The post below was written by Adrian Briggs QC, who is Professor of Private International Law at the University of Oxford. It is the second contribution to the EAPIL online symposium on the ruling of the Court of Justice in the case of Wikingerhof v. Booking (the first one, by Matthias Lehmann, appeared earlier today and can be found here).
Other contributions will follow in the coming days. Readers are encouraged to share their views by making comments to the posts. Those wishing to submit longer contributions for publication are invited to get in touch with the managing editor of the blog, Pietro Franzina, at firstname.lastname@example.org.
The late, great, F A Mann was sometime heard to refer, in a wry way which one could never quite interpret, to ‘common law pragmatism’. It has served us well; and it provides a vantage point for an assessment of the decision in C-59/19 Wikingerhof GmbH & Co KG v Booking.com BV EU:C:2020:950. Those looking for theory will, no doubt, find it elsewhere. The observations sketched out below simply seek to explain why the decision of the Grand Chamber is, as a matter of practical law, a disaster.
Where a claim is raised between parties who have chosen to place themselves within the ties of a voluntary relationship, and something goes wrong, the claim which results may be seen as an incident of that relationship which should be subject to jurisdictional rules designed for disputes arising within that relationship. Though in the Brussels/Lugano context this is seen and understood most clearly in the context of insurance, and consumer and employment contracts, it was also understood, with brilliant clarity by Darmon A-G in 189/87 Kalfelis. Spurning his advice, the Court in that case preferred to describe a virtual line between claims treated as contractual and those allocated to the special jurisdiction for tort and delict. This might have meant that a non-contractual claim could, in principle at least, be raised between contracting parties; and the seeds of trouble were thereby sown. A narrow question mesmerised the English, argued endlessly about what to do about claims based on unjust enrichment; but the deeper question was when a claim based on an obligation owed by one contracting party to another might be held, for the purpose of special jurisdiction, not to be a matter relating to a contract. A serviceable answer, and perhaps the only sensible answer, was eventually given by the decision in C-548/12 Brogsitter, which in material part observed that
It is apparent from the order for reference that the parties to the main proceedings are bound by a contract. However, the mere fact that one contracting party brings a civil liability claim against the other is not sufficient to consider that the claim concerns ‘matters relating to a contract’ within the meaning of Article 5(1)(a) of Regulation No 44/2001. That is the case only where the conduct complained of may be considered a breach of contract, which may be established by taking into account the purpose of the contract. That will a priori be the case where the interpretation of the contract which links the defendant to the applicant is indispensable to establish the lawful or, on the contrary, unlawful nature of the conduct complained of against the former by the latter. It is therefore for the referring court to determine whether the purpose of the claims brought by the applicant in the case in the main proceedings is to seek damages, the legal basis for which can reasonably be regarded as a breach of the rights and obligations set out in the contract which binds the parties in the main proceedings, which would make its taking into account indispensable in deciding the action. (italics added)
In other words, if the substance of the complaint could be said to have broken the contract to which the parties had bound themselves, special jurisdiction in the matter was contractual. It was a clear rule even though, as it now seems, the casual, justificatory, reference to the contract as indispensable gave dissenters something to make mischief with. In the meantime, the Court in C-47/14 Holterman simply copied this part of Brogsitter into a judgment principally concerned to maintain the integrity of Section 5 of Title/Chapter II. As well it might: the opportunity for an unscrupulous employer to strip the employee of the protection provided to him by accusing him of being a tortfeasor/thief rather than a contract-breaker, all the while denying that the employment contract needed to be referred to for anything other than data, was plain and obvious and quite, quite wrong. At this point we might have hoped for a period of stability; it was not to be. An unduly judgmental Opinion in C-603/17 Bosworth seemed unhappy with the idea that powerful office holders accused of fraud could derive any benefit from Section 5, but the idea that an employee might be deprived of his shield by a bare accusation of fraud was not underwritten by the Court which otherwise left the issue well alone.
But after another regrettable Opinion, and the calamitous judgment which this time swallowed it whole, the clear rule in Brogsitter, and the foundation of Kalfelis, has been stood on its head. It now appears to be the law that if the complaint may be framed or pleaded as a tort, it may by this means be excluded from the special jurisdiction rule for matters relating to a contract. According to the Court in C-59/19 Wickingerhof (and lightly editing the judgment for ease of reading):
Where the applicant relies on rules of liability in tort, delict or quasi-delict, namely breach of an obligation imposed by law, and where it does not appear indispensable to examine the content of the contract concluded with the defendant in order to assess whether the conduct of which the latter is accused is lawful or unlawful, since that obligation applies to the defendant independently of that contract, the cause of the action is a matter relating to tort, delict or quasi-delict. Wikingerhof relies on an infringement of German competition law, which lays down a general prohibition of abuse of a dominant position, independently of any contract or other voluntary commitment. Specifically, Wikingerhof takes the view that it had no choice but to conclude the contract at issue and to suffer the effect of subsequent amendments to Booking.com’s general terms and conditions by reason of the latter’s strong position on the relevant market, even though certain of Booking.com’s practices are unfair. Thus, the legal issue at the heart of the case in the main proceedings is whether Booking.com committed an abuse of a dominant position within the meaning of German competition law. As the Advocate General stated in points 122 and 123 of his Opinion, in order to determine whether the practices complained of against Booking.com are lawful or unlawful in the light of that law, it is not indispensable to interpret the contract between the parties to the main proceedings, such interpretation being necessary, at most, in order to establish that those practices actually occur.
Those who look to the jurisprudence of the Court for answers rather than distracted theorising will rightly despair at this bouleversement. Even if one leaves aside the damage which this new approach would do were it allowed to infect Sections 3, 4 and 5 of Title/Chapter II, how is it supposed to work in common or garden cases of civil liability in which – as in Brogsitter – the claim may plausibly be pleaded by reference to contractual as well as by other-than-contractual duties ? From an English perspective, a number of cases come quickly to mind. Consider (1) the electrician who rewires a piece of equipment consigned to him for repair so negligently that it electrocutes me when I plug it in; (2) the banker, who provides a credit reference on a party with whom I am proposing to deal, who has not checked his records and so gives me bad advice; (3) the consultant who works with me to develop a new commercial opportunity but who purloins my confidential information to exploit it on his own account and at my expense; (4) the solicitor who abstracts funds which he held on my account; (5) the Uber driver who injures his passenger when he jumps a red light; (6) the doctor in private practice who molests his patient when she is on the examination table; (7) the fraudster who by deceit induces another to enter into a contract and that other, rather than rescind, sues for damages which have the same economic effect as rescission would have; (8) the person who by negligent misrepresentation induces another to enter a contract, with the same consequences as in (7); (9) the individual who by duress, or the unconscionable exercise of undue influence, causes the victim to conclude a contract with him or with another; and (10) any defendant who pleads in defence to a claim framed in tort that the parties made a contractual promise that the claim would not be brought. How many of these complaints are matters not relating to a contract ?
It might be said that in each case the wrong done was committed by a person who, in doing what he did or failed to do, broke the contract to which he had bound himself. It may also be said that (1) if my son had been the first to use the equipment he would be entitled to complain of the electrician’s negligence; (2) that if the applicant had not paid for the credit reference he would still be entitled to sue the banker for breach of the duty of care; (3) the misuse of confidential information is an equitable wrong, no matter how one comes by it; (4) fraud is fraud and theft is theft and though employment is the context it is not the cause of action; cases (5) and (6) speak for themselves; as to (7) and (8), the synergy of contract, tort, and equity as a means of dealing with pre-contractual misrepresentation means that they cannot now be pulled apart; in (9) the contract will be voidable, with an alternative claim for compensation being only doubtful; and (10) would appear to be the tip of an iceberg, for it happens all over the place. Are we now supposed to say that none of these falls within the special jurisdiction for matters relating to a contract because the duties owed and broken by the defendant arise from the general law and the contractual setting is no more than that ? That the contract is the stage but not the play ? Or is the answer – surely worse – that some do, or – surely worst – that it all depends on how the self-serving claimant chooses to plead out his claim ? This last possibility would be surprising. The Court’s jurisprudence on the place where financial loss occurs (C-375/13 Kolassa, C-12/15 Universal Music, C-304/17 Löber, C-343/19 Volkswagen, among others) has been haunted by the fear, slightly unreal, that if it is routinely held to occur at the place of the bank account out of which payment is made, a claimant, possessed of several bank accounts and uncannily impressive foresight, might pave the way to a favourable special jurisdiction. It now seems that the Court has allowed itself to be lured into the very trap it had seemed to be so concerned to avoid, or – perhaps – into an even bigger one.
One turns to examine the proposition that it is different if it is ‘indispensable’ to look to the contract. It is hard to see that this has any sensible meaning. Contracts contain all sorts of things in addition to the express promises each side makes to the other. They may make provision for the implication of terms. They may try to prevent the implication of terms: entire agreement clauses, no oral modification clauses, and so on. They may define performance obligations directly, or by the subtle chiaroscuro of express promise and exclusion clause: if liability for X is wholly excluded, there can hardly be said to be a duty to do X in the first place. They may limit the liability which would otherwise arise, or restrict the circumstances in which, or grounds upon which, a complaint may be made. They may incorporate terms from another instrument, or exclude certain statutory effects which might otherwise apply. They may provide for acts to be permitted if payment is made, such as the early termination of an agency. They may provide that a claim will not be brought in tort but that, for example, a claimant will accept a payment by way of compensation or compromise: in short, they may do all manner of things. The answer to the question whether it is indispensable to look into the contract is, surely, that it is always necessary: the contract may not add to the facts and matters in dispute, but save in the cases in which it is admitted before the writ is served, this cannot be known until one has looked. Contracts, and their interpretation, can be very complex and it is absurd to say that there is no need to look into the contract before one has looked into it. Stand, if only for an unhappy moment, in the shoes of the lawyer who advised the client that she had a case in tort and who, when asked whether he had looked into the contract to see what it might have said, says that he didn’t think there was any need to.
Granted, in Wikingerhof, it would have been a surprise to find an express term excluding any liability for abuse by Booking.com of its dominant position in the market. It may have felt odd to suggest that it was advisable, still less indispensable, to read through the contract to check; but one never knows, and this provides no basis for sound conclusion; and in any event, abuse of a dominant position is only a particular version of economic duress or undue influence, both of which lie right in the middle of the contractual mainstream. If Wikingerhof GmbH had been asked whether it considered Booking.com to have or not to have broken the contract, or unlawfully coerced the surrender or contractual rights, it could only have answered in the affirmative, albeit that it may have preferred not to say so. The defendant had, by the very conduct complained of, broken or wrongfully interfered with its contract with the claimant, yet the matter was not one relating to a contract. No matter how hard one rubs one’s eyes, this still looks wrong.
It may be asked whether the unspoken aim of the judgment in Wikingerhof was to assist the German claimant by finding a way for it to sue in the place in which it felt most comfortable; to ‘protect’ the weaker party, the vulnerable victim of a dominant abuser, as it were. One hopes that no such thought was present in the curial mind, for accusations of abuse, of fraud, are only ever accusations, and findings of abuse were many months away. And there is no little irony in the fact that the decision actually improves the jurisdictional position of the company which is in a position to abuse its dominant position. When it gets wind of the fact that a victim is about to launch proceedings, the dominant abuser will be able to rely on Wikingerhof and on C-133/11 Folien Fischer to bring proceedings, in the place of the event giving rise to the alleged loss, for a declaration that it committed no wrong. Worse, unscrupulous employers (we have no need to name names), already immune to the discipline of anti-suit injunctions, will have a new spring in their step. It is not easy to understand why this should be the way the law works.
The question framed by the judgment in Brogsitter was easy to understand and to answer: has anyone teaching the subject ever found that his or her students struggled with it ? Has anyone advising a client needed to spend anxious hours in wrestling with it ? One hopes not. What is proposed to replace it – has replaced it, if we have to accept that the damage has been done – will require us to go back over the vast range of overlapping claims and unclaims, of complaints which are, as a matter of analysis, ‘not only a simple breach of contract, but also of another obligation’ cases, and develop the science which will tell is when reference to a contract is ‘indispensable’ in order to settle the question of special jurisdiction. Brexit, Covid, and now Wikingerhof. What a wretched year. We are only one horse short of an Apocalypse.