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The Parties’ Free Choice of EU Jurisdiction
The CJEU concluded that such a contractual agreement would be covered by Article 25(1) of Regulation (EU) No. 1215/2012 on jurisdiction and the recognition and enforcement of judgements in civil and commercial matters (the “Brussels Recast Regulation” or the “Regulation”).
Facts of the Case
FD as creditor resident in Slovakia and Dúha reality, a company governed by Slovak law and domiciled in Slovakia, as debtor, concluded two pecuniary loan contracts on 29 June 2016 and 11 March 2017. Each of these two contracts includes an agreement conferring jurisdiction with identical content under which, in the event of a dispute that cannot be resolved by negotiation, that dispute “shall be settle by a court of the Czech Republic having substantive and territorial jurisdiction.” On 8 December 2021, FD assigned the receivables arising from the two pecuniary loan contacts, amount to a total of EUR 153,740 to Inkreal, a company governed by Slovak law and domiciled in Slovakia.
Dúha reality failed to repay the pecuniary loans and on 30 December 2021, Inkreal brought an action before the Supreme Court of the Czech Republic (the “Referring Court”) seeking payment of debts owed and a determination of a Czech Court having territorial jurisdiction to rule on the merits of the case on the basis of the agreement conferring jurisdiction contained in the two pecuniary loan contracts.
Inkreal claimed that the agreement conferring jurisdiction was valid and that it complied with the requirements under Article 25(1) of the Brussels Recast Regulation and that there was no other special or exclusive jurisdiction of a court under that Regulation. The Referring Court held that the applicability of the Brussels Recast Regulation is subject to the existence of an international element and that it was uncertain whether the Regulation applied to the situation at issue where the international element was limited to an agreement conferring jurisdiction on the courts of a Member State other than that in which the contracting parties were established.
The Referring Court acknowledged that there are divergent views to the issue in both academic legal literature and national case law of the Member States. It declared that although the applicability of the Regulation could be justified by, inter alia, the need for a uniform interpretation and by the intention of the EU legislature to respect the contractual autonomy of the parties, the fact remained that the dispute in question could be classified as purely national on the ground that the mere will of the parties cannot suffice to confer an international character on their contractual relationship. With this backdrop in mind, the Referring Court stayed the proceedings and requested a CJEU preliminary ruling on whether the application of Article 25(1) of the Brussels Recast Regulation can be based solely on the fact that two parties with their seat in the same Member State agree on the jurisdiction of the courts of another EU member.
CJEU’s Considerations and Ruling
The CJEU considered the following:
Author: Ria Micallef
- The wording of Article 25(1) of the Brussels Recast Regulation – the CJEU held that it is clear from this provision that if the parties, regardless of their domicile, agree on a specific court/s of a Member State, that court is to have jurisdiction to settle the dispute unless the agreement conferring jurisdiction is null and void as to its substantive validity under the law of that Member State. Article 25(1) of the Regulation does not preclude the choice of a court which is located in a Member State other than that in which both parties reside and are domiciled, even if that contract has no other connection to that other Member State.
- The context behind this provision of EU law – the CJEU said that it is settled case-law that for the jurisdiction rules of the Regulation to apply, the existence of an international element is required, yet it admitted that the Regulation does not contain a definition of what constitutes an international element. Considering this gap, the CJEU sought to refer to Article 3(1) of Regulation No. 1896/2006 creating a European order for payment procedure, which defines the equivalent concept of ‘cross-border litigation’ by reference to a dispute in which at least one of the parties is domiciled or habitually resident in a Member State other than the Member State of the court seized.
- The objectives of the Regulation – the CJEU quoted the objective of respecting the autonomy of the parties and enhancing the effectiveness of exclusive choice-of-court agreement.
- The purpose pursued by this provision of EU law – the CJEU held that the Regulation seeks to unify rules on conflict of jurisdiction in civil and commercial matters by way of rules which are highly predictable. The Regulation’s main objective is therefore that of producing legal certainty and strengthening the legal protection of persons established in the European Union.
Author: Ria Micallef