whether the Icelandic courts have actually done so – and failed to find a record (although that may be due to my dodgy Icelandic). It is likely though that had they actually done so, traces of that would have surfaced in the Opinion.

This is where the answer to the third question becomes relevant: is the court asked to recognise, bound by the substantial reasons of the court which issued the judgment, as to the rejection of jurisdiction? The AG acknowledges that choice of court in favour of a non-EU court is not covered by Article 23 JR – however the AG refers to a similar proviso in the Lugano Convention to justify essentially the extension of the means and motives of the JR to the facts at issue, This is where I disagree with the Opinion: Iceland may be a party to the Lugano Convention – however jurisdiction of an Icelandic court in casu was not established by virtue of the Lugano Convention. Both parties to the contract at issue were domiciled in the EU and employed the JR’s room for court of choice agreements, to agree forum in favour of an Icelandic court.

Agreements granting jurisdiction to a court outside of the EU, are not covered by Article 23. Whether the courts of an EU Member State on that occasion are entitled to decline jurisdiction in favour of the non-EU court, is unclear. In Owusu, the Court of Justice does not answer this question as it was not asked by the High Court. Léger AG does refer to the issue once or twice in his opinion in Owusu however does not really entertain it – as the question was not sub judice. However it would seem fair to say that under the Owuso approach, the ECJ almost certainly would argue that the courts of an EU Member State, where they have jurisdiction under an alternative ground in the Regulation, have to exercise that jurisdiction. The question is not properly answered by the Commission proposal for review, neither is it in my view by the AG in Gothaer. It is to be expected however that the Court given its flavour for judicial economy, will not even go as far as the AG in pondering so many issues.


The Council on the validity of choice of court agreements

The Council in June issued its ‘General Approach‘ on the review of the Brussels I Regulation /the Jurisdiction Regulation . The General Approach is the backbone of what will be the Council Common Position, once the European Parliament has held its ‘first reading’ (which is now scheduled for November 2012, after having been postponed twice: from January 2012 it had already been moved to June). I commented here on the arbitration exception and here on the protected categories.

In its General Approach on the review of the Brussels I Regulation, the Council of the EU proposes the following with respect to choice of court agreements:

If the parties, regardless of 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.

The Commission had proposed ‘substance’ rather than the words ‘substantive validity’. The Council also suggest inserting a recital as follows:

The question 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 should be decided in accordance with the law of that Member State. The reference to the law of the Member State of the chosen court should include the conflict of laws rules of that State.

Finally, the Council prooses to add a fifht para to Article 23 as follows:

5. 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.’

Both the Council and the Commission proposal address the elephant in the room: Article 23 of the Jurisdiction Regulation lists a number of requirements establishing consent to choice of court agreements, however it does not address any conditions for the validity of the underlying agreement. The majority of ECJ authority would seem to favour having the validity of the forum clause to be exclusively determined by the conditions of Article 23. I would however submit that the material validity of the forum clause under the curent version of the JR ought to be determined by the lex contractus.

The result of the discussion is unsatisfactory, as in practice it leaves it up to the Member States to decide how to address the substantive validity of choice of court agreements. This is now addressed by the Commission in its proposal for review of the JR: the proposal introduces a harmonised conflict of law rule on the substantive validity of choice of court agreements, thus ensuring a similar outcome on this matter whatever the court seized. The Council amendment aims at making the solution clearer still.

Oddly, the Council adds renvoi to the mix (see ‘The reference to the law of the Member State of the chosen court should include the conflict of laws rules of that State.’). EU private international law, for good (mostly practical) reasons typically excludes renvoi. I am not entirely sure that adding it here has any merit.

Note that in line with the Hague Convention on Choice of Court Agreements, it will no longer be necessary for at least one of the parties to be domiciled in the EU, for an agreement giving jurisdiction to a court in the EU to be covered by the JR.


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