Case law Developments in PIL

Austrian Supreme Court on Choice-of-Court Agreements and the Assignment of Claims

The author of this post is Simon Laimer, professor at the Linz University.

The claimant, an airline established in Austria, and the defendant, which operates a hotel in India, concluded a written contract for the accommodation of the airline’s crew members in the defendant’s hotel as well as their transfer from the airport to the hotel.

The agreement provided, among other things, that the defendant should indemnify the claimant in respect of any damage to property or injury or death of persons, encompassing the property of the claimant and the crew members, caused by negligent or wilful misconduct of the hotel or its staff.

Furthermore, the agreement included an exclusive jurisdiction clause on behalf of a competent court in Vienna (Austria) and provided that it shall be governed by Austrian law without reference to the choice of law principles thereof. During a transfer from the airport to the hotel commissioned by the defendant a traffic accident occurred and several crew members were injured.

The claimant brought a claim to the Vienna commercial court (Handelsgericht) for payment of damages, including damage claims assigned to it by its crew members. While the Handelsgericht determined its jurisdiction based on the jurisdiction clause, the Court of Appeal rejected the claim in so far as it concerned the crew members’ claims assigned to the claimant for lack of international jurisdiction of the Austrian courts.

By a ruling of 29 June 2020, the Austrian Supreme Court (2 Ob 104/19m) confirmed the international jurisdiction of Austrian courts also with regard to that part of the claim. The Court held that a jurisdiction clause under Article 25 Brussels I bis Regulation cannot be invoked against third parties benefitting from the contract (citing the ruling of the Court of Justice in Refcomp), but they could rely on it if the interpretation of the clause leads to the conclusion that it (also) aims at protecting them, hence only the effect of prorogation but not the effect of derogation applies.

The decision may be correct in its outcome, although it remains questionable whether the Austrian Supreme Court should have referred this case to the Court of Justice for a preliminary ruling.

The CJEU recently ruled (in his – debatable – decision in Ryanair v DelayFix; see also Matthias Lehmann) that the mere assignment of a claim is not sufficient for the assignee to be bound by a choice-of-court clause (unless the assignee is the successor to all the initial contracting party’s rights and obligations under the applicable law; para 47). In the present case, however, the roles of the parties were exactly reversed: the Austrian Supreme Court found that, in accordance with the definition of responsibilities covered by the contract, a place of jurisdiction in favor of the assignors had been agreed between the contracting parties. With regard to the interpretation of the jurisdiction clause, both the law applicable to the contractual relationship and the lex fori led to Austrian law, which is why the Austrian Supreme Court found that it did not have to decide the corresponding dispute in legal literature (cf. Caterina Benini on the subject).

Well, it may be sufficiently clear in Austrian national law and as well in the field of insurance contract law according to art. 15 No. 2 Brussels I bis (see CJEU in Gerling v Amministrazione del tesoro dello Stato) that choice-of-court agreements in favor of third parties are effective (at least with regard to the effect of prorogation), but a CJEU decision going beyond this could have contributed to legal clarity.

A detailed summary of the decision is available in the latest issue (4-2020) of The European Legal Forum.

4 comments on “Austrian Supreme Court on Choice-of-Court Agreements and the Assignment of Claims

  1. Caterina Benini

    Thank you, Professor Laimer, for posting such a decision rendered on a very peculiar case, involving both the effectiveness of the choice of court agreement against third parties beneficiaries of the main contract (the air-company’s employees) and the effectiveness of the same choice of court clause vis-à-vis the assignee of the beneficiaries’ claims (the air-company itself).

    It seems that the Court, after ruling that the air company’s employees could benefit from the choice of court agreement included in the contract entered into their favour, did not investigate the second issue of the effectiveness of the choice of court clause vis-à-vis the assignee of the employees’ claims (the air-company itself).
    I guess that the fact that the assignee of the claims (the air-company) was bound on its own by the choice of court clause played a role in the Court’s reasoning.
    However, as the air-company acted as the assignee of the employees’ rights rather than the representative of the employees, I do think that the analysis of such second step was necessary.

  2. Simon Laimer

    Dear Ms Benini,

    Many thanks for your reaction.

    In the case under consideration the jurisdiction clause itself did not state who may be entitled to claims or act as claimant. However, the Austrian Supreme Court found that it can be deduced from the definition of responsibilities covered by the agreement as obvious and in any case recognisable to the defendant that according to the scope of these provisions, in the case of damage caused to the crew members, the latter shall be entitled to claim damages and bring them as claimants.

    Indeed, the Court didn’t investigate whether the airline is also bound by the jurisdiction clause in its role as assignee. I suppose you are correct in assuming that the particular role of the parties and the fact that the airline itself was bound by the choice of court agreement was implicitly taken as a basis for the decision by the Court.

  3. Matthias Lehmann

    Dear Mr Laimer, Many thanks for posting on this interesting case. It seems the Austrian Supreme Court is of the view that the scope of the jurisdiction clause is a matter of national law. How can this be squared with the judgment of the CJEU in Ryanair, which establishes a European rule to determine the reach of the jurisdiction clause? The fact that the clause is invoked by the claimant and not by the defendant cannot make a difference, nor can the role of assignor or assignee. The issue is in all cases the same: Who is bound by the jurisdiction clause? Under Ryanair, this question is determined by EU law, namely Art. 25 Brussels Ibis Regulation. I cannot see how the Austrian Supreme Court’s view can be reconciled with this ruling. Best wishes, Matthias Lehmann

  4. Simon Laimer

    Many thanks, Mr Lehmann, I agree with you, that is what I think. However, if the Austrian Supreme Court wants to assume that the particular situation of this case allows it to decide differently, it should have asked the CJEU for a preliminary ruling on whether this is really the case (which is most probably not). Best wishes, Simon Lamer

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