EAPIL blog

The post below, written by Gilles Cuniberti, a professor of Private International Law at the University of Luxembourg, and an editor of this blog, is the third contribution to the EAPIL online symposium on the ruling of the Court of Justice in Wikingerhof v. Booking. The previous posts, authored by Matthias Lehmann and Adrian Briggs, can be found here and here.

Other contributions will follow, the next one being scheduled for later today. Readers are encouraged to share their views by making comments to the posts. Those wishing to submit longer contributions for publication are invited to get in touch with the managing editor of the blog, Pietro Franzina, at pietro.franzina@unicatt.it.

One of the novelties of Wikingerhof is the introduction of a new requirement for the application of the special jurisdictional rules laid down by Article 7(1) and (2) of Regulation No 1215/2012: the claimant’s choice to rely on one of those rules.

29 It must therefore be held that the applicability of either point 1 of Article 7 of Regulation No 1215/2012 or point 2 of Article 7 thereof depends, first, on the applicant’s choice whether or not to rely on one of those rules of special jurisdiction and, second, on the examination, by the court hearing the action, of the specific conditions laid down by those provisions.

This is because, the court explains, the scheme of Regulation No 1215/2012 ‘is characterised by the possibility which it confers on the applicant of relying on one of the rules of special jurisdiction laid down by that regulation’ (para. 27).

The purpose of this post is to explore the implications of this requirement.

Which Choice?

If the claimant is offered the possibility to choose, one would think that this is because he has an option. In the context of Article 7, this would seems to mean that courts having jurisdiction on the basis of Article 7(1) and courts having jurisdiction on the basis of Article 7(2) are simultaneously available.

This, however, is hard to conceive.

First, the court held that the rules on special jurisdiction laid down in  Article 7 of the Brussels I bis Reguation “are mutually exclusive in the application of that regulation” (para. 26). This seems to mean that the special rules in Article 7 cannot be applicable at the same time. If one rule is applicable, the application of the other is excluded.

Secondly, the second applicability requirement of the rules in Art 7(1) and (2) is that “the specific conditions lay down by these provisions” are ascertained by the relevant court. The conditions for each of the provisions turn around a single test, which is whether it is indispensable to examine the content of the contract in order to assess the lawfulness of the conduct of the defendant. If it is, Article 7(1) applies, and Article 7(2) does not. If it is not, Article 7(2) applies, and Art 7(1) does not.

So there is no option. The conditions of Article 7(1) or Art 7(2) cannot be met at the same time. Only one of these rules applies (at best).

So what does it mean that the claimant can choose to rely on one or the other?

Whose Choice?

What it could mean is that the claimant could choose an Article 7(1) forum over an Article 7(2) forum irrespective of the respective conditions of application of each of the provisions. In other words, the claimant could derogate from the conditions of applicability and choose one forum which would not have jurisdiction under Article 7.

This interpretation would be surprising, for a number of reasons.

First, as already underscored, the Wikingerhof court held that the second applicability requirement condition is that the court verifies that the conditions for the relevant jurisdictional rule are met. This suggests that it should not retain jurisdiction if these conditions are not met.

Second, while the parties may derogate from jurisdictional rules, this is only possible if both parties agree, whether expressly (choice of court agreement) or implicitly (submission to jurisdiction). There is no reason to favour the claimant in this respect. The Wikingerhof court explained that it is somehow relevant that Wikingerhof chose to rely on (national) tort rules. But why wouldn’t it be relevant that the defendant would choose to rely on (national) contractual defences? It does not seem that Booking did exactly that in that case, but not far: it relied on a choice of court agreement.

Conclusion: Second Order Characterisation

Finally, it is not quite clear why, after insisting that the concepts of ‘matters relating to a contract’ and ‘matters relating to tort’ should receive an autonomous interpretation, and repeating the European definitions of these concepts, the Wikingerhof court found it useful to underscore on which ground of national law the claimant would be seeking to establish liability.

Why should it matter if the conditions to meet are defined at European level? And how could it matter? Would this mean that Article 7(2) would only be available if the substantive claim was delictual in nature under the applicable national law? But, as far as substantive law is concerned, there is no freedom of choice between tort and contractual liability in all legal systems. In France and Luxembourg, there is no choice: contractual liability prevails and excludes tort liability when a given claim could fall within the scope of both kinds of liability.

Ultimately, one wonders whether the possibility of second order characterization was well perceived by the court. As the readers of this blog will know, it is common, and perfectly fine, to make one characterization for private international law purposes, and another for the purpose of applying substantive rules. In the context of the Brussels I bis Regulation, it is equally fine to characterize the claim for jurisdictional purposes pursuant to European concepts, and then to characterize the same claim differently for the purpose of applicable substantive rules.

The author of this post is Caterina Benini, a Phd student at the Catholic University of the Sacred Heart in Milan.

A Controversial but Topical Issue

In the credits market, the price of a contract (or that of the claims arising from a contract) is determined by the nominal value of the claims concerned and by the risks surrounding their enforcement, including the risks relating to the uncertainty that may exist as to the courts with jurisdiction to hear and enforce the contract or the claims concerned.

Ironically, uncertainty may be greater when the assigned contract includes a choice of court clause, as it is not clear whether, and subject to which conditions, such a clause may be binding upon the assignees.

The European Court of Justice considered the issue of the third-party effects of choice of court clauses in Tilly Russ, Coreck and Profit Investment.

However, it was only in Ryanair, a case decided on 18 November 2020, that the Court specifically analysed whether an assignee of a claim is bound by the choice of court clause included in the contract from which the assigned claim arose. The recent Court’s ruling raises a number of questions, some of which have already been pointed out by Matthias Lehmann in this blog.

One takeaway of Ryanair is that, in the absence of clear rules, the fate of choice of court agreements following the assignment of the contract which included them is a fertile ground for disputes. Instead of elaborating on the Court’s findings in Ryanair, I will focus on a recent ruling of the Italian Supreme Court (Corte di Cassazione), which addressed the consequences of an assignment of claim for the enforceability of a choice of court clause (Judgment No 7736/2020).

The Ruling of the Corte di Cassazione

The facts underlying the case decided by the Italian Supreme Court may be summarised as follows.

An Italian company (hereinafter, the manufacturer) and a Finnish company (the distributor) entered into various contracts. Each contract included a choice of court clause conferring exclusive jurisdiction upon the Tribunal of Torino. The Italian manufacturer assigned part of its claims under the contracts to a factoring company seated in Italy. Following the assignment, a dispute arose between the manufacturer (the assignor creditor) and the distributor (the assigned debtor). Upon an application by the former, the Tribunal of Torino ordered the Finnish distributor to pay a certain amount of money. The latter lodged an opposition, arguing that, as a result of the assignment of the claims, the Italian company was prevented from relying on the choice of court clause featured in the contracts.

Both the Tribunal of Torino and the Court of Appeal of Torino dismissed the move. The Finnish distributor brought the case before the Corte di Cassazione, which dismissed the appeal, ultimately upholding that Italian courts had jurisdiction to hear the case.

The Cassazione reached that conclusion on the ground that the effectiveness of a choice of court clause between the original parties to a contract giving rise to claims subsequently assigned should not be doubted. The Cassazione referred for this purpose to the case-law of the Court of Justice, noting that, according to Dansommer and Profit Investment, a choice of court agreement may be binding also upon the third party, thus impliedly submitting that this the assignment results in an extension of the subjective scope of the clause rather than a transferral of the same from one assignor to the assignee.

The Court added that the assignee, having taken over the position of the assignor vis-à-vis the assigned debtor, is bound by the choice of court agreement included in the contract giving rise the claim. This is because the position of the assigned debtor should remain unaltered also with regard to jurisdiction, if not otherwise provided by the assigned party himself and the assignee.

This Author’s Submission

If party autonomy is to be taken seriously, choice of court clauses, it is submitted, should be deemed to be subject to an independent regime, different from that governing the contract where the clause is featured.

This implies that, for the purposes of determining the fate of a choice of court clause following the assignment of the legal relationship to which the clause refers, or belongs, reference ought to be had to the substantive law applicable to the dispute resolution clause itself. It is on the basis of the latter law that one should assess whether the rights and obligations provided for under the choice of court clause passed on to the assignee.

No other approach, it is contended, would be consistent with Article 25(5) of the Brussels I bis Regulation. This provides that “[a]n agreement conferring jurisdiction which forms part of a contract shall be treated as an agreement independent of the other terms of the contract”, adding, in a separate subparagraph, that “[a]n agreement conferring jurisdiction which forms part of a contract shall be treated as an agreement independent of the other terms of the contract”.

Separability only for the Purposes of Validity vs. Separability Also for the Purposes of Transferability

The issue of the fate of a dispute resolution agreement following the circulation of the legal position to which the clause relates has been mainly discussed with respect to arbitration agreements. Although choice of court agreements cannot be equated to arbitration agreements, the terms of the problem roughly coincide.

Essentially, the discussion revolves around two opposite conceptions of the principle of severability.

The first interpretation posits that, while the dispute resolution clause is severable from the main contract for validity purposes, it should be considered as an integral part of the contract for transferability purposes. Hence, when the assignee becomes the holder of the rights and obligations that arise from the contract which includes the dispute resolution agreement, it becomes automatically bound by the latter as well.

The second approach views the severability principle as a mere façade of a broader principle, which requires to consider a dispute resolution agreement as a contract in its own right, independent in all aspects from the contract to which it refers. This means that, unless the parties agree otherwise, the dispute resolution agreement will not automatically circulate together with the contract as a result of the assignment.

Independence of Choice of Court Agreements as the Key Principle

Article 25(5) of the Brussels I bis Regulation fosters the second approach described above.

Indeed, if the principle of separability were to operate for validity purposes only, the EU legislator would have limited Article 25(5) to the first subparagraph, which enshrines the principle in its traditional meaning. The inclusion of a separate subparagraph specifying that a choice of court agreement shall be considered independently from the other terms of the contract suggests that, in the view of the legislator, the principle involves more than merely prescribing the survival of the dispute resolution clause in the event that the main contract is invalid. Rather, it is submitted, the whole of para 5 indicates that a choice of court clause should be considered, in all respects, to be independent from the agreement where it is featured.

The question then is: what does the independence of a choice of court clause precisely stand for?

Independence should not be taken as meaning that the choice of court agreement should be treated as something that is materially separate from the main contract.

Arguably, the independence of the clause means that the issues surrounding the clause rules are not (necessarily) to be decided in accordance with the rules that one would resort to for the purposes of deciding the same issues in respect of the main contract.

Such normative independence of choice of court clauses has already been recognized with respect to the formal validity, which has been consistently evaluated on the basis of the uniform material rules provided for by the Brussels Regime and not on the basis of the formal requirements governing the main contract.

The same approach should then be followed also for the fate of choice of court agreements. This means that the court seised of the matter should assess whether the assignee of the contract (or of the claims arising thereform) is bound by the choice of court agreement, based on the rules governing the transferability of the dispute resolution agreement itself.

If such solution were to be followed, it would entail a significant alignment with Castelletti, where the Court ruled that “the national court seised should be able readily to decide whether it has jurisdiction on the basis of the rules of the Convention, without having to consider the substance of the case” (para. 48). Indeed, the seised court may rule on its own jurisdiction without dwelling into the merits of the case only if the enforceability of the choice of court clause is subject to a different and autonomous from the one applicable to the substantive issues.

The Tilly Russ Case

The above analysis on the principle of separability of choice of court clauses can turn useful when the interpreter (as the Corte di Cassazione did) investigates whether the CJEU’s case-law developed in relation to the third-party effects of choice of court agreements can provide an answer to the issue of the fate of choice of court clauses.

In Tilly Russ, the Court of Justice ruled that the third party is bound by the jurisdiction clause incorporated in the main contract (a bill of lading in that case), which is valid as between the original parties, “in so far as a third party, by acquiring the bill of lading, has succeeded to the shipper’s rights and obligations under the relevant national law” (para. 24).

The meaning of this crucial passage of the Court’s reasoning is unclear. One may wonder whether the shipper’s rights and obligations in which the third party succeeds are those provided for under the main contract or the dispute resolution clause. The aspect has since never been clarified by the Court, although the Court did rely on the said passage in Coreck and Profit Investment.

According to the majority of scholars, the rights and obligations to which the Court referred are those arising from the main contract. This entails that, if the third party succeeds to the assignor’s rights and obligations under the main contract in accordance with the law applicable to the assignment, the third party is automatically bound by the choice of court agreement included in the main contract.

This conclusion contradicts the independence of choice of court agreements.

Independence requires that issues relating to a choice of court clause be solved on the basis of the rules governing the dispute resolution agreement itself, regardless of the rules governing the main contract. The vicissitudes of the main contract, including the assignment of the claims arising thereform, are not relevant per se to the dispute resolution clause.

In light of this, the passage in Tilly Russ recalled above should be interpreted as requiring the seised court to determine whether the third party, simultaneously or after entering into the main contract, “has succeeded to the shipper [assignor]’s rights and obligations [provided for under the jurisdiction clause] under the relevant national law [applicable to the jurisdiction clause]”.

The Law Applicable to a Choice of Court Agreements under the Italian PIL Statute

Which law applies to a dispute resolution clause?

Courts sitting in a Member State cannot rely on the Rome I Regulation, given that choice of court agreements are excluded from the scope of application of the Regulation under Article 1(2)(e). Accordingly, regard should be had to domestic conflict of laws rules.

In a case such as the one discussed by the Corte di Cassazione in the ruling mentioned above, the relevant provision would arguably be Article 57 of the Italian Statute of Private International Law. The rule, drawn up in 1995 (and never amended since) extends the operation of the 1980 Rome Convention on the law applicable to contractual obligations (the predecessor of the Rome I Regulation) to any contract, including those excluded from the scope of the Convention itself.

Assuming that the reference to the Convention should be read today as a reference to the Rome I Regulation, an Italian court would – in the absence of a choice of law – rely on Article 4(4) of the Rome I Regulation, and apply the law of the country with which the choice of court agreement is most closely connected.

The PAX Moot is a specialised moot court competition dedicated to students interested in Private International Law.

The 2021 Round of the competition is named after Arthur von Mehren, a renowned scholar of international procedure law across the Atlantic, for the 15th anniversary of his passing away.

This Round of the competition will focus on Transnational Law and Private International Law issues and will require participants to apply and handle the complexities and nuances of how international conventions and regulations interact with each other in the context of globalisation.

The case is grounded in the present challenging global events (COVID-19 virus) and involve the application of the new 2019 Hague Judgments Convention.

The competition comprises a written round and an oral round for the students. The teams will be required to address matters of jurisdiction, applicable law and parallel actions.

More information about the competition and its timetable are available here and here.

The post below was written by Adrian Briggs QC, who is Professor of Private International Law at the University of Oxford. It is the second contribution to the EAPIL online symposium on the ruling of the Court of Justice in the case of Wikingerhof v. Booking (the first one, by Matthias Lehmann, appeared earlier today and can be found here).

Other contributions will follow in the coming days. Readers are encouraged to share their views by making comments to the posts. Those wishing to submit longer contributions for publication are invited to get in touch with the managing editor of the blog, Pietro Franzina, at pietro.franzina@unicatt.it.

The late, great, F A Mann was sometime heard to refer, in a wry way which one could never quite interpret, to ‘common law pragmatism’. It has served us well; and it provides a vantage point for an assessment of the decision in C-59/19 Wikingerhof GmbH & Co KG v Booking.com BV EU:C:2020:950. Those looking for theory will, no doubt, find it elsewhere. The observations sketched out below simply seek to explain why the decision of the Grand Chamber is, as a matter of practical law, a disaster.

Where a claim is raised between parties who have chosen to place themselves within the ties of a voluntary relationship, and something goes wrong, the claim which results may be seen as an incident of that relationship which should be subject to jurisdictional rules designed for disputes arising within that relationship. Though in the Brussels/Lugano context this is seen and understood most clearly in the context of insurance, and consumer and employment contracts, it was also understood, with brilliant clarity by Darmon A-G in 189/87 Kalfelis. Spurning his advice, the Court in that case preferred to describe a virtual line between claims treated as contractual and those allocated to the special jurisdiction for tort and delict. This might have meant that a non-contractual claim could, in principle at least, be raised between contracting parties; and the seeds of trouble were thereby sown. A narrow question mesmerised the English, argued endlessly about what to do about claims based on unjust enrichment; but the deeper question was when a claim based on an obligation owed by one contracting party to another might be held, for the purpose of special jurisdiction, not to be a matter relating to a contract. A serviceable answer, and perhaps the only sensible answer, was eventually given by the decision in C-548/12 Brogsitter, which in material part observed that

It is apparent from the order for reference that the parties to the main proceedings are bound by a contract. However, the mere 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 5(1)(a) of Regulation No 44/2001. 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. That will a priori be the case 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. It is therefore for the referring court to determine whether the purpose of the claims brought by the applicant in the case in the main proceedings is to seek damages, the legal basis for which can reasonably be regarded as a breach of the rights and obligations set out in the contract which binds the parties in the main proceedings, which would make its taking into account indispensable in deciding the action. (italics added)

In other words, if the substance of the complaint could be said to have broken the contract to which the parties had bound themselves, special jurisdiction in the matter was contractual. It was a clear rule even though, as it now seems, the casual, justificatory, reference to the contract as indispensable gave dissenters something to make mischief with. In the meantime, the Court in C-47/14 Holterman simply copied this part of Brogsitter into a judgment principally concerned to maintain the integrity of Section 5 of Title/Chapter II. As well it might: the opportunity for an unscrupulous employer to strip the employee of the protection provided to him by accusing him of being a tortfeasor/thief rather than a contract-breaker, all the while denying that the employment contract needed to be referred to for anything other than data, was plain and obvious and quite, quite wrong. At this point we might have hoped for a period of stability; it was not to be. An unduly judgmental Opinion in C-603/17 Bosworth seemed unhappy with the idea that powerful office holders accused of fraud could derive any benefit from Section 5, but the idea that an employee might be deprived of his shield by a bare accusation of fraud was not underwritten by the Court which otherwise left the issue well alone.

But after another regrettable Opinion, and the calamitous judgment which this time swallowed it whole, the clear rule in Brogsitter, and the foundation of Kalfelis, has been stood on its head. It now appears to be the law that if the complaint may be framed or pleaded as a tort, it may by this means be excluded from the special jurisdiction rule for matters relating to a contract. According to the Court in C-59/19 Wickingerhof (and lightly editing the judgment for ease of reading):

Where the applicant relies on rules of liability in tort, delict or quasi-delict, namely breach of an obligation imposed by law, and where it does not appear indispensable to examine the content of the contract concluded with the defendant in order to assess whether the conduct of which the latter is accused is lawful or unlawful, since that obligation applies to the defendant independently of that contract, the cause of the action is a matter relating to tort, delict or quasi-delict. Wikingerhof relies on an infringement of German competition law, which lays down a general prohibition of abuse of a dominant position, independently of any contract or other voluntary commitment. Specifically, Wikingerhof takes the view that it had no choice but to conclude the contract at issue and to suffer the effect of subsequent amendments to Booking.com’s general terms and conditions by reason of the latter’s strong position on the relevant market, even though certain of Booking.com’s practices are unfair. Thus, the legal issue at the heart of the case in the main proceedings is whether Booking.com committed an abuse of a dominant position within the meaning of German competition law. As the Advocate General stated in points 122 and 123 of his Opinion, in order to determine whether the practices complained of against Booking.com are lawful or unlawful in the light of that law, it is not indispensable to interpret the contract between the parties to the main proceedings, such interpretation being necessary, at most, in order to establish that those practices actually occur.

Those who look to the jurisprudence of the Court for answers rather than distracted theorising will rightly despair at this bouleversement. Even if one leaves aside the damage which this new approach would do were it allowed to infect Sections 3, 4 and 5 of Title/Chapter II, how is it supposed to work in common or garden cases of civil liability in which – as in Brogsitter – the claim may plausibly be pleaded by reference to contractual as well as by other-than-contractual duties ? From an English perspective, a number of cases come quickly to mind. Consider (1) the electrician who rewires a piece of equipment consigned to him for repair so negligently that it electrocutes me when I plug it in; (2) the banker, who provides a credit reference on a party with whom I am proposing to deal, who has not checked his records and so gives me bad advice; (3) the consultant who works with me to develop a new commercial opportunity but who purloins my confidential information to exploit it on his own account and at my expense; (4) the solicitor who abstracts funds which he held on my account; (5) the Uber driver who injures his passenger when he jumps a red light; (6) the doctor in private practice who molests his patient when she is on the examination table; (7) the fraudster who by deceit induces another to enter into a contract and that other, rather than rescind, sues for damages which have the same economic effect as rescission would have; (8) the person who by negligent misrepresentation induces another to enter a contract, with the same consequences as in (7); (9) the individual who by duress, or the unconscionable exercise of undue influence, causes the victim to conclude a contract with him or with another; and (10) any defendant who pleads in defence to a claim framed in tort that the parties made a contractual promise that the claim would not be brought. How many of these complaints are matters not relating to a contract ?

It might be said that in each case the wrong done was committed by a person who, in doing what he did or failed to do, broke the contract to which he had bound himself. It may also be said that (1) if my son had been the first to use the equipment he would be entitled to complain of the electrician’s negligence; (2) that if the applicant had not paid for the credit reference he would still be entitled to sue the banker for breach of the duty of care; (3) the misuse of confidential information is an equitable wrong, no matter how one comes by it; (4) fraud is fraud and theft is theft and though employment is the context it is not the cause of action; cases (5) and (6) speak for themselves; as to (7) and (8), the synergy of contract, tort, and equity as a means of dealing with pre-contractual misrepresentation means that they cannot now be pulled apart; in (9) the contract will be voidable, with an alternative claim for compensation being only doubtful; and (10) would appear to be the tip of an iceberg, for it happens all over the place. Are we now supposed to say that none of these falls within the special jurisdiction for matters relating to a contract because the duties owed and broken by the defendant arise from the general law and the contractual setting is no more than that ? That the contract is the stage but not the play ? Or is the answer – surely worse – that some do, or – surely worst – that it all depends on how the self-serving claimant chooses to plead out his claim ? This last possibility would be surprising. The Court’s jurisprudence on the place where financial loss occurs (C-375/13 Kolassa, C-12/15 Universal Music, C-304/17 Löber, C-343/19 Volkswagen, among others) has been haunted by the fear, slightly unreal, that if it is routinely held to occur at the place of the bank account out of which payment is made, a claimant, possessed of several bank accounts and uncannily impressive foresight, might pave the way to a favourable special jurisdiction. It now seems that the Court has allowed itself to be lured into the very trap it had seemed to be so concerned to avoid, or – perhaps – into an even bigger one.

One turns to examine the proposition that it is different if it is ‘indispensable’ to look to the contract. It is hard to see that this has any sensible meaning. Contracts contain all sorts of things in addition to the express promises each side makes to the other. They may make provision for the implication of terms. They may try to prevent the implication of terms: entire agreement clauses, no oral modification clauses, and so on. They may define performance obligations directly, or by the subtle chiaroscuro of express promise and exclusion clause: if liability for X is wholly excluded, there can hardly be said to be a duty to do X in the first place. They may limit the liability which would otherwise arise, or restrict the circumstances in which, or grounds upon which, a complaint may be made. They may incorporate terms from another instrument, or exclude certain statutory effects which might otherwise apply. They may provide for acts to be permitted if payment is made, such as the early termination of an agency. They may provide that a claim will not be brought in tort but that, for example, a claimant will accept a payment by way of compensation or compromise: in short, they may do all manner of things. The answer to the question whether it is indispensable to look into the contract is, surely, that it is always necessary: the contract may not add to the facts and matters in dispute, but save in the cases in which it is admitted before the writ is served, this cannot be known until one has looked. Contracts, and their interpretation, can be very complex and it is absurd to say that there is no need to look into the contract before one has looked into it. Stand, if only for an unhappy moment, in the shoes of the lawyer who advised the client that she had a case in tort and who, when asked whether he had looked into the contract to see what it might have said, says that he didn’t think there was any need to.

Granted, in Wikingerhof, it would have been a surprise to find an express term excluding any liability for abuse by Booking.com of its dominant position in the market. It may have felt odd to suggest that it was advisable, still less indispensable, to read through the contract to check; but one never knows, and this provides no basis for sound conclusion; and in any event, abuse of a dominant position is only a particular version of economic duress or undue influence, both of which lie right in the middle of the contractual mainstream. If Wikingerhof GmbH had been asked whether it considered Booking.com to have or not to have broken the contract, or unlawfully coerced the surrender or contractual rights, it could only have answered in the affirmative, albeit that it may have preferred not to say so. The defendant had, by the very conduct complained of, broken or wrongfully interfered with its contract with the claimant, yet the matter was not one relating to a contract. No matter how hard one rubs one’s eyes, this still looks wrong.

It may be asked whether the unspoken aim of the judgment in Wikingerhof was to assist the German claimant by finding a way for it to sue in the place in which it felt most comfortable; to ‘protect’ the weaker party, the vulnerable victim of a dominant abuser, as it were. One hopes that no such thought was present in the curial mind, for accusations of abuse, of fraud, are only ever accusations, and findings of abuse were many months away. And there is no little irony in the fact that the decision actually improves the jurisdictional position of the company which is in a position to abuse its dominant position. When it gets wind of the fact that a victim is about to launch proceedings, the dominant abuser will be able to rely on Wikingerhof and on C-133/11 Folien Fischer to bring proceedings, in the place of the event giving rise to the alleged loss, for a declaration that it committed no wrong. Worse, unscrupulous employers (we have no need to name names), already immune to the discipline of anti-suit injunctions, will have a new spring in their step. It is not easy to understand why this should be the way the law works.

The question framed by the judgment in Brogsitter was easy to understand and to answer: has anyone teaching the subject ever found that his or her students struggled with it ? Has anyone advising a client needed to spend anxious hours in wrestling with it ? One hopes not. What is proposed to replace it – has replaced it, if we have to accept that the damage has been done – will require us to go back over the vast range of overlapping claims and unclaims, of complaints which are, as a matter of analysis, ‘not only a simple breach of contract, but also of another obligation’ cases, and develop the science which will tell is when reference to a contract is ‘indispensable’ in order to settle the question of special jurisdiction. Brexit, Covid, and now Wikingerhof. What a wretched year. We are only one horse short of an Apocalypse.

The EAPIL blog hosts an online symposium on the ruling of the Court of Justice in the case of Wikingerhof v. Booking.com. The first contribution to the symposium, which is found below, is by Matthias Lehmann, who is Professor of Private International Law at the University of Vienna (as well as an editor of this blog).

Other contributions will follow (the next one will be out later today). Readers are encouraged to share their views by making comments to the posts. Those wishing to submit longer contributions for publication are invited to get in touch with the managing editor of the blog, Pietro Franzina, at pietro.franzina@unicatt.it.

In its judgment dated 24 November 2020 in Wikingerhof, the CJEU has recalibrated the relation between the heads of jurisdiction for contracts (Article 7(1) Brussels I bis Regulation) and for torts / delicts (Article 7(2)).

Facts

A hotel sued booking.com in Germany for abuse of a dominant position. The hotel alleged having been strong-armed by the booking platform into an unfavourable contract.

Booking.com denied the German court’s jurisdiction over the claim, citing a choice-of-forum clause in the contract in favour of a Dutch court. This clause was however held to be invalid by the referring German Federal Court.

If the case fell under the head of jurisdiction for torts/delicts in Art. 7(2) Brussels Ibis, German courts could have jurisdiction given that the harmful event could be said to have occurred in Germany. In contrast, if the case concerned a contractual claim in the sense of Art. 7(1) Brussels Ibis, the jurisdiction of the German courts would have been more doubtful, as it was not sure that the contract between Wikingerhof and booking.com was to be performed in Germany.

Issue

The legal issue was therefore whether an alleged abuse of a dominant position that consists in forcing another person into an unfavorable contract is tortious/delictual or contractual in nature.

Holding and Rationale

The CJEU held the claim concerned a tort/delict matter. It cites its previous case law on the relation between the jurisdiction for contractual and tort claims, in particular the Kalfelis and the Brogistter case. In Kalfelis, the court had ruled that both heads of jurisdiction were mutually exclusive. In Brogsitter, the CJEU had held that a case is contractual in nature “where the interpretation of the contract … is indispensable to establish the lawful or, on the contrary, unlawful nature of the conduct complained of” (Brogsitter, para 25).

According to the CJEU in Wikingerhof, the interpretation of the contract was not indispensable to establish the unlawful nature of booking.com’s behaviour. True, the abuse of a dominant position resulted from the unfavourable clauses of the contract. Yet the CJEU highlights that the interpretation of the clauses was necessary only to establish the existence of an abuse. In other words, the contract is needed as factual evidence, not as a legal standard. The Advocate General basically states the same when he calls the interpretation of the contract a “preliminary question” (Wikingerhof, para 124).

Assessment

After the CJEU judgment in Brogsitter, one could have feared that the head of jurisdiction for contracts would be dominated by that for torts. The new decision in Wikingerhof reestablishes the equilibrium between the two. It clarifies that Article 7(2) Brussels I bis applies in cases of abuse of a dominant position, even those made by the conclusion of an unfavourable contract.

Indeed, violations of competition law are typical torts. It would be ill-advised to force the victim of such uncompetitive behaviour to sue at the place of performance foreseen in the contract because it is precisely this contract about which the victim complaints. The fact that the victim only pleads an abuse does not mean that one could disregard its complaint: For the purpose of establishing jurisdiction, the standard of proof has never been the same as that which applies for the merits of the case. It is for the court at the alleged place of abuse to find out whether the complaint is justified or not.

The new judgment in Wikingerhof does not break with the Brogsitter ruling, but is actually compatible with the latter. According to Brogsitter, a case is contractual in nature where the contractual provisions determine the outcome of the claim. Wikingerhof adds that this is only true where the contractual provisions are used as a normative standard, and not as factual proof of competitive misbehaviour. The delineation may be difficult to understand, but it is nonetheless necessary and reasonable.

The Italian publisher ESI has recently published a book titled EU Regulations 650/2012, 1103 and 1104/2016: Cross-Border Families, International Successions, Mediation Issues and New Financial Assets, edited by Sara Landini (University of Florence).

The papers, written in English, Italian, Portuguese and Spanish, address various issues relating to the Succession Regulation, the Matrimonial Property Regimes Regulation and the Regulation on the Property Consequences of Registered Partnership, notably as regards agreements between spouses and partners, agreements as to succession, forced heirship, succession to cryptocurrencies and mediation in cross-border succession and marital property cases.

The purpose of the book is to disseminate the results of the Goineu Plus project (Integration, migration, transnational relationships. Governing inheritance statutes after the entry into force of EU succession regulation), funded by the European Union.

The table of contents of the book can be found here. For more information, see here.

December 2020 will be quiet at the Court (regarding private international law cases).

The judgment in C-774/19 Personal Exchange International will be delivered (6th Chamber: Bay Larsen, Safjan, Jääskinen; no opinion, no hearing) on Thursday 10. The question was referred on September 5, 2019, by the Vrhovno sodišče Republike Slovenije (Slovenia):

Must Article 15(1) of Regulation No 44/2001 be interpreted as meaning that an online poker playing contract, concluded remotely over the internet by an individual with a foreign operator of online games and subject to that operator’s general terms and conditions, can also be classified as a contract concluded by a consumer for a purpose which can be regarded as being outside his trade or profession, where that individual has, for several years, lived on the income thus obtained or the winnings from playing poker, even though he has no formal registration for that type of activity and in any event does not offer that activity to third parties on the market as a paid service?

On Thursday 17, AG Campos Sánchez-Bordona’s opinion on C-709/19 Vereniging van Effectenbezitters, will be published. The Hoge Raad (the Netherlands) asked the Court to interpret once more Article 7(2) Brussels I bis in a case of patrimonial damage. The preliminary reference was lodged September 25, 2019; a hearing had been scheduled for last September, rescheduled, and eventually replaced by questions for written answer.

1.(a)  Should Article 7(2) of [the Brussels Ia Regulation] be interpreted as meaning that the direct occurrence of purely financial damage to an investment account in the Netherlands or to an investment account of a bank and/or investment firm established in the Netherlands, damage which is the result of investment decisions influenced by globally distributed but incorrect, incomplete and misleading information from an international listed company, constitutes a sufficient connecting factor for the international jurisdiction of the Netherlands courts by virtue of the location of the occurrence of the damage (‘Erfolgsort’)?

(b)    If not, are additional circumstances required to justify the jurisdiction of the Netherlands courts and what are those circumstances? Are the additional circumstances referred to [in paragraph 7 below] sufficient to found the jurisdiction of the Netherlands courts?

2. Would the answer to Question 1 be different in the case of a claim brought under Article 3:305a of the BW (Burgerlijk Wetboek: Netherlands Civil Code) by an association the purpose of which is to defend, in its own right, the collective interests of investors who have suffered damage as referred to in Question 1, which means, among other things, that neither the places of domicile of the aforementioned investors, nor the special circumstances of individual purchase transactions or of individual decisions not to sell shares which were already held, have been established?

3. If courts in the Netherlands have jurisdiction on the basis of Article 7(2) of the Brussels Ia Regulation to hear the claim brought under Article 3:305a of the BW, do those courts then, on the basis of Article 7(2) of the Brussels Ia Regulation, also have international and internal territorial jurisdiction to hear all subsequent individual claims for compensation brought by investors who have suffered damage as referred to in Question 1?

4. If courts in the Netherlands as referred to in Question 3 above have international, but not internal, territorial jurisdiction to hear all individual claims for compensation brought by investors who have suffered damage as referred to in Question 1, will the internal territorial jurisdiction be determined on the basis of the place of domicile of the misled investor, the place of establishment of the bank in which that investor holds his or her personal bank account or the place of establishment of the bank in which the investment account is held, or on the basis of some other connecting factor?

The hearing in C-30/20 Volvo e.a., also on Article 7(2) of the Brussels I bis Regulation, will be held on the same day. The preliminary reference, from a commercial court in Madrid (Spain), was lodged on January 22, 2020. It will be decided by the 1st Chamber (Bonichot, Bay Larsen, Toader, Safjan, Jääskinen, with M. Safjian as reporting judge), with the opinion of the French AG, M. Richard de la Tour. At first sight, the question looks like a simple one:

Should Article 7(2) of [the Brussels I bis Regulation] be interpreted as establishing only the international jurisdiction of the courts of the Member State for the aforesaid place, meaning that the national court with territorial jurisdiction within that State is to be determined by reference to domestic rules of procedure, or should it be interpreted as a combined rule which, therefore, directly determines both international jurisdiction and national territorial jurisdiction, without any need to refer to domestic regulation?

That the reference has been allocated to a chamber of five judges, together with the fact that the AG’s view has been requested, certainly means that the decision will go beyond choosing one or the other alternative interpretations.

Vanessa Barbé (University of Valenciennes) and Christina Koumpli (University of Avignon) are inviting abstracts on The Impact of Brexit on Fundamental Rights and Freedoms for a Virtual Symposium on 27 and 28 May 2021, followed by a publication funded by the Centre for Interdisciplinary Research in Social Sciences and Humanities (CRISS, University of Valenciennes).

Some aspects of the call for papers dealing with rights resulting from the European Civil Justice and the rights of British litigants may be of particular interest for the readers of our blog.

Brexit is a political and legal earthquake with multiple consequences: on the European institutions, on the Member States and their budgets, on international trade, on British administrations and companies, but also on individuals, British or European nationals. The exit of the United Kingdom from the European Union has got a major impact on the fundamental rights and freedoms of individuals. The aim of this symposium is to identify the rights and freedoms which are called into question and to understand the potential and proven upheavals affecting their protection.

The impact of Brexit on rights and freedoms of European originis obvious: theoretically, the United Kingdom isn’t supposed to respect European citizens’ rights, workers’ rights, social rights, European environmental rights…. any longer. Admittedly, the country was already benefiting from an adaptation of its European obligations thanks to the policy selection mechanism (opt-out). But still the United Kingdom was a full member of the Union, applying the free movement of goods, persons, services and capital, and taking part in the Union’s founding policies on the environment or education, for instance. To some extent, the UK has pledged not to wipe out all the rights and freedoms formerly created, but their upholding cannot be total, as this would mean denying Brexit itself. Therefore, it would seem that several categories of rights and freedoms may be identified: those that risk to disappear completely (in relation to citizenship, for example), those that could be maintained because they are protected by other sources (international sources, regional sources such as the European Convention on Human Rights, or British legal sources such as common law), and those the future of which is uncertain, but which might be preserved by virtue of a ‘ratchet effect’ or of the principle of non-regression of rights.

The impact of Brexit on each of the four freedoms of movement might be considered, as well as on the categories of rights resulting from the implementation of the Union’s major policies in the fields of labour law, environmental law, health, education, justice and security in particular. Proposals are expected on the right to security related to the European arrest warrant, the right to privacy with regard to the protection of personal data, the right to non-discrimination in labour law, the right to a healthy environment, the right to asylum, etc… Cross-cutting categories of rights may be identified too, such as the rights of litigants, which can be considered by studying the remedies available to British litigants before domestic courts and European institutions after Brexit. The application of the Charter of Fundamental Rights in the United Kingdom’s legal order after Brexit is also a potential source of litigation, as the Court of Justice of the Union has recognised its applicability to a certain extent despite the opt-out declaration issued by the country.

In addition to rights and freedoms of European origin, British rights and freedoms are going to be affected too. Brexit, as a victory for the opponents of Europe in the broadest sense, might be, to some extent, a new opportunity to challenge the Human Rights Act 1998, the Act transposing the European Convention on Human Rights into British law. The future of that Act is uncertain after Brexit, since its repeal is being thought about, and the United Kingdom’s participation in the Council of Europe is being deeply questioned as well.

The political rights of the British citizens are also at the heart of the exit process. It took more than three and a half years after the referendum of June 23rd, 2016 for Brexit to be legally implemented by the British Parliament. Several ad hoc laws have been passed to delimit the powers of the Government and Parliament. The Supreme Court has been asked twice to rule on constitutional disputes arising from clashes between public authorities, and has been able consequently to assert itself as the third constitutional actor in Brexit. The powers and role of the British citizen/litigant may be usefully studied.

Finally, the territorial structure of the Kingdom is under threat. The border between Northern Ireland and the Republic of Ireland is at the heart of tensions between Europe and the United Kingdom, and with it, the question of the protection of the rights and freedoms of nationals of both States. In the same way, due to Scotland’s opposition to the exit procedure, the issue of the region’s independence is once again on the agenda. The Scottish First Minister Nicola Sturgeon is strongly advocating a new referendum on the independence of the region, which Boris Johnson formally ruled out in a letter of January 14th, 2020, since any (national or local) referendum must be authorised by Westminster. Furthermore, the political rights of the Scots, and their other constitutional rights could be disrupted as well, if the relationship between the region and the rest of the Kingdom was changed.

In conclusion, the symposium aims at exploring the multiple legal consequences, for the British and for European nationals, arising from the exit of the United Kingdom from the European Union.

Proposals for contribution (qualities of the author and short CV, summary of the communication of about one page) may relate to European law, British law, but also Private/ Public International law or the national laws of the Member States of the Union, as far as their relationships with the United Kingdom are considered.

The deadline for submissions is 15 January 2021.

Proposals are expected at the following address: Vanessa.Barbe@uphf.fr.

On 2 December 2020, following a lengthy procedure, the Recast Service Regulation (Regulation (EU) 2020/1784 of 25 November 2020 on the service in the Member States of judicial and extrajudicial documents in civil or commercial matters) was finally published in the Official Journal of the European Union (the Position of the Council at first reading in view of the adoption of the Recast had appeared a few days earlier: see it here).

The contents of the Regulation were known, in substance, since an agreement was reached, in June 2020, between the Council and the European Parliament as a result of the trilogue consultations.

Previous posts in this blog illustrated the envisaged innovations and the challenges posed by the recast, and discussed some of the issues raised by the current rules.

The Recast will apply from 1 July 2022.

A book titled International Commercial Arbitration in the European Union, by Chukwudi Ojiegbe, has recently been published by Edward Elgar.

The blurb reads as follows:

This illuminating book contributes to knowledge on the impact of Brexit on international commercial arbitration in the EU. Entering the fray at a critical watershed in the EU’s history, Chukwudi Ojiegbe turns to the interaction of court litigation and international commercial arbitration, offering crucial insights into the future of EU law in these fields. Ojiegbe reviews a plethora of key aspects of the law that will encounter the aftermath Brexit, focusing on the implications of the mutual trust principle and the consequences for the EU exclusive competence in aspects of international commercial arbitration. He explores the principles of anti-suit injunction and other mechanisms that may be deployed by national courts and arbitral tribunals to prevent parallel court and arbitration proceedings. Advancing academic debate on the EU arbitration/litigation interface, this book suggests innovative solutions to alleviate this longstanding and seemingly intractable issue. Arriving at a time of legal uncertainty, this book offers crucial guidance for policymakers and lawyers dealing with the interaction of court litigation and international commercial arbitration in the EU, as well as academics and researchers studying contemporary EU and commercial law.

More information available here.

Following a lecture delivered in September 2020 at the Max Planck Institute for Comparative and Private International Law in Hamburg, Giesela Rühl (Humboldt University of Berlin) published a paper on SSRN – Towards a German Supply Chain Act? Comments from a Choice of Law and Comparative Perspective – analysing the project for a legislative proposal expected to shape Germany’s legislation in the field of corporate responsibility.

The project for a Supply Chain Act (Lieferkettengesetz) comes as a response to a second national survey published in July which analysed the implementation of the National Action Plan on Business and Human Rights (NAP). According to the results presented by the Federal Labour Minister Hubertus Heil and Federal International Development Minister Gerd Müller only a few companies are voluntarily taking responsibility to ensure that human rights are respected in their supply chain. Consequently, the coalition considered that the idea of a national supply chain law needs to be pursued. A hearing by the Committee for Human Rights and Humanitarian Aid of the German Bundestag that took place on 28 October 2020 under the leadership of Gyde Jensen (FDP) showed that many experts in Germany are in favour of a Supply Chain Law. Experts from business, politics and society predominantly supported the federal government’s plan for such a law, which is intended to improve compliance with human rights and environmental standards in the global environment.

As the subject remains a hot topic for the German legislator and it will have consequences beyond the German territory, Prof. Rühl’s addresses some of these relevant aspects from a private international law and comparative perspective. The abstract of the paper reads as follow:

The protection of human rights in global supply chains has become one of the most hotly debated issues in public and private (international) law. In a number of countries, including the United Kingdom, France and the Netherlands, these debates have led to the introduction of domestic human rights legislation. In other countries reform plans are under way. In Germany, for example, the federal government recently announced plans to adopt a German Supply Chain Act, which, if passed as suggested, will introduce both mandatory human rights due diligence obligations and mandatory corporate liability pro-visions. The following article takes this announcement as an opportunity to look at the idea of a German Supply Chain Act from both a choice of law and from a comparative perspective. It argues that that any such Act will necessarily be limited in both its spatial and in its substantive reach and, therefore, recommends that Germany refrains from passing national legislation – and supports the adoption of a European instrument instead.

The author of this post is Franz Kaps, Lawyer at DL Piper, Frankfurt am Main.

To stop the spread of the COVID-19 (Coronavirus) pandemic governments closed ports and “non-essential businesses”, restricted travel and imposed “lockdowns” or “stay-at-home” orders. In cases where the COVID-19 pandemic or government measures disrupt commercial contracts, it is necessary to carefully analyze the state of affairs to determine the appropriate remedy. A considerable number of articles have already been written on contracts affected by the COVID-19 pandemic, and now it is time to summarize the legal situation for commercial contracts in the most important jurisdictions in a nutshell. This post therefore presents remedies for commercial contracts affected by COVID-19, under the laws of the countries whose systems are most commonly chosen to be applied to commercial contracts, and the CISG.

UK, Hong Kong, Singapore Force Majeure

Force majeure is principally a matter of contract law in the common law jurisdictions England, Hong Kong and Singapore. Whether a force majeure clause is applicable in a particular situation and its consequences depends primarily on the wording of the force majeure clause. A clause modelled, for example, on the 2020 ICC force majeure clause (long form), presumes that an epidemic is a force majeure event; pandemics such as COVID-19 are not expressly mentioned, therefore it will be for the arbitral tribunals and courts to interpret the term “epidemic” under no. 3 (e) ICC to encompass pandemics.

The burden of proof is on the party invoking the force majeure clause as defense. Such a party has to demonstrate that a force majeure event occurred and that it had the stipulated effect on the contractual performance. If a party invokes a force majeure clause in a commercial contract, it releases the party from its contractual obligations when circumstances beyond its control have prevented, hindered or delayed its performance.

In case the COVID-19 pandemic falls within the scope of the force majeure clause, parties should carefully examine whether there are other relevant contractual terms affecting the application of the clause – in particular, whether there are any requirements to notify the other party before invoking the clause.

Frustration

Besides force majeure clauses, the main common law doctrine with potential relevance to the discharge of obligations in the light of unforeseen events – like the COVID-19 pandemic – is frustration. According to it, a contract may be discharged upon the occurrence of an unforeseeable event that either renders the contractual obligation impossible or radically changes the basis upon which the contract was reached. However, it should be noted that the doctrine of frustration has a very limited scope.

Germany Impossibility

Pursuant to Section 275 German Civil Code (BGB) a party is not required to perform its obligations to the extent that performance is impossible. Section 275 German Civil Code applies not only if performance of the obligation is technically or legally impossible, but also in cases where performance is still technically and legally possible, but would require expenses and efforts which, considering the subject matter of the obligation and the requirements of good faith, would be grossly disproportionate to the creditor’s interest of performance. In addition, Section 275 German Civil Code governs temporary impediments, i. e. a claim for performance is excluded as long as performance is impossible. However, German courts respect the legal principle pacta sunt servanda and hence apply Section 275 German Civil Code narrowly, in order not to undermine the agreed contractual obligations.

Frustration of Purpose

The doctrine of “frustration of purpose” (German Störung der Geschäftsgrundlage) can be invoked in cases affected by the COVID-19 pandemic. Frustration of purpose under Section 313 German Civil Code will apply where the balance between performance and counter-performance of a contract is significantly changed in a way that was not foreseeable by the parties when the contract was concluded. Such a “frustrated contract” entitles the disadvantaged party to request the amendment of the contract. If an amendment of the contract is not possible or unreasonable, the disadvantaged party may rescind or terminate the contract. According to case law the principle of “contractual loyalty” requires a strict interpretation of Section 313 German Civil Code.

France Force Majeure

Article 1218 French Civil Code addresses the concept of force majeure. According to its Article 1218 , the debtor’s performance is prevented by a force majeure event if three cumulative criteria are met:

1. The event must be beyond the control of the debtor;
2. It must be an event which could not reasonably have been foreseen at the time of the conclusion of the contract; and
3. The effects of the event could not be avoided by appropriate measures.

The legal consequence of Article 1218 French Civil Code is that if performance of the obligation is temporarily prevented, it is suspended unless the delay justifies termination of the contract. In the event of permanent prevention, the contract is terminated by operation of law and the parties are discharged from their obligations.

Hardship

The recently introduced Article 1195 French Civil Code requires renegotiation of a contract if circumstances which were unforeseeable at the time of conclusion of the contract render performance excessively onerous for a party which had not accepted to bear that risk. If renegotiations fail, the parties may agree to terminate the contract, or request a court to revise or terminate the contract.

Switzerland

Swiss law has no statutory provision for force majeure events. In the absence of a force majeure clause in a contract, the applicable legal regime depends on whether the performance of the contract is impossible.

Pursuant to Article 119, 62 Swiss Code of Obligations, the impossibility to perform a contract – due to circumstances not attributable to the debtor – releases both parties from their obligations to perform and leads to the unwinding of the contract according to the rules of unjust enrichment.

In case the impossibility to perform the obligation lasts only for a limited time, the default provisions of Article 107 to 109 Swiss Code of Obligations apply. They provide that if one party is in default, the other party may set an appropriate time limit for the performance. If no performance is rendered during such a time limit, the other party may terminate the contract.

When the performance of a contract is not entirely impossible, but has become extremely onerous, a party may rely on the legal doctrine clausula rebus sic stantibus. It must be a situation which is not only extremely onerous but was also unforeseeable when the contract was concluded. In such circumstances, the parties may agree to amend or terminate the contract. Should one party insist that the contract remains unchanged, the other party may refer the matter before a court. If the requirement of clausula rebus sic stantibus are fulfilled, the court may order an amendment or the termination of the contract.

United States

U.S. contract law is ordinarily a matter of state law. I will focus on New York law, as it is the most commonly chosen by commercial parties to govern their contracts.

Contractual Force Majeure Clauses

Force majeure clauses are contractual provisions that may excuse a party’s non-performance when circumstances beyond the control of a party prevent performance. New York courts have held that force majeure clauses are to be interpreted in a narrow sense and that performance under a contract is ordinarily excused only if the event preventing performance is explicitly mentioned in the force majeure clause.

Subsidiary Solutions

In the absence of a force majeure clause, the common law doctrines of impossibility, impracticability and “frustration of purpose” may excuse performance.

The doctrine of impossibility excuses a party’s performance only when the destruction of the subject matter of the contract or the means of performance makes performance objectively impossible. The impossibility must be produced by an unanticipated event that could not have been foreseen or guarded against in the contract. Impossibility is therefore a narrow legal doctrine.

The doctrine of impracticability is similar to the doctrine of impossibility, but it is more flexible in its application. According to the doctrine of impracticability, a failure to perform contractual obligations is excused, if a party’s performance is made impracticable without its fault by the occurrence of an event the non-occurrence of which was a basic assumption on which the contract was made. Courts have generally applied the doctrine of impracticability conservatively.

Frustration of purpose is a common law doctrine that excuses a party’s performance under a contract when an unforeseen event renders the contract “virtually worthless” to the affected party. Although a literal performance under the contract is still technically possible, the frustrated purpose must be so completely the basis of the contract that, as both parties understood, without it, the transaction would have made little sense. The threshold of the doctrine of frustration of purpose is high, because performance of the contract must be economically impossible.

United Nations Convention on Contracts for the International Sale of Goods (CISG)

The CISG is applicable to contracts for the sale of goods between parties who have their place of business in different states, if these states are contracting states or if the rules of private international law lead to the application of the law of a contracting state and the CISG was not expressly excluded in the contract.

Strict Liability

Contracts for the supply of goods under the CISG are governed by the strict liability of the debtor. It is therefore irrelevant for the liability of the debtor whether they are responsible for the improper performance or the non-performance of their contractual obligation.

Exemption of Liability

In order to mitigate the strict liability of the debtor, Article 79 CISG provides for an exemption from the debtor’s liability if the failure to perform any of their obligations is due to an impediment beyond their control. It is additionally required that they could not reasonably be expected to have taken the impediment into account at the time of conclusion of the contract or to have avoided or overcome the impediment or its consequences. Article 79 CISG is advantageous to the seller. If the non-performance of an obligation to deliver is based on a force majeure event, the seller is released from the obligation to perform the contract for the period of the impediment. Also, the seller is not obliged to pay damages, because the performance is prevented by the force majeure event. However, pursuant to Article 79 para. 4 CISG the seller must inform the buyer of the impediment and its effects on their ability to perform within a reasonable period of time after they have or should have become aware of the impediment. Otherwise, they are liable for damages resulting from such non-receipt. The burden of proof that a contractual obligation was not performed or was delayed as a result of the COVID-19 pandemic lies with the debtor.

International practice accepts epidemics as being beyond the debtor’s typical sphere of control. Consequently, the COVID-19 pandemic could constitute a minore ad maius an impediment beyond control according to Article 79 CISG. Whether the COVID-19 virus exempts debtors from their obligation to perform the commercial contract depends on the individual case, since it requires a causal link between the impediment and non-performance.

Takeaway

The impact the COVID-19 pandemic will have on the parties’ commercial contracts depends primary on the wording of their force majeure clause. In case of a force majeure event, the arbitral tribunals and the courts grant the terms of a commercial contract precedence over the applicable law. If a commercial contract does not contain a force majeure clause, or if does not cover pandemics, the applicable laws determine the available remedies. The remedies and requirements under the applicable law for commercial contracts affected by the COVID-19 pandemic differ. National laws have in common that legal doctrines which amend or terminate contractual agreements are narrowly construed. The underlying consideration is that arbitral tribunals and courts are only exceptionally authorized to “rewrite” the contractual obligations of the parties. It is therefore decisive whether the contractual provisions comprise a force majeure clause covering the COVID-19 pandemic. Against this backdrop parties should commercial evaluate – based on the facts of each case – their options to invoke a force majeure defense or to perform, amend, or terminate their commercial contracts.

In light of the high thresholds for a force majeure defense under the applicable law, it is essential to ensure legal certainty by including a force majeure clause in commercial contracts which clearly encompasses epidemics and pandemics. In particular, the party that would be affected by an epidemic or pandemic in the performance of its contractual obligations should assure that such events are expressly referred to in their force majeure clause, to ensure a balanced distribution of risks. Whether the situation is one of an epidemic or a pandemic should be determine by an objective criterion: a declaration by the World Health Organization would be useful to decide when the events under examination trigger the force majeure consequences.

Good starting point for future “tailor-made” force majeure clauses in commercial contracts is the balanced 2020 ICC force majeure proposal. Moreover, as in our globalized world, the next epidemic or pandemic will spread sooner or later, a lege artis force majeure clause must cover epidemics and pandemics.

The University of Lyon (EDIEC-CREDIP) hosted a webinar (in French) under the title Situations in Motion : Debate on the Method, now available for online viewing.

Jean-Sylvestre Bergé (University of Côte d’Azur and French University Institute, IUF) presented his research project on Situations in motion and the Law, soon to be published in Q1 2021 (Dalloz). The webinar was co-chaired by Ludovic Pailler (University of Lyon) and Cyril Nourissat (University of Lyon) and organised by Marie Brossard and Véronique Gervasoni.

More details here.

By a judgment of 18 November 2020 in the case Ryanair v DelayFix, the CJEU has ruled that an assignee is not bound to a jurisdiction clause in the contract from which the assigned claim arose. While the ruling concerned the compensation claim of a passenger for a cancelled flight, it is cast in very general terms. It will therefore have far-reaching repercussions for all other cases of assignment of individual claims.

Facts

DelayFix, formerly Passenger Right, is a collection agency for the defence of air passenger rights. It started legal proceedings against Ryanair in Warsaw on the basis of compensation rights assigned to it by a Polish passenger after a cancelled flight. Ryanair contested the Warsaw court’s jurisdiction, relying on a choice-of-forum clause in its general terms and conditions in favour of Irish courts.

In the course of the proceedings, the Regional Court Warsaw submitted to the CJEU the question whether the jurisdiction clause is binding under Art 25 of the Brussels I bis Regulation or whether it is invalid under the Unfair Terms Directive.

Legal Issues

The CJEU split the question in two different issues: (1) Is the collection agency bound by the jurisdiction clause contained in the airline’s standard terms under the Brussels I bis Regulation? (2) Is the jurisdiction clause in the airline’s standard terms unfair within the meaning of the Unfair Terms Directive?

Third-party Effects of Jurisdiction Clauses

With regard to the first question, the CJEU issued a resounding “NO”. It stated at para 46 that

a jurisdiction clause incorporated in the contract of carriage between a passenger and that airline cannot, in principle, be enforced by the latter against a collection agency to which the passenger has assigned the claim.

An exception would exist only where the collection agency is the successor to all the initial contracting party’s rights and obligations (para 47). A case in point is the take-over of a contract, which is however not to be confounded with an ordinary assignment. The CJEU left it for the referring court to determine whether this exception applied in the present case.

The holding was to some extent predictable from earlier case law, see in particular the CJEU judgment in CDC Hydrogen Peroxide or in Refcomp. In these cases, the CJEU had stressed the relative effect of jurisdiction clauses and the freedom to agree on the competent court. The court had ruled that a third party who did not agree to the jurisdiction clause was bound to the latter only if it had succeeded to the original contracting party’s rights and obligations.

Nevertheless, the CJEU case law had identified several situations in which a third party is bound as a legal successor to a jurisdiction clause to which it had not agreed. It was ruled that such a binding effect would exist where a jurisdiction clause is included in the articles of association of a company (see the CJEU judgment in Powell Duffryn), in the prospectus of a bond (see the CJEU judgment in Profit Investment) or in a bill of lading (see e.g. the CJEU judgments in Russ and Coreck).

The literature had assumed that a legal succession would also exist in the event of an assignment and that the jurisdiction clause would therefore also extend to an assignee of a claim (see e.g. Magnus in Magnus and Mankowski (eds) ECPIL Art. 25 Brussels Ibis Regulation para 161; Stadler in Musielak and Voit (eds) ZPO Art. 25 Brussels Ibis Regulation para 4a). The CJEU now takes the opposite position: The assignee of a claim is not bound to a jurisdiction clause in the contract from which or in the context of which the claim arises.

Negative Effects for Agreements on the Jurisdiction of EU Member State Courts

The ramifications of this ruling are significant. For the first time, the CJEU has held that an assignee is not bound by a choice-of-forum agreement between the assignor and the debtor. As a result, the binding effect of jurisdiction clauses will be weakened. It suffices for a creditor to assign a claim to avoid an unpleasant jurisdiction clause in a contract. This behaviour cannot be excluded by a contractual prohibition of assignment because the latter is not always allowed. The ruling thus opens up manifold possibilities to circumvent jurisdiction agreements.

In this context, it must be remembered that the CJEU judgment covers only agreements on the jurisdiction of a Member State court. Jurisdiction agreements in favour of courts of third countries, such as the UK or Switzerland, will be governed by national law, which often considers the assignee to be bound. Arbitration clauses, which are considered binding on the assignee under most national laws, will also remain untouched. In sum, the CJEU has done a great disservice to EU Member State courts. It has given an incentive to choose third state courts and arbitral tribunals in their stead.

Unfairness of Jurisdiction Clauses

With regard to the second question, the CJEU referred to the national court to assess whether the jurisdiction clause in favour of Irish courts was unfair to the Polish passenger. This is understandable given that the Directive needs national transposition and national courts are competent apply the transposing legislation.

There are nevertheless two important takeaways from the CJEU’s judgment with regard to the assessment of unfairness.

First, the Court of Justice did not consider DelayFix – a business enterprise – as being precluded from invoking the unfairness of the clause under the Unfair Terms Directive, although the latter only covers contracts with consumers. The CJEU stresses that the scope of the Directive does not depend on the identity of the parties to the dispute but on the capacity of the parties to the agreement (para 53). Hence the validity of the clause must also be assessed in a subsequent proceeding between two businesses.

Second, the CJEU did not see the consumer protection provisions of the Brussels Ibis Regulation as an obstacle to a finding that the clause were unfair. One could have considered the protection under the Unfair Terms Directive superfluous given that the consumer is anyway protected by the jurisdiction of the courts at its domicile under Art 17 et seq. of the Brussels Ibis Regulation. That is however not the position of the CJEU. Instead, it asks the national court to assess the invalidity of the jurisdiction clause in an abstract manner, independently of the Brussels Ibis Regulation.

As a result, the Unfair Terms Directive may potentially apply to jurisdiction clause in a business-to-business relation. The protection afforded by the CJEU to the assignee seems unwarranted in light of the purpose of unfair terms control, which is targeted to consumers. The second part of the ruling will further weaken the binding force of jurisdiction clauses in B2B relations.

The latest edition (October 2020) of the Thessaloniki Bar Review (Armenopoulos) includes a section devoted to the application of the Rome I Regulation in Greece. The judgments reported examined issues regarding the law applicable to insurance and sales contracts, as well as a post-contract choice of law relating to multiple sales contracts.

Applicable Law in Insurance Contracts

In a lawsuit against a UK insurance company concerning a claim for compensation arising out of a freight insurance contract signed in 2014, the Thessaloniki Court of Appeal (judgment No 770/2019) resorted to Article 25 of the Greek Civil Code, i.e. the domestic conflict-of-laws provision for contractual obligations, and stated that the 1980 Rome Convention was not applicable to the case pursuant to Article 1(3) thereof (‘The rules of this Convention do not apply to contracts of insurance which cover risks situated in the territories of the Member States of the European Economic Community. In order to determine whether a risk is situated in those territories the court shall apply its internal law’). No reference was made to the Rome I Regulation.

The Court noted that the insurance contract expressly referred to the law to which the parties had submitted their contractual relationship and concluded that the dispute was governed by the English Maritime Insurance Act, common law and English practice (Institute Cargo Clauses) for boat insurance.

The court failed to examine the matter in accordance with the proper law, which was Article 7 of the Rome I Regulation, read in light of Article 1(2)(j).

Applicable Law to a Contract for the Sales of Goods

In a lawsuit brought by a Greek company against a Liberian company in connection with a contract for the sale of marine fuel between by the former and the latter, represented by its Greek agent, the Court of Appeal of Piraeus (ruling No 276/2019) applied Greek law to the sales contract on the ground that no choice had been made by the parties, and that the seller had its habitual residence in Greece. With respect to the representation of the defendant company for the purposes of the conclusion of the contract, the Court observed that the agency is excluded from the scope of Rome I Regulation. The Court relied on Greek conflict-of-laws rules to state that Greek law applied to agency, this being the law of the state where the agent had acted. 

Applicable Law in Multiple Sales Contracts

In proceedings brought by a Greek company against a company registered in the Marshall Islands, the Piraeus Court of first instance (ruling No 5326/2018) applied Greek law to a series of connected sales contracts, pursuant to Article 4(1) and (4) of the Rome I Regulation. The former was self-explanatory (seat of the seller in Greece), and the latter was founded on the fact that the contract was signed at the seller’s registered office. Finally, the court mentioned an additional reason for applying domestic law: It stated that a tacit post-contractual determination of applicable law may be deduced by the defendant’s default of appearance.

The fourth issue of the Journal du droit international for 2020 includes only one article on a topic of private international law.

It is authored by Jean-Charles Jaïs, Claudia Cavicchioli and Anne de Mazières (Linklaters Paris) and discusses the important topic of the law governing the confidentiality of international correspondence between attorneys and in-house counsels (La confidentialité des correspondances internationales des avocats et juristes en entreprise – la question du droit applicable).

The English abstract reads:

The rules applicable to the confidentiality of correspondence of lawyers and in-house counsel vary significantly from one country to the other. A French judge seized of an international dispute will thus have to confront these varying rules and determine which, amongst the competing norms, should be applied to the confidentiality of the correspondence at issue. The present article looks at the method which the seized judge should implement to determine the applicable law, and offers a reflexion on potential connecting factors. The solutions proposed differ according to whether one looks at correspondence exchanged between lawyers, between a lawyer and his/her client, or between an in-house counsel and his/her “internal client”.

The issue also includes several case notes of cases which address private international law questions. The full table of contents can be found here.

I attended recently a discussion among scholars about the notion of periculum in mora for the purposes of Article 7 of the Regulation 655/2014. In this context, attention was drawn to the decision of the Tribunal da Relação de Guimarães of 10 September 2020, which held (among other) that

IV. The preservation order requires proof of the requirements for the adoption of preventive measures: urgency, “fumus boni iuris” and “periculum in mora”.

V. The mere impossibility of collecting the claim, namely in an enforcement action instituted for that purpose, without being associated with any other element, is not enough to demonstrate the periculum in mora.

Looking at the text of the Regulation, the Portuguese court can hardly be criticised. According to Article 7(1),

The court shall issue the Preservation Order when the creditor has submitted sufficient evidence to satisfy the court that there is an urgent need for a protective measure in the form of a Preservation Order because there is a real risk that, without such a measure, the subsequent enforcement of the creditor’s claim against the debtor will be impeded or made substantially more difficult.

The provision shall be read together with Recital 14:

The conditions for issuing the Preservation Order should strike an appropriate balance between the interest of the creditor in obtaining an Order and the interest of the debtor in preventing abuse of the Order.

Consequently, when the creditor applies for a Preservation Order prior to obtaining a judgment, the court with which the application is lodged should have to be satisfied on the basis of the evidence submitted by the creditor that the creditor is likely to succeed on the substance of his claim against the debtor.

Furthermore, the creditor should be required in all situations, including when he has already obtained a judgment, to demonstrate to the satisfaction of the court that his claim is in urgent need of judicial protection and that, without the Order, the enforcement of the existing or a future judgment may be impeded or made substantially more difficult because there is a real risk that, by the time the creditor is able to have the existing or a future judgment enforced, the debtor may have dissipated, concealed or destroyed his assets or have disposed of them under value, to an unusual extent or through unusual action.

The court should assess the evidence submitted by the creditor to support the existence of such a risk. This could relate, for instance, to the debtor’s conduct in respect of the creditor’s claim or in a previous dispute between the parties, to the debtor’s credit history, to the nature of the debtor’s assets and to any recent action taken by the debtor with regard to his assets. In assessing the evidence, the court may consider that withdrawals from accounts and instances of expenditure by the debtor to sustain the normal course of his business or recurrent family expenses are not, in themselves, unusual. The mere non-payment or contesting of the claim or the mere fact that the debtor has more than one creditor should not, in themselves, be considered sufficient evidence to justify the issuing of an Order. Nor should the mere fact that the financial circumstances of the debtor are poor or deteriorating, in itself, constitute a sufficient ground for the issuing of an Order. However, the court may take these factors into account in the overall assessment of the existence of the risk.

It should be noted, though – and it has been highlighted in the abovementioned exchange of views – that the national court actually makes a very restrictive interpretation of the periculum in mora, even when a judgment has already been delivered favoring the creditor. It is not enough that the enforcement cannot be carried out in Portugal due to lack of assets there; nor that the debtor resides in another country (Spain, in the case at hand). The creditor has to prove that there is an intention on the part of the debtor to dissipate his assets, and the link between such intention and the risk of not recovering the moneys.

The ‘subjective’ element seems to be a feature common to other Member States’ interpretation of Article 7 (such as Lithuania or Germany – see LG Bremen, ruling of 7 January 2020 – 3 O 2166/19), but not to all (Spain being, for instance, one with a much more lenient understanding of the requirement: apparently, the mere impossibility of enforcement in Spain suffices for the judicial clerk, who is the one in charge at this stage, to grant the order). Moreover, and somehow funnily, the Portuguese court reaches its conclusion arguing on the basis of the similarities between the provision of the Regulation, and Article 391 of the national Code of Civil Procedure. The trend appears to be shared by other Member States, like, again, Germany and Lithuania.

In the light of the foregoing, a request for interpretation to the CJUE would not be a surprise. Unfortunately, it will hardly address any longer the policy issue of whether it makes sense to subject the cross-border preservation order to the periculum in mora requirement in spite of having obtained a decision  (see against B. Hess, ‘Article 7 Regulation 655/2014’, in Scholsser/Hess, Europäisches Zivilprozessrecht, 5th ed., para 2, forthcoming).

NoA: Note that urgency is not mentioned under Article 35 of the Brussels I bis regulation, and that measures which, because they are urgent, are ordered without the defendant being summoned to appear, are not to be recognised and enforced under the Regulation unless the judgment containing the measure is served on the defendant prior to enforcement.

Many thanks to Carlos Santaló (MPI Luxembourg) for the information on the topic as well as feedback.

The first post of the EAPIL blog was published one year ago, on 25 November 2019. More than 300 posts have followed since, written by the blog’s editors and by no less than twenty guests.

We are trying to make the blog richer in contents, and improve its visibility.

Various private international law specialists across Europe and beyond have offered to prepare guest posts for publication in the coming days or weeks. We are eager to read their contributions and share them with our readers.

In the meanwhile, we are working to make the blog – and the Association, generally – more active on social media.

Marco Pasqua, an Associate Member of the Association, with a special interest in collective redress and the liability of corporate groups for violation of EU competition law, has kindly accepted to serve as the Association’s social media manager. Thanks a lot, Marco!

So, join us also on Twitter (@eapilorg) and Linkedin!

Planning to become a member of EAPIL, and join the 255 scholars and practitioners who have already done so? We are glad to provide you with one more reason to submit your application before the end of the year!

While, as a general rule, fees are due for each calendar year, those applying for membership in December 2020 will not be required to pay any fees for 2020. The first fees due by such new members will be the fees due for 2021.

See here for information on the benefits you would be entitled to as a member, as well as on the types of membership offered and the admission process.

Once you are ready to apply for membership, just fill in the form you find here!

The 2020 Annual Conference of the French Association for European Studies (AFEE) will focus on Family within the Legal Order of the European Union, based on a collective research led by academics and practitioners from different EU countries, which resulted in a book edited by Elsa Bernard (University of Lille), Marie Cresp (University of Bordeaux) and Marion Ho-Dac (University of Valenciennes), to be published soon by Bruylant.

This year’s conference will take place on 11 December 2020, in the form of a Zoom webinar, from 11.45 to 14.30 MET, with the participation of the book’s authors and other speakers. It will be preceded, starting on 7 December 2020, by the posting of a series of short videos devoted to the contributions in the book.

Attendance is free, but those interesting in attending are required to register by 9 December 2020, by sending and e-mail to aline.dherbet@univ-lille.fr.

Family law, with its civil law tradition, and strong roots in the national cultures of the Member States, does not normally fall within the scope of European law. However, it is no longer possible to argue that family law is outside European law entirely. There are many aspects of the family which are subject to European influence, to the point that the outlines of a «European family» are starting to emerge. This book is intended to highlight the European experience of family law as well as its substantive (i.e. European citizenship, EU social policy, EU civil service…) and private international law aspects. Union law therefore contains a form of «special» family law which is shared between the Member States and supplements their national family laws. Its theoretical and political importance in the Union, as well as its future, are discussed by the authors. Far from remaining fragmented alongside the national laws of Member States, it will likely develop to offer European citizens and residents a common family law within the EU.

Contributors include: Katharina Boele-Woelki, Marlene Brosch, Christelle Chalas, Kiteri Garcia, Susanne Lilian Gössl, Loïc Grard, Víctor Luis Gutiérrez Castillo, Anastasia Iliopoulou-Penot, Beata Jurik, Hester Kroeze, Laure Lévi, Cristina M. Mariottini, Martina Melcher, Benjamin Moron-Puech, Marion Nadaud, Nicolas Nord, Cyril Nourissat, Ludovic Pailler, Nausica Palazzo, Amélie Panet-Marre, Etienne Pataut, Delphine Porcheron, Isabelle Rein Lescastereyeres, Sophie Robin-Olivier, Mathieu Rouy, Sandrine Sana Chaillé de Néré, Solange Ségala, Gaëlle Widiez et Geoffrey Willems.