The EU instruments governing cross-border cooperation in civil matters extend to cases and legal relationships that are characterised by an international element. So does the Brussels Ia Regulation 1215/2012, which harmonises the law of international jurisdiction and the recognition and enforcement of judgments. In the case of Inkreal (C-497/22), the Court of Justice was given an opportunity to clarify the outer limits of the notion of ‘international element’. It decided that a case in which two parties who were domiciled in the same Member State contained an international element because the parties had conferred jurisdiction to a court in another Member State.
Factual Background
In 2016 and 2017, FD and Dúha reality entered into two loan agreements, the former as the creditor and the latter as the debtor. Both FD and Dúha reality were domiciled in Slovakia. Both loan agreements included an identical choice of court clause, which provided that in the event a dispute arose that could not be settled through negotiation, that dispute ‘shall be settled by a court of the Czech Republic having substantive and territorial jurisdiction’.
In 2021, FD assigned the receivables arising under the loan agreements to Inkreal, another company governed by Slovak law and domiciled in Slovakia. Since Dúha reality defaulted on its repayments of the loan, Inkreal started proceedings at the end of 2021 before the Supreme Court of Czechia, who also was the referring court in this case.
FD in the first place sought payment of the debts owed by Dúha reality. It also sought the determination of a Czech court having territorial jurisdiction to rule on the merits pursuant to Paragraph 11(3) of the Code of Civil Procedure, on the basis of the agreement conferring jurisdiction contained in the two loan agreements.
The Supreme Court was uncertain whether the case was governed by Article 25 of the Brussels Ia Regulation 1215/2012, which contains a harmonised regime covering choice of court agreements. The precise question was whether the Regulation applied to the case at hand. Its applicability requires the existence of an “international element.” In the case at hand, the international element was limited to an agreement conferring jurisdiction on the courts of a Member State (Czechia) other than that in which the contracting parties are domiciled (Slovakia). The referring court also noted that there “are divergent answers to the issue in both academic legal literature and the national case-law of the Member States.”
The answer to the question is of interest because if Brussels Ia does not apply, the diverging domestic laws of the Member States would govern the effect and validity of a choice of court clause.
Decision
The Court of Justice started its analysis by reiterating that Brussels Ia only extends to cases in which an international element is present. The Regulation itself however contains no pointers on what exactly constitutes an international element. It only refers in Recitals 3 and 26 to the terms ‘civil matters having cross-border implications’ and ‘cross-border litigation’. Going forward, the Court’s analysis turned to Regulation 1896/2006, which put in place a European order for payment procedure (EOP). Article 3(1) of the EOP Regulation defines ‘cross-border litigation’ as ‘one 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 seised.’
The Court continued by noting that both Brussels Ia and the EOP Regulation concern judicial cooperation in civil matters having cross-border implication. Therefore, the Court stated that equivalent concepts in both regulations should be interpreted harmoniously (para. 21).
Against the backdrop of this analysis, the Court noted its previous decision in Case C-399/21 IRnovaaccording to which an international element also exists ‘where the situation of the dispute concerned is such as to raise questions relating to the determination of international jurisdiction.’ The Court observed that in the case at hand, such a question of jurisdiction did indeed arise, ‘more specifically whether the courts having jurisdiction to settle this dispute are those of the Czech Republic, or those of the Slovak Republic as the Member State in which the two parties are established.’ (para. 24) Therefore, the case at hand did contain an international element justifying the applicability of Brussels Ia.
The Court considered the relevance of the 2005 Hague Choice of Court Convention to its interpretation. Article 1(2) of the Convention provides that ‘a case is international unless the parties are resident in the same Contracting State and the relationship of the parties and all other elements relevant to the dispute, regardless of the location of the chosen court, are connected only with that State.’ The Court held that this provision reflects a compromise reached within the context of the negotiation of a multilateral convention. A similar compromise is not reflected in the Brussels Ia Regulation, since the Union legislature gave precedence to ‘the objective of maintaining and developing an area of freedom, security and justice by adopting measures relating to judicial cooperation in civil matters having cross-border implications.’ (para. 38)
In support of its decision, the Court held that its interpretation aligned with the aim of legal certainty pursued by Brussels Ia. Firstly, it ensured that the choice of court in favour of the courts of another Member State is effective without requiring that the parties had further connections to that Member State (para. 29). Secondly, applying Brussels Ia minimises the risk of diverging decisions on the validity and effect of a choice of court clause under national law, hence minimising the risk of concurrent proceedings in two or more Member States (para. 30).
The Court also referred to the self-containing nature of Article 25 Brussels Ia. In its case law, the Court consistently held that this provision lists exhaustively the conditions a choice of court agreement must meet to be effective. Adding ‘considerations about the links between the court designated and the relationship at issue’ would put a gloss on the clear text of Article 25, which does not contain any such requirement (para. 34).
On a final note, the Court observed that ‘that the applicability of Article 25(1) [Brussels Ia] to an agreement conferring jurisdiction such as the one at issue in the main proceedings reflects mutual trust in the administration of justice in the European Union […] and thus contributes to maintaining and developing an area of freedom, security and justice, inter alia, by facilitating access to justice […].’ (para. 35)
Conclusion
The decision of the Court rests on a solid and meticulous construction of the notion of ‘international element’ under the Brussels Ia Regulation. It discriminated between relevant sources for interpretation (in this case: precedent and other EU instruments) and irrelevant sources (in this case: the 2005 Hague Convention). The Court also carefully rooted its decision in the policy aims pursued by the Union legislature through the Brussels Ia Regulation and within the area of civil justice more broadly. It elaborately considered that its decision was deemed to ensure the effectiveness of those aims.
The decision gives rise to a further question which was outwith the remit of the preliminary reference to the Court of Justice. The case at hand concerned a purely internal case, in that both the parties and the chosen court were situated in a Member State. However, Article 25 Brussels Ia applies as soon as parties confer jurisdiction to the courts of a Member State – even if parties are domiciled in a third country (see Article 25(1) Brussels Ia: ‘regardless of their domicile’). It is unsure whether the decision at hand implies that Brussels Ia also applies when parties who are domiciled in the same third country confer jurisdiction to the courts of a Member State. Of course, if a third country acceded to the 2005 Hague Choice of Court Convention, then the Convention may govern the effect and validity of a choice of court agreement. Yet in cases to which the Convention does not apply, the decision has left the door open for applying Brussels Ia to a third country scenario such as the one described here. It is not unlikely that the reasoning the Court developed in the case at hand justifies extending its decision to this scenario, too.
Dr Michiel Poesen is lecturer in private international law at the University of Aberdeen, where he is a member of the Centre for Private International Law. His research interest is among other things in the harmonisation of the law of international jurisdiction and the intersection between private international and fundamental rights and values.
**This Blog Post was originally published on EU Law Live: https://eulawlive.com/analysis-the-court-of-justice-on-the-existence-of-an-international-element-under-the-brussels-ia-regulation-c-497-22-inkreal-by-michiel-poesen/#**
