COMMERCIAL Jurisdiction agreement and private autonomy
In a decision of February 8, 2024 in Case C- 566/22 – Inkreal s.r.o. ./. Dúha reality s. r. o., the ECJ ruled on the admissibility of a choice of court agreement. The case had the particularity that the facts forming the subject matter of the dispute had no foreign connection whatsoever, with the exception of the jurisdiction agreement.
The facts of the case can be summarized as follows:
A private individual domiciled in Slovakia granted two loans to a company under Slovakian law (Dúha reality). The claims were later assigned by the lender to a company also domiciled in Slovakia (Inkreal). The contracts each contained a jurisdiction agreement according to which a Czech court was to decide in the event of a dispute. The loan was not repaid by Dúha reality, so Inkreal brought an action for payment of the amounts owed before the competent Czech court.
The referring Czech court asked the ECJ whether this jurisdiction agreement was permissible in light of Art. 25 Brussels Ia Regulation (Regulation (EU) No. 1215/2012 of the European Parliament and of the Council of 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters). Pursuant to Article 25(1) Brussels Ia Regulation, parties may agree, irrespective of their domicile or the seat of a legal person, that a court of a Member State designated by them shall decide on a dispute. Although the wording of the provision does not expressly mention the foreign connection, this is assumed in the case law as an unwritten element of the facts. (see ECJ, judgment of March 1, 2005, Owusu, C-281/02, EU: C: 2005: 120, para. 25; ECJ, judgment of September 8, 2022, IRnova, C-399/21, EU: C: 2022: 648, para. 27, 29). The question to be examined was therefore whether the mere fact of an agreement conferring jurisdiction on the court of another Member State gives the otherwise exclusively national facts an international character and thus a foreign connection.
In its decision, the ECJ emphasized two decisive aspects, namely, on the one hand, respect for the private autonomy of the parties, who, in accordance with Art. 25 Brussels Ia Regulation, are free to conclude a jurisdiction agreement with the exception of exclusive or mandatory jurisdictions, which were not in dispute here; on the other hand, the importance of legal certainty. According to recital (15) of the Brussels Ia Regulation, the jurisdiction rules are intended to ensure a high degree of predictability with regard to the jurisdiction of state courts.
The second aspect, i.e. predictability and legal certainty, requires that the first aspect, namely the autonomous decision of the parties as to the court in which they wish to conduct a legal dispute, be respected as far as possible. However, this would be thwarted if the agreed court first had to determine whether or not there was a sufficient foreign connection by referring to the facts of the case. However, the necessity of examining the admissibility of the jurisdiction agreement in terms of the foreign connection on the basis of the facts of the case in the exercise of the court’s discretion necessarily entails the risk of contradictory decisions if different courts can be called upon due to doubts about the admissibility of the jurisdiction agreement.
The ECJ decided the question in the sense that a sufficient foreign connection already results from the agreement between the parties on jurisdiction in favor of the courts of a Member State other than the one in which the contracting parties are domiciled. Such an agreement, in itself, would already provide a cross-border connection of the legal dispute, namely from the consideration that the parties themselves have established the foreign connection through their choice of law. Therefore, on the one hand, the decision takes into account the principle of private autonomy and, on the other hand, this formal interpretation based on the wording of the agreement ensures a very high degree of legal certainty.
The decision must therefore be approved without reservation.
However, advantages and disadvantages must be taken into account in the context of a choice of law or the law applicable apart from a choice of law in accordance with Article 4 of the Rome I Regulation. If recourse is made to a court in a Member State whose law is not applicable in the dispute, the wording of Article 9 of the Rome I Regulation does not guarantee that the mandatory law of the country of origin will apply. This is because this provision stipulates that the court “may“, but is not obliged to, give effect to the foreign overriding mandatory provision (see ECJ, judgment of October 18, 2016, Nikiforidis, C-135-15, EU: C: 2016:744). In individual cases, this can lead to more legal uncertainty than would be the case if the place of jurisdiction is located in the Member State whose law is applicable to the case.
Finally, it should be noted that there is no risk of a deficit in the area of consumer protection as a result of this decision, because in consumer matters within the meaning of Art. 17 Brussels Ia Regulation, jurisdiction agreements which are detrimental to the consumer are only permissible after the dispute has arisen and not when the contract is concluded, in accordance with Art. 19 Brussels Ia Regulation.
