International Contracts: Brussels Regulations - Coursework Example

International Contracts: Brussels’ Regulations The rights of parties to enter into agreement over matters which are not beyond the commerce of men, not against public policy, morals or public order or simply to delineate the obligations of each shall not be restricted. It is likewise a universally recognized principle that the parties can stipulate by way of choice of law and choice of court otherwise known as the exclusive jurisdiction clauses, the court or body which shall have jurisdiction to the exclusion of all others over disputes which may arise by reason of the terms and conditions of the contract or breach thereof. The situs of litigation may therefore be stipulated upon by the parties as it simply refers to the place where the parties to the agreement, contract or instrument may institute an action as well as which laws to apply in the interpretation thereof. On the other hand, the jurisdiction, power or authority to adjudicate and decide cases or legal disputes is conferred by law and it is not subject to stipulation. It is therefore the duty of the courts or tribunals to determine the controversies between litigants as provided by law or jurisprudence. The proposition sought to be resolved by this paper is—whether the exclusive jurisdiction clause under the Brussels I Regulations is deemed moot or considered superfluity in light of the recent rulings of the European Court of Justice? The answer is in the negative as hereafter articulated. The historical milieu of European nations’ conglomerate dates back in 1957 when a treaty creating the European Economic Community and the European Atomic Energy Community, otherwise known as the Treaties of Rome, was signed by Belgium, France, Italy, Luxembourg, Netherlands and West Germany. The European Economic Community integration was envisioned to promote a single market system, enhance economic activity and strengthen partnership. With the conglomeration of these nations, a convention called Brussels Convention, otherwise known as the Brussels Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters of 1968, was established primarily to create unified legal processes by which reciprocal recognition and enforcement of judgments of courts or tribunals shall be given force and effect. It was likewise designed to protect vested rights of persons situated in the said nations as well as to avoid legal confusion or chaos in the determination or application of international jurisdiction of the courts, to facilitate recognition and introduce mechanism to secure the enforcement of judgments, authentic instruments and court settlements. The Brussels Convention was one way to systematize possibly polarizing litigious issues which eventually defeat the creation of an environment that is conducive for economic development and promote the single market regime. When the European Union came into being in 1993, the foregoing treaties are deemed part of the European Union which is an amalgamation of states within the European continent. The nature of this union is to regulate the relationship of European states with one another so as to foster harmony and move with fluidity and ease the transactions and agreements made by companies and individuals with others wherein both parties are subject to countries who are signatories of the European Union. With the expansion of the European Union, Brussels Regulations (Brussels I) or the Council Regulation on Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial Matters was enacted on 22 December 2000 which became effective on 1 March 2002 is essentially a reproduction of the parameters enunciated in Brussels Convention in settling disputes of individuals and entities domiciled in different states. Notwithstanding that the Brussels Convention was superseded, it continues to apply in some territorial jurisdictions such as Denmark as it opted out of the Brussels I while the European Free Trade Association will continue to apply the Lugano Convention or the Lugano Convention on Jurisdiction and the Enforcement of Judgment in Civil and Commercial Matters signed on 16 September 1988. These aforementioned conventions form part of the so-called Brussels Regime which is determinative of jurisdiction in settling disputes affecting civil and commercial relations. The scope of Brussels I however extends not only to civil and commercial matters, but can also be restrictively applied on criminal dispositions if civil relief by way of damages or restitution is awarded. Brussels I can similarly be applied to tort wherein such tortuous acts resulted in fatalities or injuries and equally to intellectual property rights and infringement cases by invoking Articles 51 and 222 thereof. Brussels I is nonetheless distinct from the Brussels Convention as it explicitly delineated jurisdiction to courts amongst the member states of the European Union thus in cases where Brussels I specifically allocates the exclusive jurisdiction to courts of member states, it excludes all others from the exercise thereof. Jurisdiction over the subject matter cannot therefore be fixed, acquired or waived by the will of the parties. Neither can jurisdiction be enlarged or diminished by any act or omission of the parties. The primordial issues or controversies it takes cognizance of relates to civil or commercial transactions but shall not include revenue, customs or administrative matters. Neither does it apply to the status or legal capacity of natural persons, matrimonial matters, wills and succession; bankruptcy; social security; and arbitration. Be that as it may, any judgment rendered in any EU country shall be final and immutable therefore to be given recognition without special proceedings. However this rule is not absolute, exception is when recognition is contested. And notwithstanding that recognition is withheld, review by other jurisdictions on matters already passed upon by other courts cannot be had by as the decision had become the law between the parties albeit wrongly. So also, foreign judgment may be enforced only after its genuineness, due execution or authenticity is ascertained. Though proviso for recognition and enforcement are clearly expressed, it likewise contains categorical grounds for non-enforcement which can solely be invoked by the parties concerned. If the parties fail to raise the grounds, it is deemed waived even while the courts having jurisdiction has judicial notice to deny recognition and enforceability, it is precluded or proscribed from raising these motu proprio. When an issue is appropriate or ripe for judicial determination, jurisdiction must first be established pursuant to laws or statutes in effect at the time of commencement of the action. Under Brussels I, jurisdiction over a defendant natural person, regardless of nationality, shall be exercised by the EU country where domicile is maintained while domicile of juridical persons or firms is determined by the country where they hold principal place of business. Domicile shall be determined pursuant to the domestic law of the EU country where the matter is instituted. If a party is not domiciled in an EU country where the case is pending, the court shall apply the law of another EU country to determine the domicile. In the case of trusts, domicile is defined by the court that is considering the case by applying its own rules of private international law. Aside from the foregoing basic jurisdictional principles, Brussels I foreclosed the freedom of the parties to choose the venue where the action is to be heard, as a general rule, on matters relating to—contracts must be brought to the place where the obligation has to be enforced or performed; maintenance jurisdiction is acquired only when the action is commenced to the place of residence of the maintenance creditor; and liability for wrongful acts—tort, delict or quasi-delict—must be instituted at the place where the incident occurred. On the other hand, when two or more courts may exercise jurisdiction over the same subject matter and with the same or different territory but option is afforded the plaintiff to choose the venue where defendant may be sued then such jurisdiction is characterized as concurrent. It cannot be gainsaid that the domicile of the plaintiff is an important factor to determine venue but it may be acquired after a choice is made as in the following instances—if the dispute concerns insurance claims, the insurer may be sued in the EU country where it is domiciled or of the EU country where the plaintiff is domiciled if the actions are brought by the policy holder, the insured or a beneficiary while for liability insurance or insurance of immovable property, the insurer may likewise be hailed at the place where the incident transpired. If the controversy involves a contract either for commercial or professional activities in the EU country in which the client is domiciled or directs such activities to that country. The consumer may file a suit in the courts of the EU country where he is domiciled or where defendant is domiciled. However, if an action is instituted against the consumer, the same shall be solely and exclusively brought in the courts of the EU country where the consumer is domiciled. If the matter involves employment contracts, the aggrieved employees may file a suit, at their option, in the domicile of the employer or where the aggrieved employees habitually work whilst an employee who does not render habitual work in any EU country may bring an action against the employer at its principal place of business. In contrast, if the employer is not domiciled in any EU country, but maintain or operates a branch, agency or other establishment in one of the EU countries, is deemed to be doing business hence that country is considered its domicile. However, the employer can institute an action against an employee solely and exclusively in the courts where the employee maintains his domicile. Exclusive jurisdiction, irrespective of domicile, shall be conferred in the territorial jurisdiction where property, documents or rights may be found, kept or applied for, respectively, if it relates to—the rights over immovable property or tenancies of immovable property; the validity of the constitution, the nullity or the dissolution of companies or other juridical entities, or of the validity of the decisions of their organs; the validity of entries in public registers; the registration or validity of patents, trademarks, designs or other similar rights: the courts of the EU country in which the deposit or registration has been applied for; the enforcement of judgments. If one or more of the parties are domiciled in the EU and have come to an agreement to choose the court which shall have jurisdiction to preside over disputes arising therefrom, then such court will have jurisdiction this is known as the exclusive jurisdiction clause or choice of court principle. To be given consideration however such agreement must strictly comply with the formalities that it must be in writing, in customary manner with which the parties have established in their transactions, acceptable in international trade, commerce or industry or in a form of ordinary practice or usage of which the parties are aware. The objective of this paper to reconcile the seemingly incongruent situation when the will of the parties to submit the controversy in a court or tribunal of their choice is defeated or rendered nugatory pursuant to recent pronouncements of the European Court of Justice. Thus, the provision or stipulation in a contract, agreement or instrument bestowing exclusive jurisdiction over a court or body can no longer be invoked exclusively barring all others from taking cognizance of the controversy. The judgment of the European Court of Justice in numerous cases contemplates the institution of two separate cases before two different territorial jurisdictions—one brought before the country of its domicile invoking breach of contract and the other citing the contractual provision on exclusive jurisdiction. The contention is that the institution of the first suit for breach successfully barred the second proceeding to prosper notwithstanding that it is the court of choice by the parties. It must be noted that when a case is initiated at an improper venue, the same must be assailed at the earliest possible time, otherwise to allow the proceedings to continue without registering any objection or opposition shall waive the right to contest it later. Thus, voluntary appearance by a litigant other than in the venue agreed upon in the contract or instrument, participated in the proceedings without objection thereto manifests his tacit agreement to the venue thus may no longer raise the violation of the exclusive jurisdiction clause as an issue. To illustrate: If party A initiates a legal action against party B in a court of law in Country A and later Party B institute the same action involving the same issues and facts in country B but also to enforce the choice of court provision. Party B as soon as he is called to answer the issues against him in country A should file his protest to assail the proceedings in country A as an infringement of the exclusive jurisdiction clause. Upon the other hand, Party A may raise the issue of prior jurisdiction against Party B. The ruling of the European Court of Justice ruling in Turner v Grovit [2005] and Erich Gasser GmbH v Misat SRL [2005] are relevant and appropriate. And, if the case will not be dismissed in the meantime, the proper course of action for Country B is to rule is to suspend the proceedings until such time that Country A rule with finality on Party A’s action. Brussels I mandates that all contracts that explicitly provides for exclusive jurisdiction clause should settle all disputes and controversies in the designated court as provided for in the contract shall be respected unless justifiable reasons warrant the abrogation thereof. It is a hornbook principle that the contract is the binding law between two parties that belong to different jurisdiction thus both parties should submit to the mutually binding agreement until a disposition avoiding or nullifying the same is issued by a court of competent jurisdiction. The European Court of Justice in its disposition in the cases of Turner v Grovit [2005] and Erich Gasser GmbH v Misat SRL [2005] reminded litigants of the objective of Brussels I which is to promote legal stability and harmony between the Courts of Member States thus any seemingly incongruous provisions must be reconciled to give meaning to its letter and intent. In the case between Erich Gasser GmbH v Misat SRL [2005], the following transpired—Misat went to the Italian Court to cause termination despite the existence of an agreement granting exclusive jurisdiction to Austrian Courts in case of dispute. Gasser filed before the Austrian court to invoke faithful compliance to their contractual obligations. Misat, however, challenged this alleging that based on the parameters set by Article 23 of the Brussels Convention, the proper venue where controversies may be properly addressed or settled was in any Court in Rome as it is where he is domiciled. The European Court of Justice anchored its decision on the primary purpose of the Brussels Convention/Regulation to maintain harmony and trust between member nations. Thus, it affirmed the right of the Italian court to proceed with the hearing of the case as it has jurisdiction until it decides otherwise. It likewise pronounced in clear and categorical manner that the Austrian Court should wait for the judgment of the Italian court as it was the court first seized of the litigation. This ruling is in compliance with Article 27 of Brussels I which reads that “where proceedings involving the same cause of action and between the same parties are brought in the courts of different Member States, any court other than the court first seized shall of its own motion stay its proceedings until such time as the jurisdiction of the court first seized is established.” As indicated, there will always be creative minds that will try to go beyond what is stipulated in the contract. To this end the European Court of Justice has made several consistent ruling that curbs the adventurism or wayward minds that will attempt to bypass the stipulated exclusive jurisdiction clause in contracts. In Gasser, ECJ ruled that in order to find symmetry and to gain mutual respect between different jurisdictions, courts should accord each other mutual respect. The first to file will be heard first as this is the accepted norm among court proceedings in any jurisdiction. To illustrate: Party A filed a case in country A against Party B who in-turn belatedly filed a case in Country B. According to their contract Country B should be the venue where disagreements and faults can be settled. Following the ruling in Gasser, Country B has the right jurisdiction since the same issues and action was filed in Country A. Country A should be allowed to proceed and rule on the petition of Party B to respect the judicial processes of Country A. Country A for its part should recognize that actual jurisdiction is possessed by Country B thus should relinquish jurisdiction immediately to avoid miscarriage of justice. In Turner v Grovit [2005], the European Court of Justice ruled under the following factual setting—a proceeding was commenced by Grovit in Spain against Turner who likewise instituted an action before the English courts urging the House of Lords to grant an anti-suit injunction where it was apparent that the proceedings commenced by Grovit was intended to defeat, obstruct or frustrate the proceedings which should properly lie within the jurisdiction of the English Courts based on the choice of court agreement. Though the English Court seized jurisdiction only after the Spanish court had acquired it, the English Court declared the Spanish Court’s arrogated unto itself jurisdiction which cannot validly be acquired as it was clear pursuant to the choice of court agreement, the Spanish court or any other European Union Member court is concerned are all excluded from seizing jurisdiction thus enjoined to cease and desist from exercising it. The European Court of Justice chastised the English Court and held that this amounted to a direct interference with the authority of the Spanish Court to determine its own jurisdiction. It further stated that the English Court exceeded its authority by challenging the Spanish Court in taking cognizance of the issue brought forth by Grovit. This act, according to the European Court of Justice, was not in keeping with the purpose of the Brussels Convention/Brussels Regulation. Thus, the European Court of Justice admonished Courts in one Contracting State from granting anti-suit injunctions restraining proceedings being commenced in the Courts of another Contracting State. It likewise declared that the Court where the proceedings are commenced has the discretion to pass judgment whether or not jurisdiction may be appropriately exercised by it and certainly, it is not for the Court of another Contracting State to do so. Thus, once jurisdiction over the parties is acquired, the court which obtained the prior jurisdiction shall retain its jurisdiction until the proceedings is terminated with finality. Any other court cannot interfere or stifle the exercise thereof unless the court voluntarily relinquished jurisdiction to rectify erroneous exercise thereof. Accordingly, the court that acquired prior jurisdiction takes precedence and any other pending action or proceeding must be suspended to await the outcome of the prior case not only to avert the issuance of possible conflicting dispositions or judgment but as a gesture of respect to a co-equal body as well. The findings of the European Court of Justice simply mean that simultaneous hearing of cases involving the same parties and subject matter shall not be countenanced otherwise chaos will ensue. Turner v Grovit [2005] have emphasized the treatment of cases of litigants of member countries within the European Union to ensure symmetry in the application of Brussels I. However the dangers of the ruling and its effect to industries that is time sensitive like the financial community was not realized until JP Morgan v Primacom AG [2005]. The instant case also highlighted the effects of the differences in the legal processes of each country that can frustrate the intent of Brussels I. In the aforementioned case, Primacom procured a loan from JP Morgan. Over the course of time, Primacom defaulted in its obligation and contrary to the exclusive jurisdiction clause of their loan agreement filed a legal action against JP Morgan in Germany. Primacom, in its petition, claimed that some or all of the loans were not enforceable as a matter of German public policy. For its part, JP Morgan, in accordance with the loan agreement’s exclusive jurisdiction clause, filed a collection action against Primacon in the English courts that demand for the enforcement of the interest rate and its payment thereof in accordance to the provisions of the load agreement. The English court recognizing that the German court started trying the case long before the English court took judicial cognizance of the case stayed its proceeding in favor of the German court’s ruling with regards to the enforcement of jurisdiction. In the Primacon case, the difference in the legal processes between the English and German courts took its toll in the enforcement of interest payment that led to losses. The German legal processes do not have a procedure in which preliminary issues are to be heard and decided on at the onset. The German court’s legal processes called for hearing the main trial first before any preliminary issues can be settled. After repeatedly objecting and re-pleading lack of jurisdiction before the German court before and during the hearing the German court finally ruled that the English Court should try the case in accordance to the provisions of Brussels I as stipulated in the loan contract. The English court eventually ruled in favor of JP Morgan. The differences in court processes amongst the European Union’s member country have impacted the stability of the European finance industry. Conclusion: Contracts between men or parties are the binding law between them. Their actions and relationship will be governed by the contract that they have signed. Contracts between parties of different nationalities are the binding law between these parties considering that it is the only thing that binds them. Normally international contracts provisions for exclusive jurisdiction to define the court that will settle their disputes, issues and controversies as a matter of course and for convenience of the parties. Enforcing the efficacy of international contracts Brussels I and the series of ruling of the European Court of Justice acknowledged the efficacy of the “exclusive jurisdiction clause”. In a series of ruling the European Court defined the process that can be followed to frustrate the attempts of some creative minds to obstruct the intent and desire of justice. In Gasser, the European Court ruled that courts of different jurisdiction should respect each other and its processes. While exclusive jurisdiction will be upheld eventually if and only if it is explicitly provided for in the contract signed between the parties respect should be accorded to the court where controversies were sought to be given judicial notice first. The court where exclusive jurisdiction lie should defer its action until such time that the first court ruled in favor of the party seeking redress with regards to the jurisdictional issue. InTurner, the European Court ruled that injunctive relief cannot be used by the court that has jurisdiction over the controversies by virtue of the contract executed between the two parties if prior jurisdiction is acquired by another though its authority to hear the case is wanting. This is congruent with the court’s ruling in Gasser where it is stipulated that respect for another jurisdiction should be given. In JP Morgan however, the ruling of the European Court of Justice was in accordance with the earlier ruling, the congruence however threatened and reverberated in time sensitive industries. JP Morgan also highlighted the impact of the difference of the court processes of each of the signatory countries. The recent ruling of the European Court of Justice does not nullify nor infringe on the exclusive jurisdiction clause of contracts. In fact, it affirms its efficacy and regime. The European Court of Justice merely accorded respect where respect is due and provided a process by which controversies between courts of different jurisdiction can be settled. Similarly, in JP Morgan the exclusive jurisdiction regime was eventually affirmed and the parties were directed to submit to the jurisdiction of the United Kingdom’s justice system. . The European Court of Justice in fact admonished courts who are prone to actions that can be considered to be disrespectful. The recent ruling also affirmed that legal maneuverings that could be considered as disrespectful which includes issuing an injunctive relief against another court was not sanctioned at all. Procedural rules are enunciated to bring about orderly disposition of cases and should be given utmost respect. The European Court of Justice has been consistent with its ruling and direction as far as expanding the ideals of the European Union of open market amongst its nation members is concerned. Common market is guaranteed if all parties from other nations are protected through the exclusive jurisdiction clause and remain in full force and effect to maintain stability in contractual relations. References: Convention (EC) of 27 September 1968 on jurisdiction and the enforcement of judgments in civil and commercial matters. Convention (EC) of 16 September 1988 on jurisdiction and enforcement of judgments in civil and commercial matters. Council Regulation (EC) No 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters. David, S. & O'Shea E., 2006. Europe, Enforcement, and the English. Legal Business Arbitration Report, [Online], 56-59. Available through: http://www.simmons-simmons.com/docs/legal_bus_arb_report.pdf [5 January 2011]. Erich Gasser GmbH v MISATSrl (Case C-116/02) [2005] QB 1; [2004] 1 Lloyd’s Rep 22 Ghandehari, S. 2009. "Private International law Seminar", Available at: http://www.juridicum.su.se/jurweb/utbildning/master/master_of_european_intellectual_property_law/Material%202009/Module%201/Summaries/PIL/Ghandehari%20Sanam%201.pdf. [5 January 2011]. JP Morgan Europe Ltd v Primacom AG [2005] 2 All ER (Comm) 764; [2005] EWHC 508 (Comm). Turner v Grovit (Case C-159/02) [2005] 1 AC 101; [2004] 1 Lloyd’s Rep 216. Read More