Of tractors and trailers. Insurance contracts, subrogration, contracts and torts. Sharpston AG on the scope of Rome I and II.

Update 22 January 2016 The CJEU held today. More on that judgment here.

First, a quick heads-up on precedent: the difference between ‘contract’ and tort’ in European private international law is crucial, as regular readers of this blog will have observed. Crucial, yet the concept is left undefined in the Brussels I (and Recast) Regulation (which has a different special jurisdictional rule for both), the Rome I Regulation on applicable law for contracts, and the Rome II Regulation on applicable law for torts. Undefined, for these foundational elements of private law are outside the reach of legal and political compromise in the legislative process. Yet courts of course do have to apply the rules and in doing so, have to distinguish between both.

The CJEU pushes an ‘autonomous’ EU definition of both concepts which in the past has led to the seminal findings in Jakob Handte (C-26/91) and Kalfelis. In Handte the Court held: the phrase ‘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.’ (the double negative exercised scholarship for some time). In Kalfelis the Court had earlier defined ‘tort’ as ‘all actions which seek to establish liability of a defendant and which are not related to a ‘contract’ within the meaning of Article 5(1).’ (5(1) has become 7(1) in the Recast).

Is the relationship between two insurers, having covered liability for a towing vehicle cq a trailer, each subrogated in their insured’s rights and obligations, one of them currently exercising a claim against the other in partial recovery of the compensation due to the victim, non-contractual?

Per Kalfelis, tort as a category is residual. Sharpston AG’s starting point in Joined Cases Ergo Insurance and AAS Gjensidige Baltic, Opinion issued yesterday, therefore is to examine whether the recourse action is essentially contractual in nature. In the negative, the action is non-contractual. The case is evidently made more complex by the underlying relationships between insurer and insured, and the presence of subrogration. In question is not therefore the relationship between the insurer and the victim: this is clearly non-contractual. The question is rather whether the action of one insurer against the other is contractual in nature, given the contractual relationship between insurer and insured, cq the non-contractual relationship between the insured and the victim.

Sharpston AG first gets two issues out of the way. Lithuania (both referred cases are pending in Lithuanian courts) is a signatory State to the Hague Convention on the law applicable to traffic accidents, which is left unaffected by Rome II by virtue of Article 28. However the Convention itself holds that it does not apply to recourse action and subrogation involving insurance companies. Further, a suggestion that Directive 2009/103 (relating to insurance against civil liability in respect of the use of motor vehicles, and the enforcement of the obligation to insure against such liability) includes a conflict of laws (applicable law) rule which is lex specialis vis-a-vis the Rome Regulation, was quickly dismissed. Indeed the Directive’s provisions do not indicate whatsoever that they can be stretched.

Then comes the core of the issue, the nature of the relationship underlying the claim. This, the AG suggests, is contractual. Relevant precedent referred to includes Brogsitter and OFAB. Essentially the AG puts forward an ancestry test: 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).

Incidentally, in para 20 of her Opinion the AG refers, in giving context, to the difference between Lithuanian and German law (the accidents both occurred in Germany) as regards the limitation periods for bringing a recourse action. In Rome II, limitation periods are included in Article 15 as being covered by the lex causae; ditto in Article 12 of Rome I. This pre-empts discussion on the matter for whether limitation periods are covered by lex fori (as a procedural issue) or the lex causae is otherwise not necessarily the same in all Member States.

If the CJEU confirms, preferably using the terminology of its AG, the tort /contract discussion in my view will have been helpfully clarified.

Geert.

Choice of court, Incoterms and the special jurisdictional rule for contracts.

Update 28 July 2020 for the Italian SC expressing caution re incoterm  “FCA – Free Carrier (named place of delivery)”, see Giulio Monga, here.

Postscript 24 September 2015: the incoterm ‘ex works’ was at issue in Cimtrode The Electrode Company GmbH v Carbide BV at Gerechtshof ‘s-Hertogenbosch. Judgment (on appeal) was issued 1 September 2015. The court held inter alia that whether the incoterm ex works was actually part of the agreement between parties, could only be judged in accordance with the lex causae. The agreement was a verbal agreement, and any choice of court which one of the parties claimed had been made, had not been confirmed in writing. Reference to relevant standard terms and conditions on the invoices sent later, following execution of the agreement, could not, the court held, be regarded as confirmation of the choice of court.

In Rhoonse Recycling & Service BV v BSS Heavy Machinery GmbH, the Court at Rotterdam first of all discussed the factual circumstance of a possible choice of court agreement between parties, in favour of the courts at Eberswalde (Germany). Such choice of court is made in the general terms and conditions of seller, BSS. Whether parties had actually agreed to these, was in dispute. Roonse suggests the reference on the front page of the order form to the general terms and conditions on the backside (‘umseitiger‘) was without subject for that back page was blank. The court therefore suggests that agreement depends on whether, as was suggested, the standard terms and conditions were attached (stapled, presumably) to the order form. Whether this was the case is a factual consideration which Rotterdam does not further entertain for even if the choice of court agreement is invalid, the court found it would not have jurisdiction under the only other alternative: Article 7(1) special jurisdictional rule for ‘contracts’.

Rhoonse suggest that the parties had agreed that the contract, a delivery of good, is performed in Rotterdam for that, it argues, is where delivery took place per the Incoterm CPT (carriage paid to). The CJEU has flagged the inconclusive effect of the mere use of Incoterms for the purposes of finding an agreement between parties under Article 7, in Electrosteel Case C-87/10 (in that case with respect to the use of ‘ex works’) and has generally insisted, per Car Trim Case C-381/08 that the courts need to make reference to all relevant terms and conditions in the agreement so as to determine the place of delivery.

Rotterdam in casu held the Incoterm CPT Rotterdam as being mostly a reference to costs, not place of delivery. Where it is impossible to determine the place of delivery on that basis, without reference to the substantive law applicable to the contract, that place at least for the sale of goods, the CJEU held, is 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. In casu, this was found to be in the geographical jurisdiction of the courts at Den Haag. Given that Article 7(1) does not merely identify the courts of a Member State but rather a specific court within a Member State, Rotterdam has no jurisdiction.

The case is a good reminder of the limited power of Incoterms to determine jurisdiction. Better have a specific choice of court clause (which here may or may not have presented itself here in the general terms and conditions of seller).

Geert.

Universal: Dutch Supreme court (Hoge Raad) quizzes the ECJ on purely economic loss and the Brussels Regulation

(Thank you to Vincent Dogan and Freerk Vermeulen for flagging the case). In Universal, Case C-12/15, the Dutch Hoge Raad has asked the ECJ for assistance in determining whether and /or how Article 5(3) of the Brussels I Regulation (now Article 7(3) in the recast) needs to be applied to cases of purely economic loss (also known as purely financial loss).

Haven’t we seen that before? Yes, we have: in Zuid-Chemie, Case C-189/08, the same Hoge Raad asked essentially the same question, however the ECJ did not answer it, for there was also physical damage (with the same victim).

Universal Music International Holding BV is the mother company of among others a Czech group of companies, who acquired a target company in the Czech Republic. A calculation error by one of the lawyers advising the parties (Ouch. All us, lawyers, sympathise), led to Universal having to pay five times what it thought it was going to pay. Arbitration and settlement ensued. This included agreement that the holding company, plaintiff in the current proceedings, would pay the amount settled for. It duly did, from a Dutch bank account. It now sues the Czech lawyers who wrongly advised the Czech subsidiary and does so in The Netherlands, as the alleged Erfolgsort in its tortious relationship with these lawyers, is The Netherlands.

Questions referred, are whether purely economic loss sustained in the Erfolgort (and without direct loss, economic or otherwise, elsewhere) lead to jurisdiction for that Erfolgort; and if so, how one determines whether the damage is direct or indirect (‘follow-up’), and where that economic loss is to be located.

I have aired my unhappiness with the Erfolgort /Handlungsort distinction on this blog before. Most recently viz Hejduk. I blame Bier (the judgment. Not the (at least as it is spelled in Dutch) drink): extension of Article 5(3) seemed good in principle but led to a continuing need to massage the consequences. The court advisors to the Hoge Raad have sympathy for the view that Bier’s main justification for accepting jurisdiction for the Erfolgort (a close link with the case leading to suitability from the point of view of evidence and conduct of the proceedings) is not present in the case of purely economic loss, particularly where events for the remainder are entirely Handlungsort related. The ECJ may well follow this reasoning, although in doing so it might yet again create another layer of distinguishing in the Bier rule.

Geert.

My (conflicts) heart leaps when I behold Canyon v GDF Suez at the High Court.

It does. It really does. (Warning: The next sentence drops all pretext of this posting having poetic qualities). Canyon v GDF Suez is an absolutely perfect illustration of the challenges of the special jurisdictional rule of Article 5(1) of the Brussels I Regulation (now Article 7(1) Brussels Ibis). Starting with the very discussion of whether there was at all a contract between parties (a prima facie case of which is required to trigger Article 5; put differently: there need not even be solid proof of such contract existing), into the discussion of ‘goods’ v ‘services’; back to the at first sight very very puzzling fall-back provision of the third indent of the Article (‘(c) if subparagraph (b) does not apply then subparagraph (a) applies.”; finally, to the determination of ‘the place of performance of the obligation in question’.

Claimant (“Canyon”) is a Scottish company with its registered office in Aberdeen. Defendant applicant (“GDF”), a Dutch company, is a large owner and operator of oil and gas fields. GDF contracted with Cecon NL BV for the transportation and installation of pipelines. Cecon subcontracted to Canyon. Cecon fell behind in payments and GDF committed to paying relevant sub-contractors directly. Canyon relies on that alleged contract and on that contract allegedly having its place of performance in the UK.

Mackie J, no doubt with very able assistance by counsel, does an absolutely perfect job of taking the case through Article 5’s cascade, with impeccable reference to relevant ECJ case-law. Readers are best directed to the (concise) judgment itself. Many thanks to Ryan Deane for alerting me for the case – he has an excellent summary here.

Fantastic class material. Geert.

 

*****

Brussels Ibis Article 7(1)

(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 good, the place in a Member State where, under the contract, the goods were delivered or should have been delivered,

in the case of the provision of services, the place in a Member State where, under the contract, the services were provided or should have been provided,

(c) if subparagraph (b) does not apply then subparagraph (a) applies.

Celtic Salmon: Irish High Court holds there’s something fishy in the State of Denmarks’ lex fori

Granted, only Monday mornings arguably may excuse such lame pun in a blog’s posting.  However the slightly lousy title should not take away from the relevance of Celtic Salmon v Aller Acqua in which the Irish High Court partially refused recognition of a Danish judgment.

Hogan J summarised the issue as follows: Where a defendant in foreign proceedings governed by the Brussels Regulation (Council Regulation No. 44/2001 EC) fails to advance and maintain a counter-claim for damages for (sic) in those proceedings, is that party then barred by the doctrine of res judicata or by the provisions of the Brussels Regulation itself from re-litigating that counterclaim for damages for breach of contract and negligence in existing proceedings in this jurisdiction where it sues as plaintiff?

Celtic Salmon used Aller Ireland, the Irish subsidiary, as anchor defendant. The mother company, Aller Denmark, was duly joined to the proceedings. Vets, commissioned by Celtic Atlantic, had established a deficiency in the feed supplied by Aller Denmark.  The dispute between the parties then started with a letter sent by Celtic Atlantic in July, 2008 claiming damages for the (allegedly) defective fish feed. Aller Denmark responded by denying liability, but also claimed for unpaid invoices in respect of the fish feed. In November 2008, aller Denmark fired the first shot in litigation, suing in Denmark. There were two separate claims. First, Aller Denmark claimed in respect of certain unpaid invoices for the fish feed (“claim 1”). (It also reserved its position to make further claims in this regard. The claim taken forward only related to a fraction of the feed actually supplied). Second, it sought an order that “Celtic be ordered to admit that the delivered feed on which Aller Acqua’s claim is based is in conformity with the contract.” (“claim 2”).

Celtic’s Irish solicitors, according to the judgment, advised that it would be unwise to bring a counter-claim in the Danish proceedings, because to do so “would preclude us from bringing proceedings in Ireland for damages for breach of contract.” In May 2009, Irish proceedings were brought by Celtic. These amounted to a claim for damages for negligence and breach of contract by reason of the allegedly defective nature of the fish feed.

The Danish courts accepted jurisdiction on the basis of Article 5 based upon (whether this had been agreed was disputed between parties) delivery (incoterm) ex works /ex factory. This is the point were procedural difficulties started (hence the relevance of lexi fori). The reports earlier commissioned by Celtic, turned out not to be admissible (or at the very least would be regarded with suspicion) by the Danish courts given that under Danish civil procedure, the court appoints its own experts. However at the time this would have been carried forward, both fish and fish feed were no longer. Celtic Atlantic elected not to pursue the counterclaim in respect of the defective feed, and reserved the right to do so at a later date (without specific reference to Danish or Irish courts).

The Danish court eventually sided with Aller in respect of two claims: claim 1 for debt in respect of the two unpaid invoices in the sum €58,655 plus interest. Claim 2” that “Celtic [Atlantic] be ordered to admit that the delivered feed on which Aller [Denmark]’s claim is based is in conformity with the contract. There was subsequently discussion among Danish experts in the Irish courts, whether the Danish judgment was in default of appearance, given the absence of defence against at least part of it.

The question now sub judice was the fate of the Irish proceedings, Hogan J justifiably concluded that Article 27 JR (the lis alibi pendens rule) no longer had any relevance, given that the Danish proceedings had come to an end. Rather, whether Celtic’s claims in the Irish courts were the same as those entertained in Denmark (and hence continuing them in Ireland, per se abusive, ia given comity) and /or whether Aller could waive the Danish judgment in defence of the Irish claims. The latter would imply recognition of the Danish judgment.

[The High court carries out a review of the Danish court’s jurisdiction under Article 5(1) and 3, with reference as for the latter inter alia to Folien Fischer however in doing so I would argue it surpassed its brief: other than for exclusive jurisdictional rules, under the current Brussels I regime, there is no room for other courts to second-guess the application of the Regulation by other courts].

Article 34(1) of the Brussels Regulation provides that “A judgment shall not be recognised: 1. If such recognition is manifestly contrary to public policy in the Member State in which recognition is sought…..” Hogan J emphasises procedural rights per Krombach, and the Charter, and concludes that by reason of the manner in which the Danish Administration of Justice Act operated in this case, the effective procedural rights of Celtic Atlantic were violated so far as claim 2 is concerned. He insisted that (only) on ‘the special and particular facts of this case, the existence and operation of the Danish law operated (…) as an “insuperable” procedural obstacle which barred the effective prosecution of its claim.’ (at 124).

A considerate judgment and one which, if only because of its rarity and the insight it offers into procedural and tactical considerations in entertaining, or not, counterclaims, stands out in national case-law on the Brussels I- Regulation.

Geert.

 

Location of damage resulting from law firm’s alleged wrongful inducement in breach of exclusive jurisdiction clause. The High Court in AMT v Marzillier.

Update May 2019 For ease of reference: confirmed by the Court of Appeal [2015] EWCA Civ 143 and by the Supreme Court  [2017] UKSC 13. Review of the latter two here.

AMT v Marzillier [2014] EWHC 1085 (Comm) concerns special jurisdiction under tort, Article 5(3) of the Brussels I-Regulation, in the event of a loss of contractual right – as well as a cursory review of the consumer title.

Here: the loss, allegedly due to wrongful inducement by defendant (a law firm) to have a contractual claim heard in England. Contractual claims (alleged precarious investment advice) by a group of individuals had been settled by AMT in Germany.  Popplewell J concisely revisits the complete history of Article 5(3), from Bier via Kalfelis and Dumez France to Marinari and Kronhofer, however, leaving out Shevill. (See also below).

On the basis of said precedents he holds that the Courts of England do indeed have jurisdiction: ‘The place where the damage occurred as a result of MMGR’s allegedly tortious conduct was England, where such conduct deprived AMT of the contractual benefit of the exclusive jurisdiction clause which ought to have been enjoyed in England. ‘ (at 46). Counsel for AMT had also put forward an alternative ground which was that the payments for the settlements and costs came from England, and that England is where management time was wasted and future business lost.  Not so: Popplewell J: ‘The unquantified heads of loss for wasted management time and loss of business are not the primary heads of claim and do not constitute the main part of the damage said to have occurred as a result of the harmful event. They are not the damage. They are not initial, direct or immediate damage, but to the extent quantifiable and recoverable, merely the remoter financial consequences of the harm suffered in Germany. ‘ (at 52).

Per Shevil, jurisdiction of the English courts will be limited to the extent of damages suffered by the loss of the contractual benefit of the exclusive jurisdiction clause which ought to have been enjoyed in England: how exactly that ought to be quantified (if liability is at all withheld, of course) will not be a straightforward matter, one assumes.

Succinct review is also made of the consumer title, with the finding that on its applicability there is an issue to be tried. At 58, Popplewell J suggests ‘wherever the dividing line is to be drawn in the case of investors, the result is likely to be heavily dependent on the circumstances of each individual and the nature and pattern of investment. At one end of the scale may be the retired dentist who makes a single investment for a modest amount by way of pension provision. At the other may be an investment banker or asset manager who plays the markets widely, regularly and for substantial amounts, for his own account. In between there are many factors which might influence the result, including the profile of the investor, the nature and extent of the investment activity, and the tax treatment of any profits or losses. The issue is fact specific.’ I do not think too much should be read in these examples – more so, the insistence that circumstances of the case do have an impact on the qualification as ‘consumer’.

Geert.

Liability for defective products and the relationship between Brussels I and Rome II. The ECJ in Kainz.

In Case C-45/13 Andreas Kainz v Pantherwerke AG, the ECJ held on the determination of locus delicti commissi, the place giving rise to the damage, in the case of defective products. It held this was the place where the product in question was manufactured. The special jurisdictional rules of Article 5 are in effect forum conveniens applications: they are intended to enable the court objectively best placed to determine whether the elements establishing the liability of the person sued are present, to assume jurisdiction. For product liability cases, this includes inter alia the possibility of gathering evidence in order to establish the defect in question.

Pantherwerke AG is an undertaking established in Germany which manufactures and sells bicycles. Mr Kainz,  resident in Salzburg, purchased a bicycle manufactured by Pantherwerke from Funbike GmbH, a company established in Austria. On 3 July 2009, while riding that bicycle in Germany, Mr Kainz suffered a fall and was thereby injured. The place of the event giving rise to the damage is, Mr Kainz claims, located in Austria as the bicycle was brought into circulation there, in the sense that the product was there made available to the end-user by way of commercial distribution.

Mr Kainz argued specifically that the Courts should take into account not only the interests of the proper administration of justice but also those of the person sustaining the damage, thereby enabling him to bring his action before a court of the Member State in which he is domiciled. The ECJ disagreed, at 20:

‘although it is apparent from recital 7 in the preamble to Regulation No 864/2007 that the European Union legislature sought to ensure consistency between Regulation No 44/2001, on the one hand, and the substantive scope and the provisions of Regulation No 864/2007, on the other, that does not mean, however, that the provisions of Regulation No 44/2001 must for that reason be interpreted in the light of the provisions of Regulation No 864/2007. The objective of consistency cannot, in any event, lead to the provisions of Regulation No 44/2001 being interpreted in a manner which is unconnected to the scheme and objectives pursued by that regulation.’

This is a statement I like a lot and have advocated for some time. In general, I find the link between applicable law and jurisdiction (often leading to Gleichlauf-type considerations; such as in Article 22’s exclusive jurisdictional rules) not very attractive.

Geert.

Christmas crums part II – ÖFAB confirms narrow scope of the insolvency exception and clarifies ‘place where the harmful event occurred’ in case of tort by omission

Ok, I cheat. Judgment of the ECJ in ÖFAB is in fact a left-over of my summer queue. Contractual claims for payment against a Swedish company (Copperhill) had been assigned to Invest, equally domiciled in Sweden. Invest brought an action against a former director and former major shareholder, both domiciled in The Netherlands. Invest sought to have both held liable for the debts of the company, because they had allegedly allowed that company to continue to carry on business even though it was undercapitalised and was forced to go into liquidation.

Firstly the Court had to decide whether the action falls within the ‘insolvency’ exception of Article 1(2)(b) of the Regulation, which provides that it does not to apply to ‘bankruptcy, proceedings relating to the winding-up of insolvent companies or other legal persons, judicial arrangements, compositions and analogous proceedings’. The ECJ held that the exception did not apply, for – per previous case-law – it has to be interpreted narrowly. Only actions which derive directly from insolvency proceedings and are closely connected with them are covered by the exception. Here, the actions in the main proceedings do not constitute insolvency proceedings but were brought after Copperhill had been subject to a company reconstruction order (a near-automatic consequence of Swedish company law, I understand, in the event of limited companies having insufficient capital). In any event, the Court held, those actions do not concern the exclusive prerogative of the liquidator to be exercised in the interests of the general body of creditors, but of rights which an individual creditor is free to exercise in its own interests.

Next up was the qualification of the action as one in tort under Article 5(3) of the Brussels-I Regulation, and if so, the determination of the locus delicti commissi. The underlying debt was a result of work carried out under contract, however the action was based on the former company director and shareholder allegedly not properly having carried out their monitoring duties. Consequently the Court held in favour of the application of Article 5(3)’s special jurisdictional rule for tort.

That leaves the determination of the locus delicti commissi. What was at stake, the Court suggested, was not the financial situation or the carrying-on of the business of that company per se, but rather the conclusion to be drawn as regards a possible failure of monitoring by the member of the board of directors and the shareholder.

Turning to the locus delicti commissi, the Court refers to the place where the activities of the company took place: ‘ It is clear from the documents submitted to the Court that, in the period in which the disputed facts took place, Copperhill’s seat was in the municipality of Åre within the jurisdiction of the Östersunds tingsrǎtt, where, in the same period, it carried on its business and built a hotel. In those circumstances, it appears that the activities carried out and the financial situation related to those activities is connected to that place. In any event, the information on the financial situation and activities of that company necessary to fulfill the management obligations by the member of the board of directors and the shareholder should have been available there. The same is true for the information concerning the alleged failure to comply with those obligations. It is for the referring court to ascertain the accuracy of that information.‘ (at 54).

In other words, in a tort caused by omission (rather than by positive action by the alleged tortfeasor), the Court turns to the place where the tortfeasor’s action ought to have taken place, so as to avoid the very omission that led to the action in tort. For it is that place which answers best to the very raison d’être of the special jurisdictional rules of Article 5: ‘In matters of tort, delict or quasi-delict, the courts of the place where the harmful event occurred or may occur are usually the most appropriate for deciding the case, in particular on grounds of proximity and ease of taking evidence‘   (at 50, with reference ex multis to Folien Fischer).

A very useful judgment. Geert.

 

Christmas Crums part I – The ECJ holds on ‘contracts’ in Corman-Collins

One or two interesting developments have been held up in my end of year queue. I shall report on them over the next week and a half or so. First up: judgment of the ECJ in Corman-Collins Case 9/12 – I reported on the Opinion of the AG here. The Court, like the AG, holds in favour of ‘services’: such is the diverse nature of the various obligations in the contractual relationship.

Given its confirmation of the contract falling under Article 5(1)(b), first indent, of the Brussels I-Regulation, the Court did not answer the final, subsidiary, question, which questioned the amount of European harmonisation of ‘place of performance of the obligation in question’ under Article 5(1)(a). As I flagged earlier, the AG had suggested the ECJ confirm its deference to national law on this issue, per Tessili Dunlop.

Geert.

No national (tort) law, please. The ECJ in Melzer v MS Global.

In Case C-228/11 Melzer v MS Global, the court at Dusseldorf requested the Court of Justice to clarify Article 5(3) Brussels I, the special jurisdictional rule for tort: on the basis of the application of this rule in Bier, a defendant may be sued in the place where the damage occurred (locus damni) and, if different, where the action (or inaction) leading to that damage occurred (the locus delicti commissi) . Article 5(3), like Article 5(1), determines not just international jurisdiction [i.e. the courts of which Member State have jurisdiction], but also territorial jurisdiction within that State.

Mr Melzer, who is domiciled in Berlin, was solicited as a client and looked after by telephone by the company Weise Wertpapier Handelsunternehmen (‘WWH’), whose registered office is in Düsseldorf. That company opened an account for Mr Melzer with MF Global UK Ltd (‘MF Global UK’), a brokerage house located in London, which traded in stock market futures for Mr Melzer in return for corresponding fees. Mr Melzer brought proceedings before the Landgericht Düsseldorf claiming that MF Global UK should be ordered to pay him damages equivalent to the difference between what he had paid out and what he had received in the context of those transactions, namely EUR 171 075.12, with interest. W.W.H. has not been implicated in the proceedings. In support of his claims, Mr Melzer maintained that he had not been sufficiently informed about the risks involved in futures trading, so far as options contracts were concerned, either by WWH or by MF Global UK.

The court at Dusseldorf rejected its jurisdiction on the basis of locus damni, arguing that this had taken place in Berlin (Melzer’s domicile), not Dusseldorf. It does however argue that it has jurisdiction on the basis of the locus delicti commissi, based on a combination of Article 5(3) Brussels I and the German Civil Code. Under Paragraph 830 of that Code (Bürgerliches Gesetzbuch), entitled ‘Joint participants and common purpose’:

 ‘(1)      Where several persons have caused damage by the commission of an unlawful act undertaken in common, each of them shall be liable for that act. That is also the case even where it is impossible to determine which of the persons involved caused the damage by his act.

(2)      Instigators and accomplices shall be treated as joint participants of the act.

The attribution of W.W.H.’s actions to MS Global, in the view of the Dusseldorf court, gives it jurisdiction on the basis of Article 5(3). It asked the following of the Court of Justice:

‘In the context of jurisdiction in matters relating to tort or delict under Article 5(3) of Regulation [No 44/2001], where there is cross-border participation of several persons in a tort or delict, is reciprocal attribution of the place where the event occurred admissible for determining the place where the harmful event occurred?’

There is no trace in the Jurisdiction Regulation of any rule on attribution for acts committed in tort. There are however many arguments against allowing such attribution from creating extra fora:

The JR’s general rule determines jurisdiction in the domicile of the defendant. This principle may be subject to many exceptions, and to many a jurisdictional rule which trumps it, however it remains the principle. As emphasised repeatedly by the ECJ, exceptions to Article 2’s general rule must be interpreted strictly, for the exceptions would otherwise lead to too many potential jurisdictions. All the more so in the case at issue. Allegations of attributions are easily made, and it is not clear how far the Court can go in reviewing the merits of the argument at the jurisdictional stage.

A restrictive interpretation also serves the Regulation’s purpose, as emphasised by the ECJ, of predictability and reliability. A party may otherwise end up being pursued in courts in which it could not reasonably have foreseen to be sued.

Furthermore of course, the attributive rule at issue superimposes national law unto Article 5(3) JR. The Court’s emphasis on autonomous interpretation sits uneasily with that.

Alternative jurisdictional rules would have been possible to establish jurisdiction: Article 6’s rule on joinders (which would have required plaintiff to use WWH as an anchor defendant) comes to mind; as does Article 5(1)’s rule on contracts (although it may not have been easy to establish that the services under contract were or should have been provided in Dusseldorf).

The Court held on 16 May. It referred inter alia to Refcomp to emphasise the presumption against letting national law infiltrate the concepts used by the Regulation, and to many of the arguments referred to above, and held

Accordingly, the answer to the question referred is that Article 5(3) of Regulation No 44/2001 must be interpreted as meaning that it does not allow the courts of the place where a harmful event occurred which is imputed to one of the presumed perpetrators of damage, who is not a party to the dispute, to take jurisdiction over another presumed perpetrator of that damage who has not acted within the jurisdiction of the court seised.

Geert.

%d bloggers like this: