Two places for a contractual obligation: a jurisdiction nightmare?

Two places for a contractual obligation: a jurisdiction nightmare?

What happens when a contractual dispute arises and there is a choice of jurisdiction? If an EU dispute, and you wanted to bring proceedings in the jurisdiction which is the place of obligation for performance under the contract rather than where the defendant is domiciled, the starting point would be article 5(1) of Brussels I.

Can Brussels I be relied on if the contract provides for a choice of places of performance?

This was the issue recently before Mackie J in Canyon Offshore v GDF Suez E&P Nederland [2014] EWHC 3810 (Comm).  On the facts, Mackie J held that art 5(1) applied to found jurisdiction of the court even though there was a choice of jurisdiction for the performance of the obligation under the contract.  That may well seem the pragmatic thing to do but having given judgment he gave permission to appeal.

Why was permission given to appeal?

The culprit for the difficulties in this area is the ECJ decision in Besix v Wasserreinigungsbau Alfred Kretzschmar Case C-256/00, [2003] All ER (D) 280 (May) which set out a requirement that art 5(1) only applied if a single place of performance could be identified. Later English court judgments, considering cases in which there were differing places of performance, do not refer to Besix and do not set out a requirement for a sole place of performance. These apparently conflicting decisions combined, as they are, with an area of law where the principles are not straight forward creates difficulties not only for litigators but also commercial lawyers drafting contracts with an international element.

 Sufficient proximity and predictability?

In Canyon Offshore, the place of performance was not set out in a contractual agreement but rather was stated in the invoices. However, the underlying principles applied by Mackie J arose out of cases dealing with places of performance within the contracts. Currently, it appears to be the case that if there is 'sufficient proximity and predictability' between courts in which proceedings are/have been commenced and the dispute itself, art 5(1) can still be applied. However, the position may well change if the appeal is pursued and a Court of Appeal judgment is handed down. For the moment, practitioners should advise clients that there is currently a question mark over whether the provision of more than one place of performance under a contract may result in art 5 not being available. The inability to rely on art 5 to bring proceedings in the place of performance of the contract, rather than the domicile of the defendant under the general rule in art 2, may well have a profound effect on any subsequent litigation.

Will this apply to Brussels I (Recast)?

Looking to the future, any guidance in this area will apply equally to Brussels I (recast) as the provisions in this area are identical. They now appear in art 7(1).

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About the author:

Janna is a dispute resolution lawyer. She deals primarily with cross border issues and is active in the work being undertaken in relation to the implications of Brexit for Dispute Resolution lawyers. Janna also heads up a LexisNexis costs team bringing together expertise from across the company to deal with the costs issues facing the profession.