Posts Tagged EEX Verordening
Kareda v Stefan Benkö: CJEU rules with speed on recourse claim brought between jointly and severally liable debtors.
Less than two months after the AG Opined (see my report here), the Court of Justice has already held in C-249/16 Kareda v Stefan Benkö. The judgment follows Opinion to a tee albeit with a slightly more cautious link between Brussels I (jurisdiction) and Rome I /II (applicable law): at 32, with reference to the similarly cautious approach of the Court in Kainz.
(Handbook of) European Private International Law, 2nd ed. 2016, Chapter 2, Heading 220.127.116.11, Heading 18.104.22.168.9 .
Uneasy cohabitation. Kareda v Benkö: special jurisdictional rules (contract or tort) for a recourse claim brought between jointly and severally liable debtors.
Ergo, Brogsitter, Granarolo...There is a long list of cases in which the CJEU is asked to decide whether a relationship between parties is contractual, with special jurisdiction determined by Article 7(1) of the Brussels I Recast Regulation, or one in tort, subject to Article 7(2) of same.
In C-249/16 Saale Kareda v Stefan Benkö Bot AG opined end of April. The Court is asked to rule on whether a recourse claim brought between jointly and severally liable debtors under a credit agreement constitutes a contractual claim. And if it is, the Court will have to examine whether such an agreement may be classified as an agreement for the provision of services, which will, as the case may be, lead it to determine the place of performance of its characteristic obligation.
I still think that what I dubbed the ancestry or pedigree test of Sharpston AG in Ergo, is a most useful litmus test to distinguish between 7(1) and 7(2): what is the ancestry of the action, without which the parties concerned would not be finding themselves pleading in a court of law?: she uses ‘centre of gravity’ (‘the centre of gravity of the obligation to indemnify is in the contractual obligation’); ‘rooted in’ (‘the recourse action by one insurer against the other…is rooted in the contracts of insurance’); and ‘intimately bound up’ (‘[the action] is intimately bound up with the two insurers’ contractual obligation‘). (at 62 of her Opinion in Ergo). I am not sure though whether the Court itself follows the test.
Before the Austrian courts, Stefan Benkö, an Austrian national, is bringing a recourse claim against Saale Kareda, an Estonian national and his former partner, seeking payment of EUR 17 145.41 plus interest and costs. While they were living together in Austria, the applicant and the defendant bought a house in 2007 and for that purpose took out three loans totalling EUR 300 000 (‘the loan’) from an Austrian bank. They were both borrowers and the referring court states that they were both jointly and severally liable debtors. Ms Kareda broke up with Mr Benkö, moved back to Estonia, and ceased her loan payments. Being sued for the arrear payments by MR Benko, she now claims that the Landesgericht St. Pölten (Regional Court, St. Pölten), the court seised by the applicant, lacked territorial jurisdiction in so far as the loan was made by an Austrian bank and the place of performance for that loan, the bank’s registered office, is not located in the judicial district of that court.
Is it possible to ‘detach’ from the credit agreement the legal relationships arising between jointly and severally liable debtors following the conclusion of that agreement, or does this form an inseparable whole? (at 28) Bot AG suggests it is the latter and I believe he is right. I agree that it would be artificial, for the purposes of the application of the Brussels I Recast. to separate those legal relationships from the agreement which gave rise to them and on which they are based.
I am less convinced by the reference, at 32 and 33, to the need for consistency between Brussels I Recast and Rome I: regular readers of this blog will not be surprised by this. (But I believe I am fighting a losing battle there). The AG refers to Article 16 of Rome I, entitled ‘Multiple liability’, which provides inter alia that, ‘[i]f a creditor has a claim against several debtors who are liable for the same claim, and one of the debtors has already satisfied the claim in whole or in part, the law governing the debtor’s obligation towards the creditor also governs the debtor’s right to claim recourse from the other debtors’.
Having decided that the issue is contractual, the AG suggests the credit agreement is an agreement for the provision of services, and that in the context of a credit agreement, the characteristic obligation leading to jurisdiction is the actual granting of the sum loaned. The other obligation entailed by such an agreement, namely the borrower’s obligation to repay the sum loaned, exists only through the performance of the service by the lender, as repayment is merely its consequence.
The final element to consider is then the actual place of performance of the characteristic obligation. In the AG’s view, only the place where the creditor has its place of business is capable of ensuring that the rules are highly predictable and of satisfying the objectives of proximity and standardisation pursued by the second indent of Article 7(1)(b) of Regulation No 1215/2012. That place will be known by the parties from the time of the conclusion of the agreement and will also be the place of the court having the closest connection with that agreement. (at 46).
(Handbook of) European Private International Law, 2nd ed. 2016, Chapter 2, Heading 22.214.171.124, Heading 126.96.36.199.9
Issued on the same day as Zulfikarpašić, Pula Parking Case C-551/15 deals with similar core issues, with a few extras thrown in. Pula Parking, a company owned by the town of Pula (Croatia), carries out, pursuant to a decision of the mayor of that town, the administration, supervision, maintenance and cleaning of the public parking spaces, the collection of parking fees and other related tasks. In September 2010, Mr Tederahn, who is domiciled in Germany, parked his vehicle in a public parking space of the town of Pula. Pula Parking issued Mr Tederahn with a parking ticket. Since Mr Tederahn did not settle the sums due within the period prescribed, Pula Parking lodged, on 27 February 2015, with a notary whose office is in Pula, an application for enforcement on the basis of an ‘authentic document’. A notary issued a writ of execution on 25 March 2015, on the basis of that document. In his opposition, Mr Tederahn put forward a plea alleging that the notary who issued the writ of execution of 25 March 2015 did not have substantive and territorial jurisdiction on the ground that that notary did not have jurisdiction to issue such a writ on the basis of an ‘authentic document’ from 2010, against a German national or a citizen of any other EU Member State.
Does the Brussels I recast apply at all? And does it relate also to the jurisdiction of notaries in the Republic of Croatia?
On the temporal scope of the Brussels I Recast, the Court repeats its (Brussels Convention) Sanicentral (Case 25/79) finding: the only necessary and sufficient condition for the scheme of the Regulation to be applicable to litigation relating to legal relationships created before its entry into force is that the judicial proceedings should have been instituted subsequently to that date. Accession timing is irrelevant to the case: per C-420/07 Apostolides the Act of Accession of a new Member State is based essentially on the general principle that the provisions of EU law apply ab initio and in toto to that State, derogations being allowed only in so far as they are expressly laid down by transitional provisions.
On the substantial scope of the Brussels I Recast Regulation, for the issue of ‘civil and commercial’ the Court refers to its standing case-law (particularly most recently Aertssen and Sapir). In casu, it would seem (the national court is asked to confirm) that the parking debt claimed by Pula Parking is not coupled with any penalties that may be considered to result from a public authority act of Pula Parking and is not of a punitive nature but constitutes, therefore, mere consideration for a service provided. Brussels I applies.
However, notaries in casu do not act as courts: in a twin approach with Zulfikarpašić, the Court holds that the writ of execution based on an ‘authentic document’, issued by the notary, is served on the debtor only after the writ has been adopted, without the application by which the matter is raised with the notary having been communicated to the debtor. (at 58) Although it is true that debtors have the opportunity to lodge oppositions against writs of execution issued by notaries and it appears that notaries exercise the responsibilities conferred on them in the context of enforcement proceedings based on an ‘authentic document’ subject to review by the courts, to which notaries must refer possible challenges, the fact remains that the examination, by notaries, in Croatia, of an application for a writ of execution on such a basis is not conducted on an inter partes basis.
European private international law, second ed. 2016, Chapter 2, Heading 188.8.131.52.1. Chapter 6, Heading 6.2.1.
Status updated: can a ‘relationship’ be a ‘contract’? CJEU says it’s complicated in Granarolo, and complements the Handte formula.
In C-196/15 Granarolo, extensive reference is made to Brogsitter, in which the CJEU held that the fact that one contracting party brings a civil liability claim against the other is not sufficient to consider that the claim concerns ‘matters relating to a contract’ within the meaning of Article 7(1) Brussels I Recast. That is the case only where the conduct complained of may be considered a breach of contract, which may be established by taking into account the purpose of the contract, which will in principle be the case only where the interpretation of the contract which links the defendant to the applicant is indispensable to establish the lawful or, on the contrary, unlawful nature of the conduct complained of against the former by the latter.
Kokott AG Opined that there was no such contractual relationship in the case at hand: see my review of the Opinion. The Court held last week and was less categorical. It suggests a contractual relationship between the parties (which did not have a framework agreement in place: rather a long series of one-off contracts) should not be excluded: the long-standing business relationship which existed between the parties is characterised by the existence of obligations tacitly agreed between them, so that a relationship existed between them that can be classified as contractual (at 25).
What follows can be considered a CJEU addition to the rather byzantine double negative C-26/91 Handte formula: ‘matters relating to a contract is not to be understood as covering a situation in which there is no obligation freely assumed by one party towards another’. In Granarolo at 26 the Court notes
The existence of a tacit relationship of that kind cannot, however, be presumed and must, therefore, be demonstrated. Furthermore, that demonstration must be based on a body of consistent evidence, which may include in particular the existence of a long-standing business relationship, the good faith between the parties, the regularity of the transactions and their development over time expressed in terms of quantity and value, any agreements as to prices charged and/or discounts granted, and the correspondence exchanged.
These criteria obviously are quite specific to the question at hand yet it is the first time the Court, carefully, ventures to give indications of some kind of a European ius commune on the existence of ‘a contract’.
Whether any such contract then is a contract for the sale of goods or one for services, is not a call the Court wishes to make. It lists the various criteria it has hitherto deployed, with extensive reference in particular to C-9/12 Corman-Collins, and leaves the decision up to the national court.
Make a mental note of Granarolo. It may turn out to have been quite pivotal. Geert.
(Handbook of) European Private International Law, 2nd ed. 2016, Chapter 2, Heading 184.108.40.206, Heading 220.127.116.11.9
Schmidt v Schmidt: Family feud again leads to discussion of forum rei sitae & forum connexitatis in Brussels I Recast.
An unusually high proportion of cases under Article 22 (old) or 24 (Recast) Brussels I relate to family disputes on property. Webb v Webb, Weber v Weber, Komu v Komu, and now, C-417/15 Schmidt v Schmidt. It’s all about keeping up with the Joneses.
Kokott AG opined in Schmidt last week – the Opinion is not available in English. Mr Schmidt had gifted a (otherwise unspecified) piece of Vienna real estate to his daughter, who lives in Germany. Ms Schmidt is included in the land register as the owner. Mr Schmidt subsequently sues in Austria for the annulment of the gift due to alleged incapacity at the time of the gift, and for removal of the registration. Is the action caught by Article 24? (in which case Ms Schmidt’s claim of lack of jurisdiction fails).
The Advocate General first of all suggests that the referring court’s request should not be turned down simply because it did not specify the time of seizure: in other words it is not clear whether the case is covered by the old or the Recast Brussels I Regulation. Ms Kokott however suggests the Court should not be pedantic about this and answer the question regardless, seeing as the rule has not changed.
Next up and potentially trickier, is the exclusion of capacity from the scope of application of the Regulation. However the Advocate General is right when she suggest that the exclusions should only be relevant where they concern the main object of the litigation. Not, as here, when they are raised incidentally. (She discusses in some detail the linguistic implications given different wording in the different language versions of the Regulation).
Then to the real question. With respect to the annulment of the (gift) agreement, the object and purpose of plaintiff’s action is not the establishment or confirmation of an erga omnes right in rem. Rather, the confirmation of voidness of an agreement transferring such right, due to incapacity. That this will have erga omnes consequences if successful, is not to the point given the long-established need to apply Article 24 restrictively. In this respect this case is akin to C-294/92 Webb and Webb.
The analysis is different however, the AG suggests, for the request to delete the entry in the land register. This does aim directly at erga omnes consequences under Austrian law.
Ms Kokott subsequently rejects the notion that as a result of part of the suit being subject to Article 24, this should drag the remainder into the exclusive bath with it: at 48: if only because if one were to accept this, forum shopping would be facilitated. Including in its suit a procedure covered by Article 24 would enable plaintiff to draw in a whole range of other issues between the parties.
Finally, the AG suggests joinder of the contractual claim (the nullity of the gift) to the right in rem claim, is possible under Article 8(4) and rejects that national rules of civil procedure should or even can play a role in this respect. This part of the Opinion may be optimistically short. For if the joinder route of Article 8(4) may lead to the same result as the one the AG had just rejected, one assumes there ought to be discretion for the national courts to reject it. Not, as the AG rightly suggests, by reference to national civil procedure rules (that would lead to unequal application) but rather by reference to the (probably) EU inspired rule that abuse of Article 8 be avoided.
The Court will probably not answer all the questions the case raises, particularly on Article 8. Expect this to return.
For the facts of the case, and the reasoning of the AG in C-559/14 Meroni, I refer to my earlier posting. At the end of May (I am indeed still hoovering up the queue) the Court held very much alongside Kokott AG’s Opinion, I shall therefore not repeat its reasoning here. The CJEU does insist that if third parties rights are directly affected with the intensity as in the case at issue, that third person must be entitled to assert his rights before the court of origin (which English courts provide for), lest one runs the risk of the injunction being refused recognition under ordre public. As I had feared, the Court does not address the AG’s concern whether Mareva orders actually constitute a ‘judgment’ for the purposes of the Regulation.
Post Brexit, this considerable attraction of English courts in interlocutory proceedings might become a lot less real. (Like many of us, I am working on a short review of Brexit consequences for European private international law).
(Handbook of) European private international law, second ed. 2016, Chapter 2, 18.104.22.168.1, 22.214.171.124.4
As I had feared /as was to be expected, the CJEU did not follow Szpunar AG’s lead in formally letting go of Case 21/76 Bier‘s Erfolgort /Handlungsort distinction, even if it did accept the AG’s rejection in the case at issue, of the mere presence of a bank account triggering jurisdiction for tort under (now) Article 7(2) Brussels I Recast.
Kolassa upheld jurisdiction in favour of the courts for the place of domicile of the applicant by virtue of where the damage occurred, if that damage materialises directly in the applicant’s bank account held with a bank established within the area of jurisdiction of those courts. In Universal Music the CJEU distinguished Kolassa: for in the latter case there where ‘circumstances contributing to attributing jurisdiction to those courts.’ In general, the Court held in Universal Music, ‘purely financial damage which occurs directly in the applicant’s bank account cannot, in itself, be qualified as a ‘relevant connecting factor’‘ (at 38) . ‘ It is only where the other circumstances specific to the case also contribute to attributing jurisdiction to the courts for the place where a purely financial damage occurred, that such damage could, justifiably, entitle the applicant to bring the proceedings before the courts for that place.‘ (at 39).
The Court at 38 flags a rather interesting and relevant argument for dismissing pure presence of a bank account as a determining connecting factor (a student of mine, Tony Claes, had made the same argument earlier this ac. year): a company such as Universal Music may have had the choice of several bank accounts from which to pay the settlement amount, so that the place where that account is situated does not necessarily constitute a reliable connecting factor. What the Court is essentially saying is that in such circumstance the applicant can manipulate jurisdiction and hence shop for a forum: which is not part of the jurisdictional rule for tort.
Crucially of course we are left having to ponder what exactly ‘other circumstances’ than location of bank account may imply.
(Handbook of) European private international law, second ed. 2016, Chapter 2, Headings 126.96.36.199, 188.8.131.52.7