Thursday, 20 September 2012

Signing your name under a contract does not automatically make you a consumer - opinion of AG Sharpston in Česká Spořitelna (C-419/11)

20 September 2012: Opinion of AG Sharpston in Česká Spořitelna (C-419/11)

This case concerned interpretation of provisions of the Regulation No. 44/2001 on jurisdiction and recognition and enforcement of judgements in civil and commercial matters. Articles 15 and 16 of this Regulation set specific rules as to jurisdiction over consumer contracts.   

In the given case, a company - Feichter-Cz - having its seat in the Czech Republic entered into an overdraft agreement with Česká Spořitelna, also domiciled in the Czech Republic. The loan was provided for business purposes. The promissory note was signed by Mr Feichter, both in his capacity as a managing director of the Feichter-Cz as well as an individual. Mr Feichter was shareholder of 60% of shares in this company. The promissory note was later not honoured by the borrower. Česká Spořitelna started proceedings seeking payment with interest before Prague City Court. Mr Feichter objected to the jurisdiction of this court, since he claimed he was a natural person who had his domicile in Austria and any proceedings seeking to enforce payment under the promissory note would be subject to Articles 15 and 16 of the Regulation and should take place in the Member State of his domicile.

AG Sharpston observes in this case that it is a common lending practice to demand a guarantee by one or more of the individuals who owns and/or manages the business that is looking to obtain extra funds, especially if it is a start-up business. (Par. 23) For Articles 15 and 16 of the Regulation to apply to the current case two conditions need to be fulfilled cumulatively: the contract needed to be concluded by a consumer and had to fall within one of the categories mentioned in Article 15(1). (Par. 27) The AG has no doubts under the circumstances of the case that the first requirement has not been fulfilled. (Par. 34) Mr Feichter entered into a contract to support the business with which he was closely connected. Therefore, the aval given by a natural person to a promissory note in such a situation has to be treated as having been given for the purposes of trade or professional activity. (Par. 41)

The more general provision of Article 5(1) of the Regulation that determines jurisdiction in contract matters is applicable in the given case, pursuant to AG Sharpston. (Par. 48) For the applicability of this provision, it is sufficient that there was a contract between a lender and a borrower and that Mr Feichter by giving the aval under the promissory note consented to take a legal obligation upon himself. It does not matter that the promissory note was in incomplete form. (Par. 45-46) The AG Sharpston considers that it is the place of payment that will be determinative for establishing of jurisdiction in this case (which was Prague). (Par. 49)

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