In a dispute concerning a conflict of international jurisdiction, the European Court of Justice (First Chamber) ruled on the applicability of the Brussels Ia Regulation to agreements conferring jurisdiction from the perspective of the existence of an international element.
The case at hand concerned FD, a resident in Slovakia and Dúha reality, a company governed by Slovak law and domiciled in Slovakia, the former acting as the creditor and the other in its capacity as debtor, concluded two loan contracts in 2016 and 2017 respectively – the agreement between the parties included an agreement conferring jurisdiction according to which any dispute which cannot be resolved by negotiation shall be settled by a court of the Czech Republic having substantive and territorial jurisdiction.
FD had in the meantime assigned the receivables arising from the loans to Inkreal, a company governed by Slovak law and domiciled in Slovakia. Since Dúha reality had not repaid the loans, Inkreal brought an action before the Supreme Court, Czech Republic seeking, among other things, the determination of a court having territorial jurisdiction to rule on the merits.
The Supreme Court pointed out that the applicability of the Brussels Ia Regulation is subject to the existence of an international element. By its reference for a preliminary ruling, the Supreme Court requested the European Court of Justice to determine whether the Regulation is applicable to the situation at issue where the international element is limited to an agreement conferring jurisdiction on the courts of a Member State other than that in which the parties have their seat.
The Court of Justice, in its determination notes that the Regulation does not preclude an agreement, by which the parties to a contract which are established in the same Member State agree on the jurisdiction of the courts of another Member State to settle disputes arising from that contract, from being covered under that provision, even if that contract has no other connection with that other Member State. The Court of Justice further noted that for the jurisdiction rules of the Brussels Ia Regulation to apply, the existence of an international element is required, even though this is not defined in the Regulation.
The European Court of Justice further stated that since the parties to the dispute are established in a Member State other than the Member State of the court which was seized on the basis of the agreement conferring jurisdiction, then the dispute in the main proceedings meets the definition of ‘cross-border litigation’. Additionally, with respect to the existence of an international element, the dispute in the main proceedings raises a question relating to the determination of international jurisdiction and whether the courts having jurisdiction to settle that dispute are those of Czech Republic or those of Slovak Republic.
In the given circumstances, the existence of an agreement conferring jurisdiction on the courts of a Member State other than that in which the parties are established in, demonstrates the cross-border implications of the dispute in the main proceedings.
The Court of Justice further pointed out that the aim of legal certainty pursued by the Regulation would be compromised if its provisions were applicable only on condition that, over and above the agreement conferring jurisdiction on the courts of another Member State, there were additional elements capable of demonstrating the cross-border impact of the dispute concerned.
The European Court of Justice therefore concluded that the Brussels Ia Regulation applies to an agreement conferring jurisdiction by which the parties to a contract which are established in the same Member State agree on the jurisdiction of the courts of another Member State to settle disputes arising from that contract, even if the contract has no other connection with that other Member State.
Christina Scicluna is a Senior Associate at Ganado Advocates.