Insights

On the 21^st of March 2024 the Court of Justice of the European Union (the “CJEU”) delivered a preliminary ruling (C-90/22) clarifying the scope of the grounds for the refusal to recognise judgements of EU Member States in terms of Regulation (EU) No 1215/2012 on jurisdiction and the recognition and enforcement of judgements in civil and commercial matters (“Brussels 1 Recast” or the “Regulation”). This preliminary ruling followed a reference by the Supreme Court of Lithuania concerning a dispute arising between Gjensidige ADB, and Rhenus Logistics UAB and ACC Distribution UAB.

The CJEU held that in terms of Brussels 1 Recast, a Court of one EU Member State (the “Addressed Court”) cannot refuse to recognise a judgement delivered by a Court of a different Member State (the “Court of Origin”) on the ground that such Court of Origin had declared itself to have jurisdiction by disregarding a choice-of-court agreement.

Facts of the Case

ACC Distribution, a technology distributor, engaged Rhenus Logistics UAB (“Rhenus Logistics” or the “Carrier”) to transport computer equipment from the Netherlands to Lithuania. It transpired, however, that some equipment was stolen in transit. The stolen products were covered by an insurance policy issued by Gjensidige ADB (the “Insurer”) and accordingly, ACC Distribution was indemnified for the lost products valued at €205,108.89.

Following this incident, the Carrier applied to a Netherlands District Court seeking a declaration that its liability for such stolen products was limited. From their end, ACC Distribution and the Insurer argued that the Dutch Court lacked jurisdiction as the contract between ACC Distribution and Rhenus Logistics explicitly stipulated that any dispute arising from the performance of such contract was subjected to the jurisdiction of the Lithuanian Courts.

In this respect, ACC Distribution and the Insurer based their arguments on Article 25 of Brussels 1 Recast which states that where the parties to a contract agree that the courts of a particular Member State are to have jurisdiction, that court shall have jurisdiction. Moreover, the jurisdiction of such designated court is exclusive unless the parties agree otherwise.

However, in this case, although the agreement in question did fall within the scope of Brussels 1 Recast, it also constituted a ‘contract for the international carriage of goods’ in terms of the United Nations Convention on the Contract of International Carriage of Goods by Road (the “CMR”). Article 31 of the CMR stipulates that the plaintiff in a dispute falling within its scope can bring proceedings in front of the court chosen by the parties in the carriage of goods agreement. However, they may also elect to do so before numerous other courts, including the courts of the country where the defendant is ordinarily resident, or has his principal place of business, or the courts of the place where the goods were taken over by the carrier, or of the place designated for delivery.

Therefore, being presented with these two seemingly contradictory legal frameworks, the Dutch court ruled that it did, in fact, have jurisdiction, and held that the choice-of-court clause in the contract was null, as it precluded the parties from choosing among the courts which had jurisdiction in terms of the CMR. Therefore, the proceedings before the Dutch court continued.

In the meantime, the Insurer opened proceedings against the Carrier in front of a regional Lithuanian Court, seeking reimbursement by the Carrier of the entire amount which it had paid ACC Distribution by way of indemnity in terms of the insurance policy. Seeing as how the two proceedings involved the same cause of action and were between the same parties, the Lithuanian Court stayed proceedings until the Dutch Court had delivered a final decision.

Shortly afterwards the Dutch Court declared that the liability of the Carrier was to be limited to €40,854.20 plus interest, which was duly paid to the Insurer. As a result, the regional Lithuanian Court dismissed the action for damages brought by the Insurer on the basis that the decision of the Dutch Court was binding upon it in the case at hand. This dismissal was upheld on appeal. The Insurer appealed once again in front of the Supreme Court of Lithuania, arguing that when analysing the concurrent rules on jurisdiction found in the CMR and Brussels 1 Recast, the latter Regulation should prevail.

The Lithuanian Supreme Court referred the matter to the CJEU, seeking clarification as to whether (i) a Member State court can declare itself to have jurisdiction to deal with disputes arising from contracts falling within the scope of the CMR, even though that contract contains a choice-of-court agreement designating a different Member State court, and (ii) whether a Member State court may refuse to recognise a judgement of a court of a different Member State on the basis that the latter declared itself to have jurisdiction notwithstanding the existence of a choice-of-court agreement.

The CJEU’s analysis

As a preliminary matter, the CJEU sought to determine whether the legality of refusing to recognise a judgement on the grounds that the Court of Origin declared itself to have jurisdiction, notwithstanding the existence of a choice-of-court agreement, should be considered in light of Brussels 1 Recast or in light of the CMR.

It referred to Article 71 of Brussels 1 Recast which stipulates that where Member States are party to other conventions which, in relation to particular matters, govern jurisdiction or the recognition or enforcement of judgements, such conventions shall prevail. Moreover, when a court of a Member State gives a judgement while exercising its jurisdiction arising from such other convention, that judgement must be recognised and enforced in other Member States in terms of the same convention.

Despite the clarity of the above principle, the CJEU argued that the CMR cannot be applied if it compromises foundational principles of judicial cooperation in civil and commercial matters within the European Union, such as the concept of mutual trust in the administration of justice in the European Union.

Ultimately, therefore, the CJEU elucidated that the Court of Origin (i.e. the court which delivered a judgement) is almost always in a better position than the Addressed Court (i.e. the court of a Member State where recognition of a foreign judgement is sought) to determine its own jurisdiction. Thus, a court of an EU Member State would typically not be permitted to review the jurisdiction of a court of another Member State.

In light of the above reasoning, the CJEU proceeded to consider whether Article 45(1)(a) and Article 45(1)(e)(ii) of Brussels 1 Recast allow an EU Member State court the power to refuse recognition of a judgement because the Court of Origin had affirmed its own jurisdiction, notwithstanding a choice-of-court agreement designating a different court.

Article 45(1)(a) stipulates that the recognition of a judgement of another EU Member State can be refused if such recognition is manifestly contrary to public policy in the addressed Member State. The CJEU highlighted that such ground needs to be interpreted restrictively. The Regulation explicitly stipulates that the jurisdiction of the Court of Origin may not be reviewed, and that the “public policy test” may not be applied to rules on jurisdiction. The CJEU clarified that recourse to the public policy exception can only be made when the recognition of a judgement would be “at variance to an unacceptable degree with the legal order of the State Addressed…”.

Secondly, the CJEU considered that recognition of a judgement may only be refused because of a breach of the rules relating to jurisdiction as set out in the Regulation, in those scenarios set out in Article 45(1)(e). Article 45(1)(e)(ii) stipulates that a Member State court can refuse to recognise a judgement which conflicts with Section 6 of Chapter II of the Regulation which sets out those prescribed instances where a specific court shall have exclusive jurisdiction regardless of the domicile of the parties. The CJEU concluded that the provisions of such Article cannot be interpreted broadly, to in a similar manner, also allow a court to refuse to recognise a judgement because it falls foul of the provisions relating to choice-of-court agreements (which are set out in Section 7 of Chapter II of the Regulation). It highlighted that the wording of the Article in question is very clear and thus not subject to interpretation.

Furthermore, the CJEU highlighted that the grounds of refusal set out in Article 45 are exhaustive and must be interpreted restrictively, since a refusal to recognise a judgement delivered by a court of an EU Member State, constitutes an obstacle to the attainment of one of the fundamental objectives of the Regulation, this being the rapid and simple recognition and enforcement of judgements given in Member States.

Conclusion

Accordingly, the CJEU held that in terms of the Regulation, the Addressed Court cannot refuse to recognise a judgement delivered by a court of a different Member State on the ground that such latter court had declared itself to have jurisdiction, disregarding a choice-of-court agreement assigning jurisdiction to the courts of a different EU Member State in the process.

 Disclaimer: Ganado Advocates is responsible for contributing this law report but was not in any way involved as a legal advisor for the parties in the judgement being covered in this law report. This article was first published in ‘The Malta Independent’ on 12/06/2024.