Article 7(1) of the Brussels I Regulations (Recast): A Superior Regime for Contractual Disputes

Introduction

The Brussels I Regulations contain jurisdictional rules that apply to member states 1 The UK being a member state, is bound by these rules and in matters that are clearly defined in Article 7(1), the Brussels rules will apply. 2 Article 7(1) of the Regulation provides that in case of conflict of law in cases involving matters relating to contract, the place of performance will be the place of jurisdiction. This is an exception to the rule contained in Article 4, which would make the place defendant’s domicile as the place of jurisdiction. Article 7(1) therefore relates to special jurisdiction.

Under the traditional common law, the principle of forum non conveniens has generally been applied to preclude jurisdiction of English courts when there is an appropriate forum in some other country. The Brussels I regime considers this to be contrary to the principle of legal certainty.

There is criticism against Article 7(1) in that it creates some problem in interpretation. The essay does not agree with that. This essay argues that the Brussels I Regulation creates a more superior regime than the one available under the english law.

Article 7(1): Ambiguities and Solutions

Article 7 (1) of the Brussels I is an alternative to the general or default jurisdiction rule contained in Article 4, which provides that the defendants should be sued in the courts of their domicile. This alternative is applicable only in cases concerning ‘matters relating to a contract’. Article 7(1) of the Brussels I Regulations (Recast ) provides that in matters relating to a contract a person domiciled in a Member State may be sued in another Member State, if that was the place of performance of the obligation in question. 3 It is specified that for sale of goods and services contracts, the place of jurisdiction would be where the goods were to be delivered or the services were to be provided.

A need for the recast was felt due to the criticisms against the earlier provisions, which were considered ambiguous, although the CJEU tried its best to remove ambiguities. For instance, in Arcado v Haviland, 4 the CJEU decided that whether or not the case involves a matter related to contract must be decided as per the law of the Union and not as per national laws. 5 Then there were some ambiguities in distinguishing between matters related to tort and contract. In Kalfelis v Shroeder 6 the court had held that all forms of civil liability that do not fall under Article 7(1) would fall within Article 7(2), which related to tortious liability. Another important point to note is that the phrase ‘matters related to contract’ is wide enough to include torts also if they are based or arise out of contract.

It is evident that the CJEU has done a lot to remove such ambiguities. For instance, in Color Drack v Lexxx International, 8 there were several places of delivery within the same member state, therefore as per Article 7(1), all the places of delivery could be the place of jurisdiction. Here the CJEU held that economic criteria can be used and the applicant may decide as per convenience in which of the places would he sue. In Rehder v Air Baltic Corporation, 9 a case involving compensation under EC Regulation 261/2004, the CJEU held that the applicant could sue in the courts of either the place of departure or the place of arrival of the aircraft. The reason was that both the places have sufficiently close link of proximity to the material elements of the dispute.

Car Trim GmbH v KeySafety Systems Srl, 11 involved a German supplier and an Italian company. When the Italian company terminated the contract prematurely, the German supplier chose to sue the Italian company before the court in Germany. The ECJ held that the contract was one of sale. As per Article 7(1), in sale of goods contracts, the place of performance is the place where the goods are to be delivered. As the Regulation does not define ‘place of delivery’, the court had two options to decide from: the place of the physical transfer of the goods to the purchaser; and the place at which the goods are handed over to the first carrier for transmission to the purchaser. 12 The court held the place of physical transfer to be the one consistent with the objectives and scheme of the Regulation. 13 Once again this case shows significant increase in clarity.

Brussels I: A Superior Regime to the English Law

In the UK, the doctrine of forum non conveniens or Spiliada doctrine, 14 allowed UK courts to refuse jurisdiction over a case if there was any other appropriate form available. In Re Harrods (Buenos Aires) Ltd, 15 the Court of Appeal decided that Argentina having an appropriate forum and being a non-contracting state to the Convention, meant that the doctrine of forum non conveniens was applicable, precluding the English courts to hear the case.

The doctrine is now considered incompatible with the Brussels I Regulation. In Owusu v Jackson, the European Court held that respect for the principle of legal certainty will not be fully guaranteed if the court having jurisdiction under the Regulation would apply the principle of forum non conveniens. 16 Even if the appropriate forum is available in a non-contracting state, the Brussels rules will preclude denial of jurisdiction by a member state if it has jurisdiction under the Regulation.

The Practice Direction 6B, which supplements Section IV of CPR Part 6 define claims, with respect to which the court is entitled to grant permission to serve out. In 3.1 of the said provision, the claimant may serve a claim form out of the jurisdiction with the permission of the court. In relation to contract, some of the grounds which are available are: contract made within the jurisdiction; contract made by an agent trading or residing within the jurisdiction; contract governed by English law; contract contains a term to the effect that the court shall have jurisdiction to determine any claim in respect of the contract. Here the claimant will have to specifically relate his claim to any one of the grounds listed in the Practice Direction.

Conclusion

In conclusion, the Brussels I Regulation has gone a long way in clarifying rules on jurisdiction relating to contracts. The CJEU has given a number of decisions that have clarified and crystallised principles relating to interpretation of jurisdiction. This has created a regime that is superior to common law. In any case, the courts in the UK are bound by these rules, as UK is a member state.

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