Monday, 12 September 2011

Lindner - or Océano meets conflict of laws

On 8 September the conclusion of Advocate-General Trstenjak in Case C-327/10 was published. The case poses some interesting questions on jurisdiction and on unfair terms. The facts are straightforward: Mr Lindner concluded a credit agreement with Hypotecni Banka a.s. to finance the purchase of a property. At the time of conclusion of the contract both parties were situated in the Czech Republic. The agreement contained a choice of forum clause which assigned jurisdiction to the courts in the region where the bank had its seat. Mr Lindner failed to pay the agreed credit installments and the bank instigated legal proceedings. It obtained a payment order but then was unable to locate Mr Lindner - a German national - in the Czech Republic. The payment order was retracted, and on 8 September 2009 the court appointed a guardian in order to represent the defendant and continue the case.

But does the Czech court have jurisdiction in this case? The questions that the referring judge put to the Court of Justice of the EU are the following:
- if one of the parties to court proceedings is a national of a State other than the one in which those proceedings are taking place, does that fact provide a basis for the cross-border element within the meaning of Article 81 of the Treaty on the Functioning of the European Union, which is one of the conditions for the applicability of Regulation 44/2001 (the Brussels I Regulation)?
- does the Brussels I Regulation preclude the use of provisions of national law which enable proceedings to be brought against persons of unknown address?
- if Question 2 is in the negative, can the making of submissions by a court-appointed guardian of the defendant in the case be regarded on its own as submission by the defendant to the jurisdiction of the local court for the purposes of Article 24 of the Brussels I Regulation, even where the subject-matter of the dispute is a claim arising out of a consumer contract and the courts of the Czeck Republic would not have jurisdiction under Article 16(2) of that Regulation to determine that dispute?
- can an agreement on the local jurisdiction of a particular court be regarded as establishing the international jurisdiction of the chosen court for the purposes of Article 17(3) of the Brussels I Regulation, and, if so, does that apply even if the agreement on local jurisdiction is invalid for conflict with Article 6(1) of Directive 93/13 on unfair terms in consumer contracts?

The issues arising from the case, as we can see, touch upon a number of issues. The first one is quickly answered by A-G Trstenjak, who rightly states that nationality is not of relevance in this situation: the cross-border element is present as soon as the case raises issues that make the court wonder whether he has international jurisdiction (Opinion at 59). The Brussels I Regulation, therefore, decides jurisdiction in this case.

The A-G continues to discuss the application of the Regulation, in particular in light of the fact that this is a consumer case. This normally means that the consumer can object to proceedings in a country other than his own on the basis of Article 16(2), which gives him the right to litigate in the court of his place of residence. But is that also the case here, where the consumer did not show up in court himself - although the court appointed a guardian to represent him - and where the choice of forum clause is possibly unfair?

A-G Trstenjak considers that the appointment of a guardian without the consumer's knowledge and consent is not enough to assume submission to the jurisdiction of the court under Article 24 of the Regulation. That would be at odds with Article 16(2) (Opinion at 82).

The choice of forum clause, according to the A-G, can validly assign international jurisdiction as long as it is not unfair within the meaning of Directive 93/13. According to the CJEU's earlier case law, the national judge will have to determine this on the basis of national law (Opinion at 97, 99, 103-104, 107, 111-112).

Should the judge be unable to assume jurisdiction on the basis of the choice of forum clause, he may still do so if Article 16(2) allows it. Article 16(2) assigns jurisdiction to the courts of the consumer's country of residence. That means, in this case, that the judge needs to determine whether the defendant is resident within the jurisdiction (Opinion at 114). If not, the judge must determine whether the defendant is resident in another Member State (Opinion at 116). This test, according to Article 26(1) of the Regulation, is a test that the judge must exercise ex officio (Opinion at 118). The question becomes one of burden of proof, in which the interests of the consumer - who is not present and who, as we have seen, the guardian may not without the consumer's knowledge represent - are decisive. The claimant may offer evidence but the judge is not bound to this information without further investigation (Opinion at 120).

The case shows how complicated questions of jurisdiction can get in international consumer cases. The A-G's application of the Brussels I Regulation, however, also shows that the Regulation is sensitive to consumer interests. The mechanisms of the Regulation in combination with the unfair terms cases - remember Océano! - make for a pretty tight safety net. Let's see what the Court of Justice says. We'll keep you posted...

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