C. Jurisdiction in Matters Related to Contracts (Article 7(1))
2. Article 7(1)(a): The Place of Performance of the Obligation in Question
244. Article 7(1)(a) BRIbis states that “[a] person domiciled in a Member State
may be sued in another Member State: (1) (a) in matters relating to a contract, in the courts for the place of performance of the obligation in question”. Therefore, two steps are necessary in order to determine where claimants should litigate their contractual disputes: first, one has to find the obligation upon which the party bases the claim (“the obligation in question”). Then, the place of performance of this specific obligation has to be identified. We now examine these two elements in detail.
245. The term “obligation in question” has been defined by the ECJ in De Bloos.
As a preliminary point, it must be highlighted that this judgment was rendered under the auspices of the Brussels Convention, which sets up a forum for all types of contracts without distinction.539 Consequently, many cases that were rendered at that time would fall under Article 7(1)(b) BRIbis today. Nevertheless, this case law is still useful to understand the functioning of Article 7(1)(a) BRIbis. Going back to the ECJ’s case law, in De Bloos, a Belgian firm (De Bloos) concluded an exclusive distributorship agreement with Bouyer, a business located in France. According to the contract, Bouyer transferred the exclusive right to distribute its products on various markets to De Bloos.540 Subsequently, the latter started proceedings in Belgium against its contractual partner, alleging a unilateral and unlawful breach of contract, without proper notice being given. Indeed, Bouyer considered that the contract had ended and hence, entered into negotiations with another distributor.541 On this occasion, the referring court asked the
ECJ what contractual obligation(s) should be taken into account in order to anchor its jurisdictional power. The Court of Luxembourg clarified that the word “obligation” refers to the obligation that forms the basis of the legal proceedings.542 More precisely, this obligation corresponds to the contractual right upon which the claimant bases the action.543 Therefore, the obligation in question does not always correspond to the characteristic performance.
539 Ex-Article 5(1) BC stated that “[a] person domiciled in a Contracting State may, in another Contracting
State, be sued: (…) in matters relating to a contract, in the courts for the place of performance of the obligation in question”.
540 De Bloos, supra n 511, Opinion of Mr. Advocate-General Reischl, 1512. 541 Ibid.
542 De Bloos, supra n 511, para 11. 543 Ibid, para 13.
The meaning of the Court’s answer may first be illustrated by a simple example:544
if a Spanish firm sues its contractual partner located in Germany for the payment of the price corresponding to a delivery of goods, the relevant obligation that determines which courts have jurisdiction is the obligation to pay. However, if the German purchaser sues the Spanish firm because the goods are defective, the obligation in question is the delivery of these goods. For distributorship agreements, such as the agreement in De Bloos, and similar complex contractual relationships, the answer to this question is not always straightforward. For example, should the obligation to give proper notice be the obligation in question? Instead, should the obligation not to sell products to other market players be taken into account? Or should the obligation to deliver goods, which is the principal obligation of Bouyer, be the relevant one? Unfortunately, this question was not clarified by the ECJ.
246. The second step of the reasoning consists in identifying the place of
performance of the obligation in question.545 In Tessili, the ECJ held that this place has
to be understood by reference to the substantive law applicable under the private international law rules of the court before which the matter is brought.546 To put it more simply, the court seised has to find the law applicable to the obligation in question in order to locate the place of performance. In the example mentioned in the above paragraph, which involves a Spanish and a German undertakings, if the Spanish firm seeks the payment of the price in the Spanish courts, these would have to determine what the law applicable to the obligation to pay is. Today, the law applicable to contractual obligation is regulated by the Rome I Regulation in civil and commercial matters.547 According to this Regulation, the law applicable to the obligation to pay is the one
544 It is important to emphasise that today, this example would be governed by Article 7(1)(b) BRIbis,
unless the place of delivery were located in a third State.
545 Note that in Shenavai, the ECJ considered the possibility that a claim be based on various obligations.
In an obiter, it held that when more than one obligation forms the basis of legal proceedings, the courts where the principal one is performed have jurisdiction (Case C-266/85 Hassan Shenavai v Klaus Kreischer [1987] ECR 00239, para 19). This is the accessorium sequitur principale rule. Later on, the ECJ clarified another point: when the claim at issue is based on obligations of equal rank, then the Shenavai case law does not apply (Case C-420/97 Leathertex Divisione Sintetici SpA v Bodetex BVBA [1999] ECR I-06747, paras 39-40, 42). This means that national courts must locate the place of performance for each of the obligations concerned.
546 Case C-12/76 Industrie Tessili Italiana Como v Dunlop AG [1976] ECR 01473, para 13; Case C-288/92 Custom Made Commercial Ltd v Stawa Metallbau GmbH [1994] ECR I-02913, para 26; Case C-440/97 GIE Groupe Concorde and Othes v The Master of the vessel "Suhadiwarno Panjan" and Others [1999] ECR I-06307, para 13.
547 Regulation (EC) No 593/2008 of 17 June 2008 on the law applicable to contractual obligations (Rome
designated by parties. In the absence of choice of law agreement, then the law of the country where the seller has his habitual residence applies. In our example, and in case parties did not select the law applicable to their contractual relationship, Spanish law would govern the action, as it corresponds to the habitual residence of the seller.
The ultimate step is to look at Spanish substantive law in order to determine the place of performance of the obligation to pay. In this context, Article 1171 of the Spanish Civil Code establishes that, in principle, the obligation to pay is performed at the debtor’s domicile, unless parties agreed on another location. Therefore, the place of performance is Germany, given that the debtor is domiciled there. This means that Spanish courts should not accept jurisdiction under Article 7(1) BRIbis. Although the facts of this example seem quite simple, one quickly acknowledges the complexity of applying the De Bloos/Tessili case law. Consequently, the solution has been simplified since the enactment of the Brussels I Regulation for the most frequent contracts of the economy. Nevertheless, parties can also avoid the application of this complex technique by locating the place of performance in the contract or concluding a choice of court agreement.548
3. Article 7(1)(b): Sales and Services Contracts
247. Article 7(1)(b) BRIbis specifically deals with sale of goods and provision of
services. It reads as follows: “[a] person domiciled in a Member State may be sued in another Member State: (…) (b) for the purpose of this provision and unless otherwise agreed, the place of performance of the obligation in question shall be: — in the case of the sale of goods, the place in a Member State where, under the contract, the goods were delivered or should have been delivered, — in the case of the provision of services, the place in a Member State where, under the contract, the services were provided or should have been provided”. According to this provision, all contractual claims that derive from a sale of goods or a provision of services can be dealt with in the forum designated by Article 7(1)(b) BRIbis.
248. Article 7(1)(b) BRIbis directly designates the place of performance for sale
of goods, as well as provision of services. Although the ECJ did not provide a clear-cut definition of these two types of contracts, they should nevertheless be interpreted
548 While a choice of court agreement is submitted to the requirements of Article 25 BRIbis, an agreement
on the place of performance is not (see, C-56/79, Siegfried Zelger v Sebastiano Salinitri [1980] ECR 00089, paras 4-5).
autonomously. One should not try to technically define the terms “sale” or “service” but rather identify whether the characteristic obligation could be one of a sale of goods or provision of services.549 As a result, a contract whose characteristic obligation is the supply of goods has to be qualified as a “sale of goods” under Article 7(1)(b) BRIbis. Similarly, a contract which has as its characteristic obligation the provision of services falls in the scope of services contracts.550
In this context, the ECJ had the opportunity to clarify that a contract whose object is to manufacture items thanks to the materials provided by the buyer and under his responsibility has to be considered as a contract for the provision of services. However, where the manufacturer provides the materials, and is responsible for the good execution of the work, then this would rather constitute a contract for the sale of goods.551 On this occasion, the Court explained that the previous activity of manufacturing items before selling them does not affect the qualification of the contract as a sale of goods.552 In another judgment,553 the ECJ stated that, in complex contractual relationships covered by
a distributorship agreement, although they imply the selling of goods, they are more likely to be considered as a contract for the provision of services rather than a sale of goods. According to the Court, the distributor provides a service to the grantor, by selling his products and thus, increasing his distribution. In return, the distributor earns the competitive advantage to be the sole reseller of the grantor’s products in a given territorial area. Therefore, the purpose of the contract leads the Court to conclude that a distributorship contract cannot be considered as a simple bunch of successive selling agreements that would qualify as a sale contract.
As regards the concept of provision of services, its exact boundaries are still unclear. On the one hand, for instance, Berlioz considers that the provision of services encompasses any contract whereby a party is under the obligation to do or not to do something, for free or against remuneration, in someone’s benefit.554 The objective of such a broad meaning is to avoid falling too easily under the scope of Article 7(1)(a) BRIbis, and have to cope with its complexity. On the other hand, however, it has to be
549 Briggs, supra n 497, 268-269; Kropholler and von Hein, supra n 495, 173. 550 Car Trim, supra n 529, para 32.
551 Ibid, paras 40-43. 552 Ibid, para 38.
553 Case C-9/12 Corman-Collins SA v La Maison du Whisky SA [ECLI:EU:C:2013:860], paras 24-43. 554 “toute opération ayant pour finalité l’accomplissement par une personne, au profit d’une autre, d’un
acte, positif ou non, à titre onéreux ou non” (P Berlioz, “La notion de fourniture de services au sens de l’article 5-1 b) du Règlement de « Bruxelles I »” [2008] 135 [3] Journal du Droit International 717).
highlighted that some important judgments call into question the applicability of such a broad definition. For instance, in Falco, the ECJ seems to limit the scope of services contracts in two ways: first of all, the Court states that the objectives laid down by the Regulation require Article 7(1)(b) BRIbis to be interpreted narrowly, as it is an exception to Article 4 BRIbis.555 Second of all, the ECJ considers that in a contract of license, whereby the owner of an intellectual property right simply commits not to challenge the use of this right by his contractual partner, no provision of service is provided. In other words, this reasoning seems to indicate that the mere abstention from one party or an obligation not to do prevents the application of Article 7(1)(b) BRIbis.556
Overall, literature emphasises that two requirements must be fulfilled for a contract to qualify as a provision of service: an activity in exchange of a remuneration – that does not have to be monetary. For example, contracts for legal, tax or architectural services fall under the scope of this definition. Similarly, services offered by intermediaries for financial investments or by real-estate agents are encompassed within the meaning of Article 7(1)(b) BRIbis.557
249. Furthermore, Article 7(1)(b) BRIbis establishes that the place of performance
for sales contracts is the place where the goods are –or should have been– delivered. Similarly, as regards provision of services, the place of performance is located where the services are –or should have been– provided. In other words, this means that reference to national laws in order to determine the place of performance, as the De Bloos/Tessili case law provides, is excluded. Instead, the place of performance for these types of contracts has to be interpreted in an autonomous manner, according to the origins, objectives and scheme of the Regulation.558 Against this background, the ECJ ruled that, in a case involving a sale contract, national courts first have to ascertain whether the place of delivery is apparent from the parties’ agreement.559 In case contractual terms are silent on this particular issue, then the ECJ indicates that the final destination, where the goods were physically transferred to the purchaser, and where he obtained the actual power of
555 Case C-533/07 Falco Privatstiftung and Thomas Rabitsch v Gisela Weller-Lindhorst [2009] ECR I-
03327, para 37.
556 Ibid, para 31.
557 Kropholler and von Hein, supra n 495, 169-171.
558 Car Trim, supra n 529, para 47; Color Drack, supra n 529, paras 18, 24; Rehder, supra n 529, paras 31,
33; Falco, supra n 555, paras 20, 26.
559 This is expressly allowed by Article 7(1)(b), which states that the place of performance corresponds to
the place where services have to be provided (or should have been provided) “under the contract” (Car Trim, supra n 529, paras 54-5). This includes Incoterms (Case C-87/10 Electrosteel Europe SA v Edil Centro SpA [2009] ECR I-04987, para 22).
disposal, is the actual place of performance.560 The same rule is applicable mutatis
mutandis to the provision of services. Nevertheless, issues could arise when the final destination of goods or services does not match the transfer of property, this is, when intermediaries are involved.561 However, in Car Trim, the ECJ seems to endorse the ultimate place where goods are handled as the place of performance.562
250. When the contract has to be performed in various locations within a single
Member State or in different Member States, the ECJ indicates that the relevant place is the one which presents the closest linking factor with the contract at issue. Most of the time, this place corresponds to the place where the main delivery of goods or provision of services is carried out, according to economic criteria.563 This particular location has to first be inferred from the contract.564 Alternatively, national courts have to take into account where, in fact, the most part of activities were held.565 Eventually, if the principal place of performance cannot be determined, then the claimant has the choice to sue at the location of the delivery of his choice.566 In this context, in a contract involving air
transport services, the ECJ held that a passenger may alternatively sue the airline company, which is liable for the cancellation of his flight, at the place of departure or arrival. In the opinion of the Court, these two locations present a close linking factor with the contract.567 On another occasion involving an agency contract, the ECJ clarified that where the place of performance cannot be inferred from the contract and that no main activity can be identified, then the agent’s domicile is deemed to be the place that presents the closest linking factor with the contract.568 This result is in contrast with the previous
case law of the ECJ.569 Indeed, it seems that the Court intends to reduce the fora available to claimants when the place of performance is difficult to locate, as it establishes an alternative forum in the agent’s domicile. It looks like the Court wanted to avoid the conclusion that no principal performance can be identified and thus, allocate jurisdiction to a multiplicity of courts.
560 Car Trim, supra n 529, para 62. 561 Briggs, supra n 497, 270. 562 Car Trim, supra n 529, para 60.
563 Color Drack, supra n 529, para 40; Rehder, supra n 529, para 35; Wood Floor, supra n 529, para 31. 564 Wood Floor, supra n 529, paras 38-9.
565 Ibid, para 40.
566 Color Drack, supra n 529, para 42; Rehder, supra n 529, para 44. 567 Rehder, supra n 529, paras 43-4.
568 Wood Floor, supra n 529, para 42.
569 U Grušić, “Jurisdiction in Complex Contracts under the Brussels I Regulation” (2011) 7 (2) Journal of Private International Law 328.
D. The Place where the Damage Occurred (Article 7(2))