Case law Developments in PIL

News and Updates from the Court of Justice of the European Union

A partial renewal of positions, both of AGs and of judges, will take place next October at the Court of Justice. The reasons vary from retirement to normal rotation (the latter being the case of the so-called “smaller countries” in as far as AGs are concerned).

As a consequence some opinions and judgments have been or will be delivered before scheduled. In PIL this will the case of C-296/20, Commerzbank, a request for a preliminary ruling from the Bundesgerichtshof (Federal Court of Justice, Germany) on the interpretation of Article 15 (1)(c) of the Lugano Convention 2007. The Opinion was delivered on September 9. AG Campos Sánchez-Bordona proposes that

Article 15(1)(c) of the Convention on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters, signed at Lugano on 30 October 2007, the conclusion of which was approved on behalf of the European Community by Council Decision 2009/430/EC of 27 November 2008, must be interpreted as meaning that it is not applicable in the case where, at the time when the contract is concluded, the parties to that contract are domiciled (within the meaning of Articles 59 and 60 of the Convention) in the same State bound by the Convention and the foreign component of the legal relationship arises only subsequently, when the consumer has transferred his or her domicile to another State also bound by the Convention.

In the alternative, Article 15(1)(c) of the Convention would be applicable in the case where the parties’ domicile at the time when the contract is concluded is situated in a single State bound by the Convention and the consumer subsequently relocates to another State also bound by the Convention, provided that the economic operator pursues in the State of the consumer’s new domicile a trade or profession such as that which gave rise to the conclusion of the contract.’

Should one or the other strands of the Opinion be followed, the Court would be taking a stance in favor of predictability both for the consumer and the other party to the contract, in line with C-585/08 and C-144/09 (Pammer and  Hotel Alpenhof). The contrary view will be more comfortable for the consumer, but deterrent for potential contractual parties (I would add: as things stand. Business counter-party will certainly try to develop strategies to reduce the impact of a consumer moving cross-border. A easy one: indiscriminate increase of the price of goods and services).

Our colleague Geer Van Calster provides a short accurate summary of the Opinion’s reasoning here, based on the provisional English translation. I would like to complete it by highlighting the following points:

First of all, according to the Opinion the ratio legis of Section 4 of Title II of the Convention is  to ensure adequate protection for the consumer against a very specific risk, namely that of internationality. Indeed, a process abroad entails costs and challenges an average consumer will not not willing or able to assume.

Secondly, consumer protection in the field of international jurisdiction is not an absolute goal in the Convention. Some requirements have been set up by the lawmaker delineating the scope of the Section, tending to ensure that the economic operator will be able to foresee where he or she may sue and be sued when entering into a contract with a consumer. It should be borne in mind that under Article 16 of the Convention the consumer has the choice between filing a claim with the courts of his or her own domicile – forum actoris– or those of the defendant.

By contrast, the other party to the contract is deprived of any choice: he or she can only file a claim with the counts at the consumer’s domicile. Like in a B2B case, the relevant domicile in this regard is the one at the date on which the court action is brought (see C 98/20, mBank). There is no doubt this rule always carries uncertainty with it, for no one can predict whether a potential defendant domiciled in a contracting State at the time a contract is concluded will move cross-border afterwards. The insecurity is the same no matter the type of contract, i.e, B2B or B2C. There is an important difference, however, in a B2B setting: because a choice of court is possible without any limitation, and also Article 5(1) remains available, the parties can figure out jurisdiction from the very beginning.

The logical inference from those two points would be that, in case the consumer moves to another contracting State after the conclusion of a contract which, at that point in time, was purely domestic, it is for him or her to cope with the risks and costs of cross-border litigation. In other words: if the consumer is the one transforming a domestic situation into an international one, he or she should stand the consequences of internationality (in terms of jurisdiction).

Thirdly, it is true that at first sight, Article 17(3) of the Convention makes it difficult to claim than Section 4 of Title II does not apply to situations lacking an international element (more precisely: an international element resulting from the domicile of the parties) when the contract is entered into. As a matter of fact, the provision endorses the premise that balance is needed between protecting the consumer and offering predictability to the professional. The Opinion explains why it would be neither sound nor advisable to infer that Article 15(1)(c) applies to situations of supervening internationality on the basis of the mere existence of Article 17(3). It recalls in this regard, among other, the fact that the mechanism the latter rule relies on – choice of court clauses- may not be admissible under the law of the contracting States.

This notwithstanding, one cannot simply ignore Article 17(3). Therefore, the AG will try to offer an interpretation of Article 15(1)(c) apt to conciliate both the objective of protecting the consumer from the inconveniences deriving from internationality (including one which the consumer him- or herself creates), and the objective of providing the other party to the contract with foreseeability as to the courts having international jurisdiction. To this aim, Article 15(1)(c) of the Convention could be interpreted as encompassing any situation in which the professional pursues its economic activity in, or directs it towards, States other than that where he or she is domiciled, including the State where the consumer is domiciled at the time when  proceedings are instituted.

In the past, the Court has rendered decisions which could be read as supporting the opposite hypothesis, that is to say, Article 15(1)(c) applies in any event, independently of whether the international element is present when the contract is entering into or appears at a later stage due to a change of domicile of the weaker party, who moves to another contracting State . Just like the referring national court, the AG considers those Court’s judgments and orders not categorical. He claims instead that the “weighty consequences which applying the consumer protection rules brings to bear upon a professional surprised by a change of domicile by the consumer which it was not expecting or could not have foreseen call for an explicit examination of this issue.” Whether this “explicit examination” will end up with the endorsement of the Opinion remains to be seen: to be clear, judging from the jurisprudence of the Court of Justice in consumer matters, the odds are against. The Court has steadily shown a clear pro-consumer tendency and it is unlikely that it will give it up now: at least, not without a sign from the lawmaker, which has already been suggested in the literature, see for instance here (or maybe, by making litigation more costly for the business party to the contract, the Court is indirectly pushing in support of ADR mechanisms).

In the meantime, should the Court decide not to follow the Opinion, I would like to add that a clause in a domestic contract with the consumer whereby he or she must communicate the change of abode does not provide for predictability as a factor to decide whether to engage or not in deals with a specific consumer. It will prove useful for other purposes, though, such as service of process (if the consumer complies with the obligation).