Jurisdictional problems regarding disputes arising in the context of contracts of sale The recent case law of the EC Court of Justice on Article 5.1, Brussels I Regulation Paolo Lombardi Venice 19 May 2012

The Case: Distributorship contract between the Italian company L (that manufactures videogames) and the French company N (that distributes such videogames in France). According to the distributorship contract, L sold and delivered some videogames to N with different sale contracts. N did not pay the price of those sales. L terminated the distributorship contract for substantial breach and obtained from the Italian Court of Varese an injunction for payment of the price against N according to Italian procedural law. N started an opposition procedure.

First objection of the company N: Jurisdiction clause contained in the distributorship contract: “the parties submit to the exclusive jurisdiction of the Varese Court with regard to any dispute relating to this agreement”. Article 23, paragraph 1, of EC Regulation 44/2001: “If the parties […] have agreed that a court or the courts of a Member State are to have jurisdiction to settle any disputes which have arisen or which may arise in connection with a particular legal relationship, that court or those courts shall have jurisdiction”.

First reply of the company L: Article 5 (1) (b), first indent, of EC Regulation 44/2001: “a person domiciled in a Member State may, in another Member State, be sued in matters relating to a contract, in the courts for the place of performance of the obligation in question. […] 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”. All the outstanding invoices contained the following delivery clause: “Delivery terms: Ex-Works Incoterms® 2000”.

ECJ, 9 June 2011, Case C-87/10 (Electrosteel Europe vs. Edil Centro): In order to verify whether the place of delivery is determined “under the contract”, the national court seised must take account of all the relevant terms and clauses which are generally recognised and applied through the usages of international trade or commerce, such as Incoterms® (“international Commercial Terms”) drawn up by the International Chamber of Commerce.

Second objection of the company N: Is an invoice a contractual document? Article 5, point 1, letter b), first indent, of EC Regulation 44/2001 grants jurisdiction to the courts for the place where the goods were delivered or should have been delivered under the contract and an invoice is not a contract.

ECJ, 25 February 2010, Case C ‑ 381/08 (Car Trim vs. KeySafety Systems): the place where, under the contract, the goods sold were delivered or should have been delivered must be determined on the basis of the provisions of that contract. Where it is impossible to determine the place of delivery on that basis, without reference to the substantive law applicable to the contract, that place is the place where the physical transfer of the goods took place, as a result of which the purchaser obtained, or should have obtained, actual power of disposal over those goods at the final destination of the sales transaction.

Conclusions: It is advisable for the suppliers to include: in the distributorship contracts jurisdiction clauses as wide as possible, in order to cover any dispute arising out of the contracts of sale made in execution of the distributorship contracts. in the sale contractual documents (and not in the documents issued after the conclusion of the contract, such as invoices or transport documents) clauses stating clearly that the delivery is performed at the seat of the supplier (where no valid choice of forum clause has been agreed for the sale contracts).

Venice 19 May 2012 Thank You! Paolo Lombardi