Restrictions on Jurisdiction Clauses in Consumer Contracts within the European Union

by Beatriz Añoveros Terradas*

(2003) Oxford U Comparative L Forum 1 at ouclf.iuscomp.org | How to cite this article

Contents

Abstract

Jurisdiction clauses in cross-border consumer contracts may contravene the consumer’s interests. This article examines whether the European consumer, when entering into international contracts, is protected against disadvantageous choice of court agreements. Art 17 of the Council Regulation on Jurisdiction and Recognition and Enforcement of Judgments in Civil and Commercial Matters aims to protect the consumer by limiting party autonomy in certain international consumer contracts. The extent and effectiveness of such a provision is analysed. The discussion of Art 17 raises issues regarding several aspects of its scope of application and its relationship to other provisions of the Regulation. Art 17 forms part of Section IV entitled “Jurisdiction over Consumer Contracts.” This section’s material scope of application has been substantially modified by the Regulation. This fact has increased the significance of the definition of the term ‘consumer’ as the main factor determining the beneficiaries of the protective rules. It is suggested that such a provision limits the derogative effect of jurisdiction clauses in consumer contracts. In order to have also prorogative effect, a jurisdiction clause, which is valid under Art 17, must additionally fulfil the requirements laid down in Art 23. The further analysis of the protective rules will also expose some gaps that may reduce the desired level of protection, which may be filled through a Community derived rule contained in the 93/13/EEC Directive on Unfair Terms in Consumer Contracts which limits party autonomy in those consumer contracts not covered by Art 17. The article examines, through a comparison between the Spanish and English legislation which implement the Unfair Contract Terms Directive, whether such legislation can complement the protection afforded by the Brussels I Regulation by providing for cases not covered by the latter.

1. Introduction

The freedom of the parties to determine the contents of a contract is a general principle of contract law recognised by almost all legal systems. In private international law, party autonomy means the freedom of the parties to choose the law applicable to the contract. It also involves the choice to determine the forum which is to have jurisdiction to hear any potential or actual dispute between them.

The main reason for jurisdiction clauses in international contracts is that they provide for certainty by determining in advance a forum acceptable to both parties. Furthermore, they have the advantage that the parties can choose a neutral forum or a forum specialised in the relevant subject-matter.1 All of the above reasons justify and explain the wide acceptance of jurisdiction clauses and the important role they play in international trade and commerce.

Within the European Union, the Council Regulation on Jurisdiction and Recognition and Enforcement of Judgments in Civil and Commercial Matters (hereinafter, Brussels I Regulation and BIR)2 gives wide room for party autonomy. The Brussels I Regulation, in force since March 1, 2002, has superseded the Brussels Convention3 among the Member States except as regards Denmark (Art 68 BIR). This conversion from treaty to regulation has its origin in the new Title IV of the Treaty of the European Union which contains specific provisions on judicial cooperation in civil matters. 4 In particular Art 65 TEU anticipates that the Community will take measures to improve and simplify the recognition and enforcement of decisions in civil and commercial cases.

According to Art 23 BIR, where one or more of the parties to a contract is domiciled in a Member State and those parties have agreed that a court or the courts of a Member State are to have jurisdiction to settle any disputes which have arisen or which may arise in connection with a particular legal relationship, that court or those courts shall have jurisdiction. Such jurisdiction shall be exclusive unless the parties have agreed otherwise.

The advantages and the important role which jurisdiction agreements play in international trade must be reassessed with regard to cross-border consumer contracts. In the vast majority of cases, consumer contracts are standard form contracts offered on a “take it or leave it” basis in which the consumer lacks knowledge of the exact significance of a jurisdiction clause and therefore agrees to it whilst being ignorant of all its implications. In consumer contracts, there is generally no bargaining power on the part of the consumer. Choice of forum agreements are normally incorporated into the contract or form part of the supplier’s general conditions.5 Jurisdiction clauses will rarely be individually negotiated.6 The risks of harming the consumer through jurisdiction clauses are basically twofold: first, by choosing a forum far from the consumer’s domicile, the supplier may seek to discourage him from bringing an action, restricting in such a case the consumer’s access to justice; second, jurisdiction agreements in international contracts may imply an indirect choice of the proper law of the contract. This consequence may be used by the supplier to avoid the application of a protective law.

As is well known, individual consumers who have a legitimate complaint face several difficulties even in a purely domestic situation.7 Consumers are often not aware of their rights, and even if they are, they may not know how to claim them. The biggest problem, however, is the fact that the relatively small amounts which are frequently involved will inhibit consumers from taking legal action. Moreover, litigation can be very costly and time-consuming.

All these difficulties in domestic cases are amplified in cross-border consumer disputes. In international litigation the consumer might have to litigate abroad and the law applicable to the contract might be a foreign law. Thus, consumers are even less likely to know their rights. Furthermore, finding a lawyer may be more difficult, and the proceedings are likely to be conducted in a foreign language.

Other barriers have been stressed by the Commission in the Green Paper on Consumer’s Access to Justice.8 Additional delays occur when letters rogatory have to be sent to the court of other Member States. And when the party who loses the dispute is domiciled in a country other than the one in which the court has handed down its decision, enforcement must be preceded by the recognition of the foreign decision.9 The Green Paper on Legal aid in civil matters also shows the difficulties met by cross-border litigants in obtaining access to legal aid.10

Moreover, there are numerous differences in the procedural rules of the different Member States which may lead to advantages in selecting trial in one Member State rather than another (eg litigation’s costs). When dealing with consumer complaints, some – but not all – Member States have special procedures whose main features are their celerity and low cost.11 Therefore, the mere fact that the consumer has to take legal action abroad may inhibit him from seeking redress.

In addition, the supplier may seek, through a forum selection clause, to avoid the application of mandatory rules which protect the consumer. As every court applies its own rules of conflict of law to determine the applicable law, the selection of a court may determine the selection of the proper law applicable to the contract.

On the other hand, since 1980, the choice of law rules with regard to contractual obligations have been common to all Member States. The Rome Convention on the Law Applicable to Contractual Obligations has unified the choice of laws rules throughout the Community.12 This means that all courts within the European Union will apply the same conflict of law rules and therefore, in principle, the substantive applicable law will be the same regardless of the forum.13 Art 5 of the Rome Convention aims to protect the consumer by determining the proper law of certain consumer contracts.14 To this end, Art. 5 limits the parties’ choice of the applicable law. The contract will be governed by the law chosen by the parties, but the application of the chosen law shall not have the result of depriving the consumer of the protection afforded to him by the mandatory rules of the place of his habitual residence. In the absence of such a choice the law of the place of the consumer’s habitual residence will apply.

However, when the chosen court is the court of a non-Member State, the Rome Convention does not apply, and the consumer will consequently not be protected by Art 5. The level of protection afforded to the consumer through the harmonisation of the laws of the Member States can be avoided through the choice of a foreign law as the law applicable to the contract.

The establishment of the Internal Market in Europe has significantly increased intra-Community consumer transactions. The free movement of goods and services provided for by the Treaty of Rome and the intensification of competition has increased the variety of goods and services, improved quality, and reduced prices.15 Furthermore, foreign suppliers of goods and services have now direct access to the consumer’s market. The free movement of persons has also increased the number of people moving from one State to another, be it for holidays, professional reasons, or in order to receive services. In order to benefit from the Internal Market, it is very important that the consumer feels confident when he enters into an intra-Community transaction. As has been pointed out, “all the consumer rights provided by the EC legislation and by domestic law will count for nothing if they cannot be effectively enforced.”16

Additionally, modern distribution methods, including those using tele-purchase and especially the Internet, facilitate cross-border consumer transactions. Without the purchaser having to leave his Member State, he may now easily enter into contracts with suppliers domiciled in other Member States as well as outside the European Union.

Thus, the question arises whether the European consumer entering into an international contract is sufficiently protected against harmful jurisdiction clauses.

Conscious of the potential negative effects of such clauses in intra-Community consumer transactions, the Member States of the European Community have restricted party autonomy in consumer contracts. Art 17 BIR aims to provide the consumer with the desired level of protection by limiting the enforceability of jurisdiction agreements in certain consumer contracts. A detailed analysis of the exact implications of the limitation provided by this provision is conducted in the first part of this article. To this end, we will examine the personal, material and territorial ambit of application of Section IV of the Brussels I Regulation entitled “Jurisdiction over Consumer Contracts” formed by Arts 15-17 BIR.

The study of the protective measures provided for by the Brussels I Regulation will show that there are some gaps which could be abused by foreign suppliers and might leave the European consumer unprotected. When a contract entered into by a consumer domiciled in the Community has a connection with a non-Member State but is still closely linked to the Community, we consider it necessary to protect the consumer. We intend to show by a comparison between Spanish and English legislation implementing the Unfair Terms in Consumer Contracts Directive that this legislation could be used in order to control jurisdiction clauses in consumer contracts beyond what is provided by the Brussels I Regulation.

2. The existing jurisdictional protective measures: Art 17 of the Brussels I Regulations

As has been said, Art 17 BIR limits, without prohibiting, the use of jurisdiction clauses in cross-border consumer contracts. Does this provide enough protection for the European consumer? In order to ascertain the extent of this limitation and its effects it is necessary to identify the scope of this provision as relates to (1) those persons (consumers) for whose benefit these special protective measures are provided (below, 2.1.1.1-2.1.1.2), (2) those contracts which fall under the BIR definition of “consumer contracts” (below, 2.1.2), and (3) the territorial scope of application of Section IV in particular, and of the Brussels I Regulation in general (below, 2.2).

The Brussels I Regulation has substantially modified the scope of application of Section IV while the rules of jurisdiction over consumer contracts remain almost identical. A thorough discussion of the revised Section IV of the Brussels I Regulation is beyond the scope of the present article. I will rather give an overview of the existing law under the Brussels I Regulation, referring back to the previous law (Brussels Convention) where appropriate.

For Section IV of the BIR to be applicable the following requirements must be fulfilled: first of all, the person who enters into an international contract must be a consumer according to the definition given by the Brussels I Regulation (Art 15(1) BIR); secondly, Art. 15 (1)(c) BIR imposes certain conditions relating to the conclusion of the contract, but these provisions do not apply to contracts for the sale of goods on instalment credit terms, or to a loan repayable by instalments, or any other credit arrangement made in order to finance the sale of goods.

Art 15(1)(c) (which mirrors Art 13 of the Brussels Convention) has been substantially amended while the definition of a consumer remains identical. As this notion of “consumer” has in the past proven to be the decisive factor within the rules governing jurisdiction,17 particular attention will be given to this important issue. This will be followed by a briefer account of the meaning and effects of Art 15 (1)(c).

Before turning to the analysis of Art 15 (1), one more preliminary remark seems appropriate as relates to the continuity between Brussels Convention and Brussels I Regulation. While the latter has replaced the former, the Brussels Convention, and particularly the interpretation given by the ECJ to several provisions of the Convention by virtue of the Luxemburg Protocol of 3 June 1971 remain important aids for the interpretation of the Brussels I Regulation. The same is true for the accompanying Report to the Brussels Convention,18 which retains its relevance for the simple reason that the Brussels I Regulation, as an instrument of Community secondary legislation, cannot be accompanied by a similar official Report.19 Furthermore, attention must be paid to the Rome Convention and the Giuliano/Lagarde Report.20 That Report stated i.a. that the consumer within Art 5 of the 1980 Rome Convention on the Law Applicable to Contractual Obligations had to be interpreted in accordance with the Brussels Convention.21 Even if the Schlosser Report does not refer to the Rome Convention, given that the two Conventions were drafted at the same time, it is widely accepted22 that the Giuliano/Lagarde guidelines on Art 5 should be taken into consideration when construing Art 13(1) BC and extensively Art 15 BIR (although the Protocols which would establish jurisdiction for the European Court of Justice to interpret the Rome Convention are not yet in force.)23

2.1. Scope of application of Art 15 BIR

2.1.1. Definition of ‘consumer’ within Art 15 BIR: some interpretative issues

Art 15(1) BIR defines ‘consumer’ as the person who concludes a contract “for a purpose which can be regarded as being outside his trade or profession;” this formulation, which is ambiguous and imprecise, gives rise to some problems in the application of the protective jurisdictional rules.

In its case-law with regard to the interpretation of the former Section IV of the Brussels Convention, the Court of Justice has laid down three main canons of construction: autonomous interpretation, restrictive interpretation, and teleological interpretation.24

The first case brought to the European Court of Justice concerning Section IV of the Brussels Convention was Société Bertrand v Paul Ott KG.25 Bertrand, a French company, was sued before a German court by Ott, a German company, for non-payment of the total amount of two equal bills of exchange payable at 60 and 90 days as the price of a machine tool. A French court subsequently held that the decision of the German court was enforceable in France. Bertrand appealed against the decision of the French court on the grounds that a sale in which the price must be paid in particular by two bills of exchange constitutes a credit sale, that it is mandatory for actions against credit buyers to be brought before the courts of the State in which the buyer is domiciled, and that a decision of a foreign court which has not complied with this binding rule on jurisdiction cannot be made enforceable in France. The French Cour de Cassation referred a question to the ECJ on the interpretation of Art 13(1) BC (Art 15 BIR) in order to ascertain whether the transaction in question was a sale of goods on instalment credit terms, in which case the French court could have reviewed the German court’s jurisdiction and denied the enforcement of the decision under Art 28 of the Brussels Convention.26

The ECJ had two options. The first was to interpret the expression “sale of goods on instalment credit terms” according to the law of a particular Member State, in which case the ECJ should have chosen either the law of the Member State where the case was tried, or the law of the Member State where enforcement was sought. The second was to interpret this term as a uniform Community concept, giving it an autonomous interpretation valid for all Member States. The Court followed the second option and held that “for the purpose of eliminating obstacles to legal relations and to the settlement of disputes in the context of intra-Community relations in matters of the sale of goods on instalment credit terms”27 it is necessary “to consider that concept as being independent and therefore common to all Members States.”28 The approach in the case-law has been consistent29 with an autonomous and uniform interpretation of the notion “consumer”, with reference to the system and objectives of the Convention. In his opinion in Benincasa Advocate General Ruiz-Jarabo Colomer outlines two main reasons for such interpretation.30 Firstly, national legislation varies from one State to another and may differ strongly in certain aspects, depending on the case at issue. To rely on a particular piece of legislation rather than another would jeopardise the legal certainty that the Brussels Convention seeks to ensure. Secondly, the same national legislation may contain different definitions of ‘consumer’ depending on the field of law in which they occur.31

The second principle stated by the Court in the Bertrand case and followed in the subsequent case-law was the necessity of a restrictive interpretation of the concept of consumer. The possibility given to the consumer in Art 14(2) BC (Art 16 BIR) of suing the other contracting party before the Court at the claimant’s domicile (forum actoris) “cannot give rise to an interpretation going beyond the cases envisaged by the Convention.”32 Section IV of the Brussels I Regulation derogates from the general principle of the Regulation (Art 2), according to which the national courts of the Member State in which the defendant is domiciled are to have jurisdiction.

The Court also stated the necessity of a teleological interpretation of Section IV. With regard to the Brussels Convention it held that this Section seeks to protect the consumer by providing a procedural safeguard.33 Consumers, who are less experienced in legal matters and economically in a weaker position, must not “be discouraged from suing the other party to the contract being compelled to bring his action before the courts in the Member State in which the other party to the contract is domiciled.”34 Therefore, “the protective role fulfilled by those provisions implies that the application of the rules of special jurisdiction laid down to that end by the Convention should not be extended to persons to whom that protection is not justified.”35

The application of both a restrictive and teleological interpretation of the term ‘consumer’ could give rise to some problems of construction. In certain situations the restrictive and teleological interpretation could lead to different results. As will be shown, some situations may require special protection due to the existence of an unequal bargaining power of the contracting parties (teleological interpretation); however, following a restrictive interpretation, these situations could fall outside Section IV.

In light of these principles we will now try to outline and further develop the essential features of the notion of consumer as laid down in Art 15 BIR. To this end we will first focus on the meaning of “a purpose which can be regarded as being outside his (the consumer’s) trade or profession.” Secondly, we will examine the term “person,” in order to ascertain whether the special rules of jurisdiction apply only to individuals (natural persons) or whether other persons (companies, corporations etc.) can also be regarded as consumers within the meaning of Art 15 BIR.36

2.1.1.1. Meaning of “a purpose which can be regarded as being outside his trade or profession”

In defining the term ‘consumer’, Art 15 BIR emphasises the non-professional or non-trade character of the consumer activity.37 The person in question must conclude a contract for a purpose which must be regarded as being outside his trade or profession.

The rather general nature of this description leaves open a number of questions. Some of these have been clarified by the European Court of Justice, while others remain unresolved.

One could argue from the wording of Art 15 BIR that all those individuals who are acting outside any trade or profession fulfil the conditions stated by the Convention. However, in his opinion in Benincasa, the Advocate General states that “the status of the consumer referred to by Art 13 [BC] is not determined by a pre-existing subjective situation: the same natural person may be a consumer for certain purposes and an entrepreneur for others.”38 Therefore the quality of ‘consumer’ depends on the position held by the person concerned as relates to the contract in question. As has been pointed out by Bischoff, the quality of ‘consumer’ cannot be regarded as a personal status such as “marital status”.39

Moreover, the contract must be a ‘consumer contract’ and not one of a commercial nature.40 This principle was laid down by the Court in the Benincasa case.41 This case concerned an Italian national with residence in Munich, Mr Benincasa, who concluded a franchising contract with Dentalkit Srl, an Italian company which set up in 1987 a chain of franchised shops in Italy specialised in dental hygiene products. The contract was concluded by Mr Benincasa in order to establish and operate a shop in Munich. Mr Benincasa set up the shop, paid the initial sum and entered into some purchase agreements, which were never paid for. He ceased his business and sued Dentalkit before the Landericht at Munich, arguing that the franchise agreement and the subsequent purchase contracts were void. Dentalkit raised the objection that the German Court had no jurisdiction because of the existence of a jurisdiction clause in favour of the Courts of Florence. Mr Benincasa pleaded, inter alia, that the application of the jurisdiction clause was to be excluded since he was a ‘consumer’ within the meaning of Art 13 BC (Art 15 RBI) and that therefore, according to Art 15 BC (Art 17 BIR) the clause had no effect. Furthermore, in accordance with Art 14 BC (Art 16 RBI) the consumer may sue the other contracting party before the Courts of the Member State in which the consumer has his habitual residence. If Mr Benincasa was regarded as a consumer, the German Courts had jurisdiction.42

The Court was requested to give a preliminary ruling on the interpretation of the concept ‘consumer’ in order to determine whether Mr Benincasa was a ‘consumer’ within the definition given by Art 13 BC (now Art 15 BIR). To this effect, the Court held that “in order to determine whether a person has the capacity of a consumer, a concept which must be strictly constructed, reference must be made to the position of the person concerned in a particular contract, having regard to the nature and aim of the contract, and not to the subjective situation of the person concerned.”43

It follows from the foregoing that when deciding whether a person is acting outside any trade or profession, the relevant factor is the contractual position of this person within the given contract, rather than the individual circumstances of the party concerned.44 When he entered into the contract, Mr Benincasa was not a businessman. However, once he concluded the franchise agreement with Dentalkit he started acting in a business capacity. Moreover, the purpose of the franchise agreement cannot be regarded as a private and final one.45 Thus, the Court held that Mr Benincasa was not a consumer within the meaning of Art 13 BC (now Art 15 BIR), since “the specific protection sought to be afforded by those provisions is unwarranted in the case of contracts for the purpose of trade or professional activity, even if that activity is only planned for the future, since the fact that an activity is in the nature of a future activity does not divest it in any way of its trade or professional character.”46

The result achieved by the Court in Benincasa conforms with the necessity of a restrictive interpretation of the notion ‘consumer’. However, it could be argued that this interpretation is inconsistent with a teleological approach. Mr Benincasa did not have any previous business experience and could therefore have been seen as the weaker party to the contract. However, the Advocate General stated that “the wording of Art 13 [BC (Art 15 BIR)] does not permit it to be extended to cover any contract, irrespective of its subject-matter and purpose, in which an economic weaker party is faced by a party in a position which is objectively superior or superior by reason of the circumstances.”47 It is clear that Art 15 BIR cannot be applicable in all situations in which a difference in bargaining power exists.48 This result would go against the scope of the protective jurisdictional measures. These protective measures have a clear procedural character. The forum actoris is upheld in order to encourage the ‘consumer’ to bring proceedings against the other contracting party without being compelled to bring his action before the Courts of the defendant’s domicile. Only those persons for whom proceedings are something unusual49 must be protected; ie ‘consumers’ strictu sensu. Parties who act in a business capacity, even when less experienced than the other contracting party, must foresee the possibility of litigation.50

Difficulties arise in defining when a person acts in a business capacity.51 There are some borderline situations that might fall under Art 15 BIR. We will analyse some of them so as to reach the conclusion that the term ‘consumer’ according to Art 15 BIR has to be interpreted in a restrictive way.

A trader or professional may conclude a contract partially for a trade purpose and partially for a domestic purpose. For example, a company could purchase a car for both business and private use. According to the Giuliano/Lagarde Report “the situation only falls under Art 5 if he [the relevant contracting party] acts primarily outside his trade or profession.”52 The burden of proof lies on the person invoking the application of the protective rules. Nonetheless, “where the receiver of goods or services or credit in fact acted primarily outside his trade or profession but the other party did not know this and, taking all the circumstances into account should not reasonably have known it, the situation falls outside the scope of Art 5.”53 Thus, if the recipient of goods or services holds himself out as a professional, for instance, by using his professional stationery to order goods (which might well be used in his trade or profession), the good faith of the other party is protected and therefore the case will fall outside Art 5.54

The Giuliano/Lagarde Report further states that the rule does not apply to contracts made by traders, manufacturers or persons in the exercise of a profession (eg doctors) who buy equipment or obtain services for that trade or profession.55

On the other hand, a trader may use his economic and legal skills to conclude a contract for a purpose which can be regarded as being outside his trade or profession.56 As pointed out by Esplugues Mota, one can imagine a trader who buys some furniture for his house. In that case, the purchaser acts outside his business but uses his economic and legal skills to conclude the contract, and therefore it could be argued that he does not need special protection on the grounds of his weaker position. Nevertheless, this case might well be covered by the wording of Art 15 BIR. Carrillo57 rightly observes that to grant such a person the protective fora could go against the objectives of the Convention as interpreted by the ECJ, since “the Convention is inspired by the concern to protect the consumer as the party deemed to be economically weaker and less experienced in legal matters.”58

The Court of Justice has from the very beginning limited the scope of Art 13 BC (Art 15 BIR) requiring that the consumer acts in a final and private capacity.59 The same principle can be found in the Schlosser Report which states that “only final consumers acting in a private capacity should be given special protection and not those contracting in the course of their business to pay by instalments for goods and services used.”60

What is to be understood by the terms ‘final’ and ‘private’ consumption? While the term ‘private’ arguably refers to a non-professional or non-trader, similar to the concept of “familiar or domestic” used in other conventions61 and in domestic legislation, the term ‘final’ is more difficult.

In Shearson Lehman Hutton Inc. v TVB,62 the main issue related to the applicability of Section IV to agency contracts concerning currency, security and commodity futures. A German judge entered into an agency contract for currency, security and commodity futures transactions with Hutton Inc., an American brokerage company registered in New York. The German subsidiary of the American firm, Hutton GmbH, acted as the intermediary. The considerable sums invested by the judge were nearly all lost; he then decided to assign his claims to TVB a German trust company, registered in Munich. TVB sued Hutton Inc. (which in the meantime had been taken over by another American Company, Shearson Lehman Hutton) in a German Court, claiming reimbursement of the losses. The action was based on unjust enrichment, damage for breach of contract and of pre-contractual obligations and for negligence, on the basis that the defendant had not sufficiently explained to the assignor the risks of the futures transactions. While the Landgericht of Munich declined jurisdiction, the Oberlandesgericht held that the Landgericht had jurisdiction. Shearson Lehman then appealed to the Bundesgerichtshof, which referred the issue to the ECJ for a preliminary ruling on the applicability of Art 13 BC (Art 15 BIR).63

The Court of Justice ruled that Section IV of the Brussels Convention was not applicable in this case since TVB, the assignee company, was not a consumer within Art 13 BC (Art 15 BIR). The Court did not examine whether this kind of contract might have fallen under Section IV had the plaintiff been a consumer. In fact, though, a person who invests through a brokerage company in the exchange market does not necessarily act as a professional.64 Rather, following the definition given by Art 15 BIR such an investor may be regarded as a consumer. The main problem, were the point to arise in a future case, would be to decide if the private investor who enters into an agency contract concerning currency, security and commodity futures could be considered a ‘final consumer’. The answer to that question, which depends on the meaning of the latter term as used by the Official Reports and the Court of Justice, is unclear. 65

The person who invests through a brokerage company in the exchange market merely seeks a profit for his investment.66 Some authors define ‘final consumer’ as a person who purchases goods or services to satisfy his private necessities, and therefore who does not reintroduce the product acquired into the market.67 According to them, the purpose of ‘the activity of the private investor is the reintroduction of the product in the market.’68 Hence, following the above definition, such an investor cannot be regarded as a ‘final consumer.’ However Arenas, recognising the need for the protection of the private investor in this kind of situation, relies on the teleological interpretation to solve the problem: the person in question is not acting in a business capacity and therefore should not be “discouraged” from suing the other contracting party.69

However, the same result can be achieved by means of another interpretation. The consumer who enters into an agency contract concerning currency, security and commodity futures receives not goods, but a service from the brokerage company. The contract between the private investor and the brokerage firm is normally a contract for the supply of services. From this perspective it could well be said that, since the consumption of that service is ‘final’, the consumer is a ‘final consumer’ or ‘final user’ vis-à-vis the brokerage firm. Therefore, when the person who enters into a contract of the type described acts outside his trade or profession, it is submitted that he may be regarded as a consumer within the definition in Art 15 BIR.70 In such a case, the investor is a consumer vis-à-vis his agent, albeit not a consumer vis-à-vis the seller of the securities.

The Brussels I Regulation does not require the other party to the contract, ie the provider of the goods and services, to act in the course of a trade or profession.71 This omission could lead to the conclusion that a contract between two consumers may fall within the ambit of application of Section IV. However, the Giuliano/Lagarde Report notes that “in the opinion of the majority of the delegations it will, normally, only apply when the person who supplies goods or services or provides credit acts in the course of his trade or profession.”72 Thus, it is preferable to regard contracts entered into by two consumers as falling outside Art 15 BIR.73

2.1.1.2. The meaning of the term “person”

The term ‘person’ is used in Art 15 BIR in a generic way, ie it does not refer to any particular kind of person, as some Directives do.74 This gives rise to the question whether only individuals (natural persons) benefit from the special jurisdiction rules or other persons (companies, corporations, etc.) may be also regarded as consumers.75

The wording of Art 15 BIR does not expressly exclude companies and other entities from falling within the concept of consumer,76 although companies normally act in a business capacity.77 Nevertheless, some non-trading companies, such as “those formed for the promotion of art, science, education, religion or charity, could be held to be acting outside of any trade or profession.”78 Even so, such companies due to their corporate form are likely to be run in a business manner.79

The consumer may assign his claim to a company. That was the situation in Shearson Lehman Hutton Inc. v. TVB case.80 In order to be regarded as a consumer, the assignee company has to fulfil the requirements laid down by Art 13 BC (Art 15 BIR). In view of the ECJ, Art 13 BC (Art 15 BIR) only protects a private final consumer not engaged in trade or professional activities and who is a party to the action in accordance to Art 14 BC (Art 16 BIR).81 Thus, Section IV of the Convention does not apply to a plaintiff who is acting “in pursuance of his trade or professional activity and who, therefore, is not himself a consumer party to one of the contracts listed in Art 13(1) BC [Art 15 BIR].”82

More difficulties arise in the case in which a consumer association claimed the application of Section IV of the Regulation when enforcing the consumer’s rights. As Kessedjian has pointed out, two kinds of actions can be distinguished:83 first, those which seek “to represent a special category of persons in their individual claims” (eg class actions, actions en répresentation conjointe.84). Secondly, there are actions intended to protect the collective interests of consumers (eg injunctions)85. It is not the purpose of this research to analyse collective actions brought by consumer organisations or some public body in the consumer’s interest.86 Thus, we will not examine the possibility of applying Section IV to injuctions, since in this kind of action the organisation acts in its own name and therefore, following the ECJ ruling in Shearson Lehman Hutton, cannot be regarded as a consumer.87 The existence of this difficult problem was acknowledged by the Working Party for the Revision of the Brussels and Lugano Conventions. On that occasion, some delegations proposed an amendment88 to include in Art 13 BC (Art 15 BIR) a section concerning injuctions. However no agreement was reached.

In the case of the French actions en répresentation conjointe, the action is brought on behalf of the consumer who has given a mandate to the organisation in question. This situation differs from that analysed under the Shearson Lehman Hutton case where the assignee company acted on its own behalf. Assuming that all other requirements laid down in Art 15 BIR are fulfilled it can be argued that those organisations can be regarded as consumers within Art 15 BIR, and therefore benefit from special protective fora. It is, however, difficult to justify a special procedural protection in these circumstances. Kessedjian has rightly observed that a real weakness deserving special procedural protection does not exist: the consumer can choose whether to assign his claim to a consumer association or to bring an action himself and take the benefits of Section IV of the Regulation.

It follows from the foregoing that the term ‘consumer’, laid down in Art 15 BIR, must be interpreted in a uniform way common to all Member States. The Court has not yet fully defined the consumer concept in an autonomous way. It has, however, stated some guidelines so as to designate the persons who benefit from special jurisdiction rules. Firstly, a teleological interpretation must be applied with regard to the protective objectives of Section IV in order to protect a final private consumer not engaged in any trade or profession. Secondly, Section IV must be interpreted in a restrictive way, so as to cover only the consumer who really needs to be protected. Moreover, it can be assumed that in principle only individuals (natural persons) may be regarded as consumers. Finally, the consumer must be a party to the proceedings and must be bound by one of the consumer contracts covered by Art 15 BIR.

2.1.2. Consumer contracts covered by Art 15 BIR and the conditions relating to the conclusion of the contract

Art 15 BIR divides consumer contracts into three categories. First, it applies to “contract for the sale of goods on instalment credit terms” (Art 15(1)(a)); secondly, it covers contracts for a loan repayable by instalments, or any other form of credit, made to finance the sale of goods (Art 15(1)(b)). Thirdly, in ‘all other cases’ jurisdiction shall be determined by Section IV when the contract “has been concluded with a person who pursues commercial or professional activities in the Member State of the consumer’s domicile or, by any means, directs such activities to that Member State or to Several States including that Member State, and the contract falls within the scope of such activities”. Finally, Section IV does not apply to a contract of transport other than a contract which, for an inclusive price, provides for a combination of travel and accommodation (Art 15(3) BIR).

A distinction should be noted between, on the one hand, sale of goods and loans on instalment credit terms and, on the other hand, all other consumer contracts. Only the latter must produce certain effects within (or be connected to) in the market of the country of the consumer’s domicile.89

The concept of “sale of goods on instalment credit terms” in Art 13(1)(1) BC (Art 15(a) BIR) has been given an autonomous interpretation by the ECJ. In its decision in Bertrand v Ott,90 the Court of Justice held that a contract of sale on instalment credit terms is a transaction in which the price is discharged by way of several payments or which is linked to a financing contract. Further, according to the Schlosser report, “the rules governing instalment sales also apply to the legal institution of hire purchase, which has developed into the commonest legal form for transacting instalment sales in the UK.”91

In its recent case Hans-Herman Mietz v Intership Yachting Sneek BV,92 the Court has further developed the definition of “sale of goods on instalment credit terms.” The case concerned a contract, described by the parties as a “contract of sale,” for the construction of a yacht conforming to a standard model but with a number of alterations to be made, between Mr Mietz, domiciled in Germany, and Intership Yachting, a Dutch company. Mr Mietz was to pay DM 250,000 in five instalments while Intership Yachting undertook to manufacture the yacht and to transfer title to Mr Mietz after the full payment of the price. One of the questions referred to the ECJ was whether the contract described was a contract of sale of goods on instalment credit terms within the meaning of Art 13(1)(1) BC (Art 15(a) BIR). The ECJ held that Art 13(1)(1) BC (Art 15(a) BIR) is intended to “protect the purchaser where the vendor has granted him credit; that is to say, where the vendor has transferred to the purchaser possession of the goods in question before the purchaser has paid the full price.”93 The main reason for such protection is “on the one hand, that the purchaser may, when the contract is concluded, be misled as to the real amount which he owes, and on the other, he will bear the risk of loss of those goods while remaining obliged to pay any outstanding instalments.”94 Following these considerations, the Court held that the contract at stake was not covered by Art 13(1)(1) BC (Art 15(a) BIR), but was to be classified as a contract for the supply of services or of goods within the meaning of Art 13(1)(3) BC.

As has been said, letter (c) of Art 15 BIR states that “in all other cases, the contract has been concluded with a person who pursues commercial or professional activities in the State of the consumer’s domicile or, by any means, directs such activities to that State or to several States including that State, and the contract falls within the scope of such activities.” Two significant amendments have been made with regard to the former provision of the Brussels Convention (Art 13(1)(3)) . In the first place, Art 15(1)(c) does not limit the protection to “any other contract for the supply of goods or the supply of services” (as does Art 13 BC), but refers to “all other cases.” It may thus be assumed that consumer contracts other than those referred to in Art 15(1)(a) and (b) are subject to the special jurisdiction provision, provided that one of the parties to the contract can be regarded as a consumer. This fact strengthens the significance of the concept of “consumer” discussed in the previous section. The Brussels I Regulation has therefore extended the material scope of application of Section IV, solving one of the main protective drawbacks of the jurisdiction rules regarding consumer contracts.

Secondly, the amended Art 15 BIR redefines the necessary conditions that “all other consumer contracts” have to fulfil in order to receive protection.95 The main concern related to the use of new technologies and, in particular, whether e-commerce consumer transactions, the so-called Business to Consumer contracts (hereinafter BtoC), were covered (or ought to be covered) by Section IV of the former Brussels Convention. The wording of Art 13(3) BC was uncertain on this point. Therefore, one of the main objectives of the revised version of Art 15 BIR was to clarify in which situations the consumer was granted the forum actoris when contracting through the Internet.96 As the Council and the Commission pointed out, “the development of electronic commerce in the information society facilitates the economic growth of undertakings. Community law is an essential if citizens, economic operators and consumers are to benefit from the possibilities afforded by electronic commerce.” However, the decision to include BtoC contracts in Section IV of the BIR was highly criticised by industry.

Art 15 BIR has set out the conditions with regard to the conclusion of the contract in a more flexible way, that is to say, it is less casuistic and therefore will be easier to apply to new situations which probably deserve protection. The first condition is that the contract has been concluded with a supplier who pursues commercial or professional activities in the State of the consumer’s domicile or, by any means, directs such activities within that State or several States including that State. Secondly, the contract has to fall within the scope of such activities. In these cases the consumer can sue the supplier in the courts of his (the consumer’s) country of domicile (Art 16 BIR).

The conditions formerly laid down in Art 13 BC, according to which the conclusion of the contract had to be preceded by a specific invitation or advertisement addressed to the consumer in his country of domicile and that he must there have taken the steps necessary for the conclusion of the contract, have been omitted in the Regulation. The last omission is especially significant in relation to BtoC contracts.97 In such contracts, the place where the consumer concludes the contract could be very difficult to determine. As has been remarked, with the new wording of Art 15 BIR “we can assume that as long as the consumer has his domicile within the territory of a Member State, the e-commerce contract can be concluded not only from the State of his domicile but also while the person in question is on travel,” whenever the web site where the goods or materials are being advertised is available in the Member State where the consumer has his domicile.98

As has been pointed out, Art 15 (c) BIR includes two criteria in order to give jurisdiction to the courts of the consumer’s domicile. The first is the so-called “Doing Business” test, which requires the supplier to be engaged in commercial or professional activities in the State of the consumer’s domicile. Whenever the supplier operates in the consumer’s market he will foresee the possibility of being sued in that State. The second criterion is that of the so-called “Stream-of-Commerce”, which extends to those cases in which the supplier directs commercial or professional activities to the State of the consumer’s domicile. In the latter , the supplier is deemed to assume the risk of being sued in that State.99

The question which arises at this point is the exact meaning of “directing activities,” ie when should a professional be considered as directing its activities to the State of the consumer’s domicile or to several States including that State? It seems that the mere accessibility of a web site in a particular State would not be sufficient. On the contrary, when the supplier solicits the consumer through e-mail (for example), Art 15 (c) applies.100 When the web site permits the conclusion of the contract through the Internet (on-line), Art 15 (c) applies unless the site expressly excludes activities from being directed at certain markets, or prevents consumers domiciled in certain Member States from contracting.

The Council and the Commission have pointed out in their statement on Art 15 BIR that “for Art 15(1)(c) to be applicable it is not sufficient for an undertaking to target its activities at the Member State of the consumer’s residence, or at a number of Member States including that Member State; a contract must also be concluded within the framework of its activities. This provision relates to a number of marketing methods, including contracts concluded at a distance through the Internet.” In this context they stress that “the mere fact that an Internet site is accessible is not sufficient for Art 15 to be applicable, although a factor will be that this Internet site solicits the conclusion of distance contracts and that a contract has actually been concluded at a distance, by whatever means. In this respect, the language or currency which a website uses does not constitute a relevant factor.”101

The distinction laid down by the Council and the Commission between passive and active web sites has been criticised by some authors. According to Droz and Gaudemet-Tallon, web site advertising if accessible in the State of the consumer’s domicile meets the criterion and therefore makes the distinction between passive and active sites irrelevant.102

Despite the objections made to Art 15 (c) BIR, the truth is that the Community institutions wanted to protect the consumer who enters into BtoC contracts. The main difficulty is to ascertain the limits of this protection and the situations which should deserve protection. To that end it is very important to determine the meaning of the term ‘directing activities’ at a Member State. However, in the absence of official guidance we must await an ECJ ruling that defines the concept.103

2.2. Territorial condition arising from Art 16 and Art 4: both parties must be domiciled in a Member State

In the previous part we have analysed the material and personal scope of application of Section IV of the Brussels I Regulation. In order to apply Section IV, the territorial scope of application of the Brussels I Regulation must now be examined.104

The general rule of jurisdiction laid down in Art 2 provides that persons domiciled in a Member State shall, whatever their nationality, be sued in the courts of that Member State (actor sequitur forum rei).105 Therefore, in order to assess jurisdiction it is the defendant’s domicile which is relevant, while the plaintiff’s domicile is, in principle, irrelevant.106 This rule is compulsory but not exhaustive.107 Consistent with this rule, Art 4 provides that the Brussels I Regulation does not apply when the defendant is domiciled outside any Member State. In that case the relevant court will determine its jurisdiction according to its national rules (subject to Art 22 and 23 BIR).

In order to ascertain the territorial scope of application of Section IV, three situations must be analysed. The first is where both contracting parties, the consumer and the supplier, are domiciled in a Member State; secondly, one of the parties is not domiciled in a Member State; finally, the supplier not domiciled in any Member State has a branch, agency or other establishment in a Member State.

2.2.1. General rule: both parties domiciled in a Member State

Leaving aside some exceptions which will be analysed below,108 when the consumer and the supplier are both domiciled in a Member State, the jurisdiction rules shall be determined according to Section IV. Art 16 provides that the consumer may choose whether to sue the supplier before the courts of the State where he, the consumer, is domiciled, or before the courts of the State where the supplier is domiciled. The first option (forum actoris) constitutes one of the principal mechanisms for the protection of the consumer,109 the second option corresponds to the general rule provided by Art 2. On the other hand, the supplier may only bring an action against the consumer in the courts of the State of the consumer’s domicile.110

2.2.2. One of the parties domiciled outside any Member State

More difficulties arise when one of the contracting parties is not domiciled in a Member State.

Where the plaintiff is domiciled in a non-Member State and brings an action in a Member State, then, according to the general rule provided by Art 2 BIR, the courts of the State of the defendant’s domicile have jurisdiction. Thus, in the case of a defendant supplier domiciled outside a Member State who enters into a contract with a consumer domiciled in a Member State, the supplier benefits from the application of the Brussels I Regulation. This result is in principle not surprising since the rule actor sequitur forum rei is broadly accepted.111 However, the very application of the Brussels I Regulation in a situation like the one described above is controversial. Provided that the supplier is domiciled in a non-Member State and the consumer is domiciled in a Member State, the situation is only connected to one Member State. In that case the situation is a non intra-Community one and therefore it could be argued that the Brussels I Regulation should not apply. As has been remarked “the Contracting States were setting up an intra-Convention mandatory system of jurisdiction. They were not regulating relations with non-Member States.”112 Thus, the courts of the Member State involved should assess their jurisdiction according to their own national jurisdiction rules. This was the reasoning used by the Court of Appeal in Re Harrods (Buenos Aires) Ltd.113 in applying the forum non conveniens doctrine in a case where the defendant was domiciled in England. It held that the Brussels Convention was not applicable since England was the only Contracting State involved. Thus, English courts here had to assess whether or not they had jurisdiction according to their own national rules.114 Therefore they could decline jurisdiction.

The ECJ finally had the opportunity to rule on the above-mentioned question in its decision in Group Josi Reinsurance Company SA.115 The Court stated that “Title II of the Convention is in principle applicable where the defendant has its domicile or seat in a Contracting State, even if the plaintiff is domiciled in a non-member country. It would be otherwise only in exceptional cases where an express provision of the Convention provides that the application of the rule of jurisdiction which it sets out is dependent on the plaintiff’s domicile being in a Contracting State.”116 It may therefore be assumed that, whenever the defendant is domiciled in the territory of a Member State, Art 2 of the Regulation shall apply nothwithstanding the plaintiff’s domicile in a non-Member State.

In this context Recital 11 of the Brussels I Regulation states that “[The] rules of jurisdiction must be highly predictable and founded on the principle that jurisdiction is generally based on the defendant’s domicile and jurisdiction must always be available on this ground save in a few well-defined situations in which the subject-matter of the litigation or the autonomy of the parties warrants a different linking factor.” This statement has led Droz and Gaudemet-Tallon to argue that, insofar as jurisdiction on the ground of the defendant’s domicile must always be available, the Harrods case has effectively been overruled.117

When the defendant is domiciled in a non-Member State, according to Art 15(1) BIR read in conjunction with Art 4, Section IV is not applicable.

When a consumer domiciled outside the Community enters into a contract with a supplier domiciled within the Community, there is in principle no reason why he should benefit from the protective fora.118 If the consumer is sued before a court of a Member State, this court will apply its own national rules on jurisdiction and the supplier will be able to rely on any applicable long-arm national jurisdiction rules.119 For instance, a French supplier who sues a consumer domiciled outside any Member State before the French Courts may also rely on Art 14 of the French Civil Code.120

When the supplier is the defendant and is domiciled outside a Member State, it is not so clear whether the consumer could benefit from the forum actoris and bring proceedings in the courts of the Member State in which he himself is domiciled. This problem arose in Brenner and Noller v Dean Witter Reynolds Inc.,121 a case in which two individual consumers,122 both domiciled in Germany, entered into an agreement with an American company, Dean Witter Reynols Inc. registered in New York, for the management of commodity futures transactions on a commission basis. Subsequently, the American firm penetrated the German market through advertisements made by its agency Dean Witter Reynolds GmbH, a German company established in Frankfurt. The agreement in this case, however, was exclusively mediated through another German company, Metzler Wirschafts-und Börsenberatungsgesellschaft, which was completely independent from the American firm.

The sums invested by the American firm on behalf of the plaintiffs were almost entirely lost. Thus, Mr Brenner and Mr Noller sued the American firm in the German courts for compensation on the grounds of breach of contractual and pre-contractual obligations, tortious conduct in connection with inflating charges by carrying out a large number of sometimes unreasonable transactions, and unjust enrichment.

The German court of first instance declined jurisdiction and its decision was upheld on appeal. The Bundesgerichtshof,123 referred four questions to the ECJ on the interpretation of Art 13-14 of the Brussels Convention.124

In its reference the Bundesgerichtshof made clear that in the present case the defendant (the American firm) was not domiciled in a Member State and no branch, agency or other establishment within the meaning of Art 13(2) BC (15(2) BIR) acted as intermediary in the conclusion or performance of the contract.125 Thus, the contract was concluded by a consumer domiciled in a Contracting State (Germany) and a supplier domiciled in a non-Member State (New York).

The German court asked the ECJ whether, in order to apply Section IV, it is necessary that the supplier is domiciled in a Member State, or is deemed to be so under the second paragraph of Art 13 BC (Art 15 BIR). The ECJ firstly noted that Art 13(1) BC (Art 15 BIR) expressly states that Section IV, as a whole, applies “without prejudice to the provisions of Art 4.”126 According to this provision, when the defendant is domiciled in a non-Member State, “the jurisdiction of each Contracting State shall, subject to the provisions of Art 16, be determined by the law of that State.”127 The Court then stated that with regard to consumer contracts the only exception to Art 4 is the one contained in Art 13(2) BC (Art 15(2)BIR); accordingly, “the courts of the State in which the consumer is domiciled have jurisdiction in proceedings under the second alternative of Art 14(1)(…) if the other party to the contract is domiciled in a Contracting State or is deemed under Art 13(2) to be so domiciled.”128

The outcome of the ECJ’s decision is unsurprising since the wording of the Convention and the Brussels I Regulation is clear in this respect. However, it seems unjust for many reasons.

In the first place, as we have seen above, when the supplier is domiciled in a non- Member State he benefits from the application of the Brussels I Regulation when he brings proceedings in the courts of the consumer’s domicile (assuming the consumer is domiciled in a Member State). However, when the consumer wishes to sue the foreign supplier before the courts of his (the consumer’s) domicile, the Brussels I Regulation does not apply. For instance, an American supplier may sue a German consumer before the German courts according to the general rule of jurisdiction laid down in Art 2 BIR, whereas the German consumer may not bring an action against the American supplier in the German courts. Arguably, such a result would, in certain circumstances, be inconsistent with the European approach to consumer policy.

Secondly, however, in the Brenner case the consumer could rely neither on special rules of jurisdiction under German law,129 nor on the long-arm fora provided for under German law.130 The outcome of the ECJ’s decision is even more unsatisfactory with regard to the fact that each State will be able to apply its own jurisdiction rules, thus leading to different standards of consumer protection within the Community. For instance, if the same case had been decided by a Spanish court, the consumer, being domiciled in Spain, would have been able to sue the American supplier before the Spanish courts.131 The existence of different standards of protection throughout the Community may hinder the purpose of European consumer protection policy.132

On the other hand, it might also be argued that the relevant situation is a non intra-Community one, and therefore is not a matter of Community Law but of national law. Thus, the problem in the case at hand could be seen as the result of a lack of protection provided for under the German jurisdiction rules and not as a failure of the Brussels I Regulation.133

Although the outcome is discriminatory, the wording of the Regulation is very clear in this respect. However, it is next necessary to examine whether the exception provided for in Art 15(2) could be relied upon to grant the European consumer the desired protection.

2.2.3. The exception laid down in Art 15(2) BIR: the defendant domiciled outside a Member State has a branch, agency or other establishment in one of the Member States

Art 15(2) BIR134 provides for an exception to Art 4 BIR: “Where a consumer enters into a contract with a party which is not domiciled in a Member State but has a branch, agency or other establishment in one of the Member States, that party shall, in disputes arising out of the operations of the branch, agency or establishment, be deemed to be domiciled in that State”135. Thus the consumer may choose either to sue the other contracting party in the courts of the Member State where that party has the branch, agency or other establishment (hereinafter branch), or in the courts of his (the consumer’s) domicile.

The meaning of the terms “branch, agency and other establishment,” is not always easy to define, nor when the dispute arises “out of the operations of that branch, agency or establishment.” In order to supply a definition, reference must be made to the provision laid down in Art 5(5) BIR and the ECJ’s interpretation of the corresponding Brussels Convention provision. Art 5(5) BIR provides for a special jurisdiction rule, according to which if the defendant has a branch, and the dispute arises out of the operation of that branch, jurisdiction is given to the courts of the Member State where the branch is situated. As the wording of Art 5(5) and 15(2) BIR is almost identical, it has been argued that “the interpretation of Art 5(5) should be adopted in order to prevent confusion.”136 However, such a joint construction may give rise to an interpretation of Art 15(2) BIR resulting in a lack of protection for the European consumer.

This is because the aim of Art 15(2) BIR is to protect the consumer by precluding the application of Art 4 BIR when the supplier is domiciled outside any Member State but has a branch in a Member State.137 This could be seen as a way of securing the consumer the possibility of bringing proceedings within the Community, by finding him a defendant who is deemed to be domiciled in a Member State.138 This protective intention cannot be found in Art 5(5) BIR, which departs from the general rule provided for in Art 2 BIR for a different reason, namely to facilitate proceedings.139 The existence of a protective purpose distinguishes Art 15(2) from Art 5(5) BIR and therefore the contexts of both articles are different.140 Thus, it would be possible to argue fort a wider construction of Art 15(2) BIR since a restrictive interpretation may jeopardise the intended consumer protection.

According to the case-law141 of the European Court of Justice, the essential features of the concept ‘branch’ are the following: first, the branch must be under the direction and control of the parent body.142 Secondly, it must have a place of business which has the appearance of permanency,143 such as the extension of a parent body, so that third parties do not have to deal directly with such parent body but may transact business at the place of business constituting the extension. Finally, the branch must not simultaneously represent the interests of several competing firms.144

This strict test shows the restrictive interpretation given by the Court which, as has been argued, “will often prevent the consumer from using the seat of the intermediary as a basis of jurisdiction.”145 For instance, in the case of a brokerage contract the intermediary will often serve as a forwarding body where the branch is not subject to the direction and control of the brokerhouse, as happened in the cases Shearson Lehman Hutton v TVB and Brenner and Noller v Dean Witter Reynolds Inc.146

In addition, in order for Art 5(5) BIR to apply, a second condition must be satisfied, namely the dispute must concern the operations of the branch. The concept of “operations of the branch” has been interpreted as encompassing issues of rights and contractual or non-contractual obligations in respect of the management of the branch itself. This would include matters arising out of the situation of its building or the local engagement of staff.147 Moreover, it also includes “those [transactions] relating to undertakings which have been entered into at the [branch’s] place of business in the name of the parent body and which must be performed in the Contracting State where the [branch’s] place of business is established.”148 Further, it also includes disputes in relation to non-contractual obligations that have arisen out of the branch’s activities at the place where it is established on behalf of the parent body.149

More difficulties could arise if we accept the interpretation given by AG Darmon in Brenner. As we have seen in the Brenner case, the conditions laid down in Art 13(2) BC were not fulfilled and therefore the ECJ assumed that the defendant had no branch in a Member State. However, in AG Darmon’s opinion even if the requirements laid down in Art 13(2) BC had been fulfilled, Section IV would still not have applied since the supplier would have been deemed to be domiciled in Germany, the same state in which the consumer was domiciled. Thus, the dispute at issue would not be an international, but an internal one.150

This reasoning has been strongly criticised.151 It has been argued that the necessity of an international condition in order to apply the Brussels Convention derives from the Preamble. It is, however, debatable to what extent the above mentioned statement means that the Brussels Convention is only applicable if the relevant situation has connections with at least two Member States.

On the other hand, Art 13(2) BC creates a deemed domicile for the defendant at the place where the branch is situated. This legal fiction may turn an international situation into a domestic one, as if, in Brenner, the American firm had actually been domiciled in Germany. It was this reasoning that led the Advocate General to suggest the non-applicability of the Brussels Convention. It is, however, only because of the application of Brussels Convention that the foreign firm would otherwise have been deemed to be domiciled in a Member State in the first place. Thus, it seems odd and contradictory to create a legal fiction in order to apply the Convention and subsequently use the selfsame fiction so as to deny its application.152 Moreover, if such an approach were upheld, discrimination may arise since the German plaintiff in Germany would be less protected than any other European consumer-plaintiff seeking to bring an action before the German courts.153

Lastly, if we accept the construction given by the Advocate General we are in fact limiting the effectiveness of Art 13(2) BC (Art 15(2) BIR) since it is more common for the consumer to enter into a contract with a branch domiciled in his state than with a branch situated in another Member State.154

As has been rightly observed by Briggs, the real remaining issue was not the international character of the dispute but whether the German Court had jurisdiction,155 an issue that falls outside the Convention.

2.3. Jurisdiction clauses covered under Art 17 BIR (ex. Art 15 BC)

The Brussels I Regulation accords an important role to party autonomy. The parties are, in principle, free to choose the forum which is to have jurisdiction to determine potential or actual disputes. Art 23 BIR provides that “If the the parties, one or more of whom is domiciled in a Member State, have agreed that a court or the courts of a Member State are to have jurisdiction to settle any dispute which has arisen or may arise in connection with a particular legal relationship, that court or those courts shall have jurisdiction. Such jurisdiction shall be exclusive unless the parties have agreed otherwise.”156 The article then sets out a number of formal requirements which the jurisdiction agreement must satisfy in order to be valid. A detailed analysis of Art 23 BIR157 is beyond the scope of this article; it is, however, worth pointing out that jurisdiction agreements in international contracts are widely allowed, subject only to limitations that ensure that the parties have actually agreed to a choice of forum clause derogating from the ordinary jurisdictional rules, and that their consent is clearly and precisely demonstrated.158

As has been seen, granting the parties a wide freedom to choose the competent forum in transnational contracts may cause serious harm to consumers. To avoid the potential negative consequences a choice of forum clause may cause for the consumer, Section IV of the Brussels I Regulation contains a special provision which limits party autonomy in consumer transactions.

The main objective of Art 17 BIR is to protect the consumer159 by preventing the supplier from avoiding, through a choice of forum clause, the provisions laid down in Art 15 and Art 16 BIR, eg by limiting the choice granted to the consumer and/or avoiding restriction imposed on him.160 Thus, a choice of forum clause granting jurisdiction to a court other than those provided for in Section IV is valid only if it complies with the conditions laid down in Art 17 BIR.

According to the first sentence of Art 17 BIR “the provisions of this Section (Section IV) may be departed from only by an agreement” which complies with one of the conditions set out in the subsequent paragraphs. As a result Art 17 BIR “only applies when there would otherwise be jurisdiction under Arts 13-14 (15-16 BIR), ie when one or more of the jurisdictions in Section IV is being derogated from.”161 Conversely, when Section IV is not applicable and the contract contains a jurisdiction clause, Art 23 BIR is in principle applicable.162

In the following section we will analyse jurisdiction agreements falling within Art 17 BIR in order to ascertain whether the European consumer is adequately protected against detrimental jurisdiction clauses. To this end we will examine briefly the three conditions of effectiveness laid down in Art 17 BIR and the scope of their application.

2.3.1. Conditions of effectiveness

Art 17 BIR provides that “the provisions of this Section may be departed from only by an agreement:

  1. Which is entered into after the dispute has arisen.
  2. Which allows the consumer to bring proceedings in courts other than those indicated in this Section.
  3. Which is entered into by the consumer and the other party to the contract, both of whom are at the time of conclusion of the contract domiciled or habitually resident in the same Member State, and which confers jurisdiction on the courts of that Member State, provided that such an agreement is not contrary to the law of that Member State.”

The first and the second conditions clearly protect the weaker party, while the third aims to protect the supplier against a change of domicile by the consumer. Each of these conditions will now be examined in more detail.

2.3.1.1. “Which is entered into after the dispute has arisen”

The consumer is protected against jurisdiction agreements entered into before the dispute has arisen.163 For instance, a choice of forum clause inserted in a standard form contract which the consumer is unable to negotiate at the time of conclusion of the contract will not be effective. However, once the dispute has arisen it is assumed that the consumer is aware of the effects of such a clause. At that time he is likely to contemplate litigation164 and thus, it is plausible that he will seek legal advice. Thus, he is more likely to understand the significance of a jurisdiction clause. 165

The controversial question relates to the concept of ‘dispute’166 and to the point of time at which the dispute may be said to have ‘arisen’.167 Three different stages may be distinguished: first, an “informal stage” where the parties acknowledge the existence of a problem within their contractual relationship; second, the moment when the writ is served on the defendant; finally, when the defendant enters an appearance. The second and the third stage imply the existence of legal proceedings, while the first one does not necessarily presuppose that the conflicts between the parties will result in litigation.168

In the light of the protective objectives of Section IV, it could be argued that the dispute should be regarded as arising at the latest possible moment, namely, when the defendant enters an appearance. However, as Kaye has rightly pointed out, this interpretation “would tend to deprive Art 15 (1) [Art 17 BIR] of most of its positive scope of operation, given the unlikelihood in practice of jurisdiction agreements being entered into after one party has already commenced proceedings and the general inferred Convention principle, in any event, of assessing jurisdictional grounds and competence as at the date of institution of proceedings and not thereafter.”169 If the ‘dispute’ were considered to arise only with the appearance of the defendant, Art17(1) BIR will in practice be otiose since Art 24 BIR170 provides for a special jurisdiction ground when the defendant enters an appearance defence and the latter is not entered solely to contest jurisdiction. Although Art 15 BIR does not refer to Art 24 BIR, most commentators171 consider that it also applies to consumer contracts since as we have seen, the consumer is aware of the existence of legal proceedings and is therefore likely to take seek advice.

Thus, the relevant time within this provision should be construed as the stage after the conclusion of the contract and before the institution of proceedings,172 ie what we have called the “informal stage.”173

2.3.1.2. “Which allows the consumer to bring proceedings in courts other than those indicated in this Section”

Art 17(2) BIR allows the parties to insert a jurisdiction clause even before the dispute has arisen when the clause is for the exclusive benefit of the consumer.174 Although the wording of this provision is rather vague, it must be interpreted as a means of granting an alternative forum to the consumer and not as imposing exclusive jurisdiction upon him.175 If the latter were the case, the protective aim pursued by Art 17(2) BIR would be defeated, since at the time of the conclusion of the contract the consumer cannot fully assess whether the chosen forum is convenient. The consumer (beneficiary of the jurisdiction clause) retains, therefore, the right to bring proceedings before the fora provided for in Art 16 BIR.176

It is however difficult to imagine when the consumer would wish to use the additional forum granted by Art 17(2) BIR. The choice of forum clause must grant jurisdiction to a forum different from the consumer’s domicile and the supplier’s domicile (the protective fora already provided for by Art 16 BIR). However, it is hard to conceive of a case where such a forum would prove more convenient for the consumer than his domicile or the supplier’s domicile. The analogous provision in the field of insurance contracts has, however, much to commend it as it considers the interests of persons other than the policyholder that might be affected by the contract, eg those of the insured or a beneficiary. When the policy holder is not the same person as the insured or beneficiary, it is possible to see the merits of a jurisdiction clause providing for the insured or beneficiary’ domicile as an alternative forum (Art 13(2) BIR).

2.3.1.3. “Which is entered into by the consumer and the other party to the contract, both of whom are at the time of the conclusion of the contract domiciled or habitually resident in the same Member State, and which confers jurisdiction on the courts of that State, provided that such an agreement is not contrary to the law of that State”

Three different situations may arise: first, both parties are domiciled in the chosen State; second, both parties are habitually resident in the chosen State; finally, one of the parties is domiciled and the other is habitually resident in the chosen State. It is not clear from the wording of Art 17(3) BIR whether all these situations are included or only the former two. According to Kaye, it is probable thatall three are meant to be covered, although “it would have been helpful, if Art 15(3) [17(3) BIR] had instead said “each of whom is….either domiciled or habitually resident in the same Contracting State.”

A further lacuna in Art 17(3) BIR is that it does not expressly mention the person who, after the conclusion of the contract, changes his domicile or habitual residence. However a change of domicile by the supplier would not have any significant effect, as he can only sue the consumer in the courts of the latter’s domicile. Equally, in such a case the consumer as plaintiff can always choose between the courts of his domicile and the courts of the supplier’s domicile (Art 16 BIR). It seems therefore that Art 17(3) BIR intends to protect the supplier as plaintiff from a change of domicile of the consumer.177 In such a case, insofar as the contract is a consumer contract within Art 15 BIR, the supplier may be faced with a non-expected forum, the new consumer’s domicile.178 Moreover, as Art 17(3) RBI establishes, the agreement shall not be contrary to the law of the chosen State.179

2.3.2. The application of Art 23 BIR to intra-Community consumer transactions

A jurisdiction agreement in an international contract generally has two effects: it prorogates the jurisdiction of the chosen court (prorogatio fori) and it derogates from the natural jurisdiction (derogatio fori).180

Art 17 BIR limits the derogative effect of jurisdiction clauses in a consumer contract. A jurisdiction agreement can derogate from the protective jurisdiction grounds in Art 15 and 16 BIR only if it complies with one of the conditions laid down in Art 17 BIR. Therefore the conditions under Art 17 BIR are “conditions of validity” of the jurisdiction agreements which derogate from Arts 15 and 16 BIR.

This analysis explains why Art 17 BIR does not require the jurisdiction agreement to fulfil any formal requirement and why it is necessary to relate Art 17 to Art 23 BIR, which is concerned, as we have seen, with the “prorogation of jurisdiction”. Further, Art 23(5) BIR states that “agreements….conferring jurisdiction shall have no legal force if they are contrary to the provisions of Articles 13, 17 or 21…”; thus it subjects the application of Art 23 BIR itself to, inter alia, Art 17 BIR. Therefore, provided that the jurisdiction agreement is permitted under Art 17 BIR, Art 23 BIR will apply to regulate the prorogative effect of the jurisdiction agreement.181

In order for a party to enforce a jurisdiction agreement valid under Art 17 BIR, it is also necessary for the jurisdiction clause to comply with the requirements laid down in Art 23 BIR. Under Art 23 BIR a jurisdiction agreement must satisfy not only certain formal requirements, but also a number of substantive conditions to bring the case within its scope of application.182 The question which arises is whether a jurisdiction agreement in a consumer contract must comply with both types of requirements or only with the formalities laid down in Art 23 BIR.

2.3.2.1. Formal requirements

It is submitted that the formalities laid down in Art 23 BIR must also be satisfied by a jurisdiction clause inserted in a consumer contract. The Schlosser Report,183 the majority of commentators,184 and the ECJ185 all agree on the extension of the Art 23 BIR formal requirements to Art 17 BIR.186 However, the obligation to fulfil Art 23 BIR formal requirements is due not so much to an extension of these conditions to Art 17 BIR, but to the application of Art 23 BIR to jurisdiction agreements in consumer contracts. Nonetheless, it seems that some of the formal requirements laid down in Art 23 BIR are not suitable for jurisdiction agreements in consumer contracts.

In order to satisfy such requirements, a jurisdiction agreement under Art 23(1) BIR must be:

“a) in writing or evidenced in writing, or
b) in a form which accords with the practices which the parties have established between themselves, or
c) in international trade or commerce, in a form which accords with a usage of which the parties are or ought to have been aware and which in such trade or commerce is widely known to, and regularly observed by, parties to contracts of the type involved in the particular trade or commerce concerned.”187

Art 23(2) BIR further states that “Any communication by electronic means which provides a durable record of the agreement shall be equivalent to ‘writing’.”188

It seems clear that in consumer contracts the only relevant condition is the first one (and paragraph 2 in relation to BtoC contract), since in a consumer contract there will rarely be common practices between the parties (as required by Art 23 (1)(b)); on the other hand the use of the words “trade or commerce” in Art 23(1)(c) shows that this provision was introduced in order to take into account the uses and requirements of international trade. 189

The formality requirements, under Art 23 BIR, according to which the jurisdiction agreement must be “in writing or evidenced in writing” is relevant also to jurisdiction agreements in consumer contracts. It has been argued,190 however, that those formalities are superfluous in consumer contracts. This is because in so far as the jurisdiction agreement is entered into after the dispute has arisen, the consumer may be expected to have received legal advice as to the effect of an oral agreement, and therefore the protective formalities are not required. The view of this writer, however, is that if the dispute is indeed taken to have arisen at an “informal stage” , it is necessary, for the protection of the consumer, that there is a written confirmation of the agreement. Furthermore, when the jurisdiction agreement is agreed in favour of the consumer (Art 17(2) BIR), it is necessary that the intention to advantage the consumer be “clear from the wording of the jurisdiction clause, or from evidence therein, or from the surrounding circumstances.”191 Finally, when the third situation contemplated by Art 17 BIR arises, then, since this provision is designed basically to protect the supplier, it is also necessary that the jurisdiction agreement complies with Art 23 BIR formalities.192 Therefore, we may conclude that it is only where the jurisdiction agreement is relied upon to prorogate jurisdiction that it needs to satisfy the formal requirement laid down in Art 23 BIR.

2.3.2.2. Conditions of applicability

A jurisdiction clause must satisfy the following substantive conditions in order to be within the scope of application of Art 23 BIR:

  • the chosen court must be the court of a Member State; and
  • at least one of the contracting parties must be domiciled in a Member State.

A number of difficulties may arise in the application of these two conditions to jurisdiction agreements inserted in consumer contracts covered by Section IV BIR.

At the outset, an example may help to clarify the issue. Let us suppose that a consumer domiciled in England enters into a contract with the Spanish branch of an American firm which is registered in New York. The general conditions of the contract include an agreement conferring exclusive jurisdiction upon the courts of New York to resolve any disputes. The choice of forum clause has two effects: it prorogates the jurisdiction of the chosen court and it derogates from the natural jurisdiction. Therefore, in the case at issue, the jurisdiction agreement establishes the jurisdiction of the New York courts and derogates from that of the English courts. If the consumer subsequently brings an action before the English courts, as the courts of his domicile, the English court will have to ascertain its jurisdiction against the derogating jurisdiction clause. In such a case, should the effectiveness of the clause be assessed under Art 17 BIR or according to English national rules?

It has been argued that the requirements laid down in Art 23 BIR apply “almost certainly” to jurisdiction agreements under Art 17 BIR, since, as set out in the Preamble, the Convention determines the international jurisdiction of the courts of the Member States.193 It follows from this interpretation that a court of a Member State faced with a jurisdiction agreement conferring jurisdiction to a court outside a Member State, “will be free to decide whether to give effect to the agreement, and to make that decision according to its own law including its conflicts rules.”194

For example, according to English national law “Where plaintiffs sue in England in breach of an agreement to refer disputes to a foreign court, and the defendants apply for a stay, the English court, assuming the claim to be otherwise within its jurisdiction, is not bound to grant a stay but has a discretion whether to do so or not”.195 The court will exercise its discretion unless the plaintiff produces compelling arguments to the contrary, for example, by showing that the jurisdiction clause is forbiden in a statutory rule (eg Consumer Credit Act, 1974, s.141(1)).196 This rule is, nevertheless, subject to Art 23 of the BIR and, as will be shown is also subject to Art 17 BIR even when the jurisdiction clause is in favor of the courts of a non-Member State.

To the extent that the conditions laid down in Art 17 BIR limit the derogative effects of a jurisdiction agreement in a consumer contract, such limitations apply both where the chosen court is the court of a Member State, and where the chosen court is that of a non-Member State. In the latter case, such a clause can derogate from the protective fora provided for in Art 15-16 BIR only in so far as it complies with one of the conditions of Art 17 BIR, ie when it has been entered into after the dispute has arisen or when it affords the consumer an additional protective forum (in the sense that benefits the consumer and does not impede the possibility granted to the consumer in Art 15-16 BIR). The fulfilment of the third condition raises more difficulties since it requires both parties to be domiciled in a Member State and that the jurisdiction agreement confers jurisdiction upon the courts of that Member State.

It is worth distinguishing two different issues. The first is whether the court seised of the dispute has discretion to stay or to refuse leave to serve out the proceedings in the case of a jurisdiction clause granting jurisdiction to the court of a non-Member State in a consumer contract. The second question is whether the jurisdiction clause is valid. To distinguish the two issues is important because, as previously noted, the court seised can only consider the derogative effects of a clause granting jurisdiction to a court of a non-Member State in a consumer contract when this clause complies with one of the conditions laid down in Art 17 BIR Therefore, the court is not free to decide to stay proceedings or to refuse leave to serve out the proceedings. There is accordingly no discretion for the court when dealing with consumer contracts.

Insofar as the jurisdiction clause complies with one of the conditions under Art 17 BIR, it may still have to satisfy certain other requirements. The formalities of Art 23 BIR are, in this case, not applicable since the jurisdiction agreement grants jurisdiction to the courts of a non-Member State.197 Therefore the “formal validity” of such clause will need to be assessed by the court seised in accordance with its own national rules including its conflicts of laws rules.

The effects of a non-Member State jurisdiction clause in a consumer contract are therefore different from those of such a clause in a commercial contract. In the latter case it seems that both questions (the discretion of the court seised whether to stay or to refuse leave to serve out, and the validity of the jurisdiction clause) must be assessed pursuant to national law.198

As the Schlosser Report observes, there is nothing in the Convention which validates or invalidates such clauses, so the court seised will have to decide whether to give effect or not to such a clause in accordance with its own lex fori. As Briggs and Rees rightly point out, “that is a convenient result, and it accords with a point made in Re Harrods, where it was observed by the Court of Appeal that such clauses should be given effect, even despite the Convention.”199 Thus, when dealing with commercial contracts it seems that an English court may have discretion to stay proceedings or to refuse leave to serve out the proceedings commenced in breach of a jurisdiction clause granting jurisdiction to the courts of a non-Member State.200 This interpretation201 is, however, “sharply distinguishable from the general Spiliada doctrine,202 and the argument advanced (in this section) does not, it is suggested, apply beyond it.”203

It would appear from the foregoing that the European consumer who enters into a consumer contract within Section IV BIR has nothing to fear in relation to jurisdiction agreements (even in the case of a non-Member State jurisdiction clause). There are, however, many transnational consumer contracts falling outside the scope of Section IV which may contain a jurisdiction agreement. The question whether in those cases the European consumer should or should not be protected by European legislation (either conventional or institutional) will be addressed in the third part of this article.

3. Jurisdiction clauses falling outside Article 17 of the Brussels I Regulation

3.1. Introduction

When the defendant supplier is domiciled outside the Community, Section IV BIR does not apply204 and the jurisdiction of the court within a Member State, which is seised of the matter, shall be determined according to its own national laws.205 What are the effects here of a choice of forum clause, inserted in a contract between a consumer domiciled in a Member State and a supplier domiciled in a non-Member State, which confers jurisdiction upon the courts of the non-Member State?

Let us imagine the case of an English consumer who, attracted by an advertisement, enters into a contract for the purchase of goods with an American firm. The contract contains a choice of forum clause in favour of the New York courts.

It should be noticed that there is nothing at Community level which may impede the New York court from hearing and determining any action in respect of this situation.206 Both the supplier and the consumer may bring their case before the chosen court. However, from a Community perspective, the question which arises is whether the consumer as plaintiff may commence proceedings in the courts of his domicile contrary to the jurisdiction agreement and, if so, whether the relevant court may assert jurisdiction.207

In the case at issue, if the English consumer were to sue the supplier before the English Courts relying on Art 16 of the Brussels I Regulation, the supplier could argue that, as he is not domiciled in a Member State, the Brussels I Regulation does not apply. If the consumer instead based his claim on national jurisdiction rules, the supplier could demand a stay of proceedings on the basis of the binding jurisdiction clause in favour of the New York courts. Whether the English courts would indeed have to stay proceedings or whether they should disregard the jurisdiction clause in issue is the question we intend to analyse.

In such a situation neither Art 17 nor Art 23 of the Brussels I Regulation would apply. The former, as has been shown, only applies when the defendant is domiciled in a Member State, whilst the latter requires, as a condition of applicability, that the chosen court is the court of a Member State. Thus, the validity and effectiveness of such a clause needs to be assessed according to national law.

The rules governing choice of law in contract have been unified throughout the European Community by the 1980 Rome Convention on the Applicable Law to Contractual Obligations. However, Art 1(2)(d) of the Rome Convention provides that the rules of the Convention shall not apply to “agreements on the choice of court.” Thus, national courts shall assess the validity of the jurisdiction agreement according to the law designated by its own national conflicts of laws rules.

The application of different conflicts of laws rules throughout the Community may lead to different standards of protection which could jeopardise the proper functioning of the internal market. At the same time, according to Art 153 of the Treaty establishing the EC the Community shall promote the interests of consumers and ensure a high level of consumer protection. In this context might a Community rule be identified, harmonising the attitude of the European courts, and requiring them to disregard the jurisdiction clause in favour of the courts of a non-Member State?

The harmonisation of the laws of the Member Sates in the context of the completion of the internal market is one of the devices used by Community law in order to promote the interests of consumers and to ensure a high level of consumer protection (Art 153 TofA).208 The European legislator has chosen the directive as the appropriate community instrument for the enactment and development of harmonization in this field. Furthermore, it has opted for a minimum harmonization, a legislative technique though which the Community sets minimum standards of consumer protection, with freedom for Member States to impose higher standards.

There are a variety of directives, covering both specific and general issues in relation to consumer contracts, which aim to approximate the substantive law of the Member States.209 The contents of such Community acts are required to be implemented by the Member States and the implementing measure will substitute the previous domestic law in the harmonized areas.210 The applicability of such implementing domestic law depends, however, on the general applicability of the national law. Therefore, it is possible for the application of the national conflict of laws rule to determine the application of the law of a non-Member state in a situation connected to the internal market.211 In the case at issue this could mean that the validity of the jurisdiction clause could be assessed according to the law of a third State (New York in our example).212 In such a situation the judge of the seised court could not disregard the jurisdiction clause when such a clause is valid according to the applicable (New York) law.

This was the main problem encountered by the first generation of directives devoted to the protection of consumers (ie the directives issued from 1985 until 1993, such as, for example the Consumer Credit Directive).213 These Directives did not contain any rule indicating their spatial scope of application. They limited themselves to outlining rules of substantive law (to be transposed into domestic Member State law) and therefore, their own applicability depended on the applicability of the relevant State’s national law.214 In such cases, to determine the law governing the contract, the seised court would apply its own private international law rules.

Since Directive 93/13/EEC on Unfair Contract Terms215 the Community legislator has opted for the introduction of a private international law rule which aims to establish the mandatory character of the substantive community law. In particular Art 6(2) of this Directive enjoined that, “Member States shall take the necessary measures in order to ensure that the consumer does not lose the protection granted by this directive by virtue of the choice of law of a non-Member country as the law applicable to the contract, if the latter has a close connection with the territory of the Member State.” A very similar provision was adopted in Directive 7/97/EC on the protection of consumers in respect of long-distance contracts (Art. 12(2)),216 as well as in Directive 44/99/EC on certain aspects of the sale of consumer goods and associated guarantees (Art 7(2)),217 and Directive 2002/65/EC concerning the distance marketing of consumer financial services and amending Council Directive 90/619/eec, together with Directives 97/7/EC and 98/27/EC.218 See also Proposal for a Directive of the European Parliament and of the Council on the harmonisation of the laws, regulations and administrative provisions of the Member States concerning credit for consumers, 11 September 2002, COM (2002) 443 final.

In addition, there are two directives concerning specific consumer contracts (ie Directive 90/314 on package travel, package holidays and package tours219 and Directive 94/47 on the protection of purchasers in respect of certain aspects of contracts relating to the Member States)220 which also contain special rules indicating their spatial scope of application. Here though the rules differ considerably from those contained in the previously mentioned directives.

Finally, the Directive on certain aspects of electronic commerce in the internal market adopts a different approach again, and takes a step backward to the method used in the first generation of Directives since, as it explains, it does not aim to “establish additional rules on private international law relating to conflicts of law nor does it deal with the jurisdiction of Cours.”221

It will be argued, in what follows, that the relevant national court faced with a hostile jurisdiction clause inserted in a consumer contract not covered by the protective rule provided for in Art 17 BIR, should take account of the protection afforded by Community law. When the jurisdiction clause has been inserted in a consumer contract not individually negotiated, special attention should be paid to the Unfair Terms in Consumer Contracts Directive and the relevant domestic implementing legislation. As will be shown, a jurisdiction clause such as the one in the example may legitimately be held to be unfair within the meaning of the Directive.

3.2 Directive 93/13/EEC on Unfair Terms in Consumer Contracts and the potential of a rule complementing Art 17 of the Brussels I Regulation

The aim of the Unfair Contract Terms Directive is the approximation of the laws of the Member States relating to unfair terms in consumer contracts.222 All Member States have implemented the Directive in their national law.223 The Directive applies to consumer contracts for the sale of goods and supply of services;224 it applies only to terms which have not been individually negotiated (Art 3(1)).225 The Directive establishes guidelines for determining when a term may be regarded as unfair. A term shall be so regarded if, “contrary to requirement of good faith, it causes a significant imbalance in the parties’ rights and obligations, to th detriment of the consumer.”226 Further the Directive contains a non-exhaustive list of terms that may be regarded as unfair (Annex).227

Under Art 6(1) of the Directive, the Member States shall prescribe that unfair terms used in a contract concluded with a consumer by a seller or supplier shall not be binding on the consumer, but that the contract shall continue to bind the parties according to its other terms if it is capable of existing without the unfair terms.

To determine whether a jurisdiction clause, inserted in a consumer contract made between a consumer domiciled in a Member State and a supplier domiciled in a non-Member State and conferring jurisdiction upon the courts of the non-Member State, is unfair , regard should be had to the following provisions of the Directive:

Letter q of the Annex provides for the unfairness of a term “excluding or hindering the consumer’s right to take legal action or exercise any other legal remedy, particularly by requiring the consumer to take disputes exclusively to arbitration not covered by legal provisions, unduly restricting the evidence available to him or imposing on him a burden of proof which, according to the applicable law, should lie with another party to the contract.”228

Art 6(2) (third country provision) provides that Member States shall take the necessary measures in order to ensure that the consumer does not lose the protection granted by this directive by virtue of the choice of law of a non-Member country as the law applicable to the contract, if the latter has a close connection with the territory of the Member State.”

The first question which arises is whether the first sentence of letter q of the Annex in relation to Art 3(1) of the Directive can be applied to harmful forum selection clauses at all. In other words, is such a clause apt to exclude or hinder the consumer’s right to take legal action and, if so, be contrary to the requirement of good faith, in causing a significant imbalance in the parties’ rights and obligations arising under the contract, to the detriment of the consumer? Should this be the case another issue must be resolved, namely whether the national rule implementing the directive should apply to international consumer contracts and in which circumstances.

3.2.1. Construing letter q of the Annex of the Unfair Contract Terms Directive as covering harmful jurisdiction clauses

An extensive analysis of the legal status of an Annex falls outside the scope of this article. Because of the interpretative problems which arise in cases where an Annex is not implemented or is partially implemented, the discussion here will be limited to cases in which the Annex has been implemented (as has occurred in the United Kingdom and Spain).

It is debatable whether letter q of the Annex is intended to protect consumers against harmful jurisdiction clauses falling outside Art 17 BIR. Letter q of the Annex does not expressly mention forum selection clauses as a means of excluding or hindering the consumer’s right to take legal action. It does, however, expressly refer to arbitration agreements. The use of the word ‘particularly’ shows that the reference to arbitration agreements is only an example of contractual terms that may hinder the consumer’s right to take legal action.

We have seen that a choice of forum clause can have very harmful consequences for consumers. Thus, it could be argued that such clauses are covered by letter q of the Annex and therefore may be considered as unfair. For instance, a jurisdiction clause, such as the one in our earlier example, compelling the passive consumer to litigate in New York, might be considered as a clause hindering the consumer’s right to take legal action.

The above considerations suggest that, in certain circumstances, letter q of the Annex should be interpreted as applying to unfair harmful jurisdiction clauses inserted in consumer contracts.229

This interpretation of letter q of the Annex has been followed at a national level, for instance, by the Office of Fair Trading230 and the Spanish Supreme Court.231 Furthermore, the ECJ has recently upheld the unfairness of a term purporting to confer exclusive jurisdiction on a court in the territorial jurisdiction of the seller or supplier’s principal place of business. Once again, this was where, contrary to the requirement of good faith, it caused a significant imbalance in the parties’ rights and obligations arising under the contract, to the detriment of the consumer.232 According to the Court, such a term falls within the category of terms which have the object or effect of excluding or hindering the consumer’s right to take legal action, as referred to in letter q of the Annex.233

Although the preliminary question referred to the Court was whether a national court may determine of its own motion whether a term of a contract is unfair, the ECJ considered it necessary to determine first the potential unfairness of a jurisdiction clause inserted in a consumer contract providing for the exclusive jurisdiction of the courts of the supplier’s domicile. Although here the question arose in a purely internal contract, it is submitted that the same interpretation may be extended to international situations. If litigation in a court different from the consumer’s domicile, but within the same State, is potentially unfair, a jurisdiction clause compelling the consumer to litigate abroad should a fortiori be regarded as unfair.

Nevertheless, not all jurisdiction clauses in international consumer contracts may be considered unfair; only those which cause, contrary to the requirement of good faith, a significant imbalance in the parties’ rights and obligations arising under the contract, to the detriment of the consumer. In this context the provisions relating to jurisdiction in consumer contracts provided for in the Brussels I Regulation are pertinent, in particular Art 17 BIR concerning jurisdiction clauses. It is of great importance from a European perspective to maintain the coherence of the Community system as a whole. Since Art 17 BIR permits those jurisdiction clauses that are framed in accordance with its requirements, a jurisdiction clause not covered by Art 17 BIR should also be considered valid under letter q of the Annex of the Directive subject to the same conditions. That is, if a) it is entered into after the dispute has arisen; b) it allows the consumer to bring proceedings in courts other than those indicated in this Section; c) it is entered into by the consumer and the other party to the contract, both of whom are at the time of the conclusion of the contract domiciled or habitually resident in the same Member State, and which confers jurisdiction on the courts of that State, provided that such an agreement is not contrary to the law of that State. Insofar as these requirements are met, the choice of forum clause will not hinder the consumer’s right to take legal action and therefore cannot be regarded as unfair. This interpretation maintains the coherence between the Brussels I Regulation and the Directive.

3.2.2. The application of Directive 93/13 to international consumer contracts

Having examined the potential of a rule limiting party autonomy in consumer contracts contained in letter q of the Annex of the Unfair Contract Terms Directive, it is still necessary to analyse the application of such a rule in an international situation.

The application of the domestic legislation implementing the Directive on international consumer contracts gives rise to some difficulties. In principle, the national court may only rely on the implementing domestic law when either its conflict of laws rule leads to the law of a Member State (which has properly transposed the Directive) or when its national statute implementing the Directive is considered as an international mandatory rule of the lex fori. However, after the implementation of the Unfair Contracts Terms Directive, the majority of Member States provide, in their domestic legislation on unfair contract terms, for a special unilateral conflict of laws rule or a rule indicating the overriding character of the statute when certain conditions are satisfied.234

To understand the scope of application of the implementing national statutes, it is necessary to examine thoroughly the scope and meaning of Art 6(2) of the Directive. According to this Article, States are obliged to take the necessary measures to ensure that the consumer “does not lose the protection granted by the Directive by virtue of the choice of law of a non- Member country as the law applicable to the contract, if the latter has a close connection with the territory of the Member State.”

As has been said, Art 6(2)235 of the Directive aims to strengthen the mandatory character of the Directive’s provisions whenever there is a close connection between the consumer contract and a Member State, regardless of the choice of the law of a non-Member State as the law applicable to the contract. Therefore, Art 6(2) aims to grant the consumer the minimum protection afforded by the Directive when the parties have chosen the law of a non-Member State;236 it limits the effect of party autonomy in consumer contracts when the law of a non-Member State has been chosen.237

The question which arises at this point is why the Community legislator limits the protection afforded by the Directive to cases in which the parties have chosen the law of a non-Member State. As has been said, the first generation of consumer protection Directives did not contain any rule such as the one in Art 6(2) of the Unfair Contract Terms Directive. It is suggested that the main reason for the enactment of such a rule is to be found in the need to close gaps in the provisions of the Rome Convention. Art 5 of the Rome Convention establishes a uniform conflict rule for certain consumer contracts. The aim of Art 5 is to protect consumers when they enter into international contracts. Nevertheless, it has a very limited material scope of application and it only protects the “passive consumer.”238

The rationale of Art 6(2) is wider and is to avoid the possible damage to the consumer that a choice of a foreign law may cause when there is a close link between the contract and the Member States. Thus Art 6(2) does not limit the protection to certain consumers as Art 5 RC does. It does not require that the conditions indicating the existence of a close link should all arise in the same Member State. It therefore, protects the intracommunity active consumer. Furthermore, Art 6(2) does not limit its material scope of application. This is because, notwithstanding the existence of a close link between the contract and the Member States, there is the fear that the supplier may impose on the consumer a less protective law through a choice of law clause in favour of the law of a non-Member State.239

The same negative outcome may occur indirectly where the parties submit themselves to the jurisdiction of a non-Member State. The supplier may seek through a forum selection clause to avoid the Community or national protective rules. Where a court of a non-Member State hears the case there is no guarantee that it will apply the same level of protection provided for in the Community rule. The aim of Art 6(2) would fail if the jurisdiction clause in favour of the courts of a non-Member State were held to be valid even though the contract is closely connected to the Community.

Furthermore, in the vast majority of cases, jurisdiction agreements will be accompanied by choice of law clauses and, in the absence of an express choice, the jurisdiction agreement might be considered as evidence of an implied choice in favour of the law of the chosen court.240 Therefore, the effectiveness of such a clause should be susceptible to challenge on the basis of unfairness. Such an expedient can be regarded as forming one of the necessary measures that Member States should take to ensure the consumer the level of protection afforded by the Directive when there is a close connection between the contract and the Community.241

The question which arises at this point is, in which circumstances ought the effectiveness of a non-Member State jurisdiction clause in consumer contracts to be limited and to what extent? It is certainly the case that not all consumer contracts entered into by European consumers and foreign suppliers deserve a special Community standard of protection. Further, Art 6(2) expressly requires the existence of a close link between the contract and the Member State in order to ensure the European consumer the protection granted by the Directive. Therefore, only when the contract is closely connected to the Community is it justifiable to grant the consumer the above mentioned protection against harmful jurisdiction clauses.

When is there a “close connection” between the consumer contract and the Community?

The term “close connection” used by Art 6(2) is not unfamiliar. A very similar term was introduced in the 1980 Rome Convention, ie “the closest connection”. According to Art 4 of the latter Convention, “to the extent that the law applicable to the contract has not been chosen in accordance with Art 3, the contract shall be governed by the law of the country with which it is most closely connected.” In general,242 the country in question is presumed to be the place of residence or the place of business of the person who is to effect the performance which is characteristic of the contract (4(1)); the presumption does not apply when the characteristic performance cannot be determined, and will be disregarded if it appears from the circumstances as a whole that the contract is more closely connected with another country (Art 4(5)).

However, Art 6(2) of the Directive does not articulate the criteria for determining when there is such a “close connection”, nor the law which will apply to the concrete consumer contract.243 Should the connecting factors be understood as being similar to those under the Rome Convention, or should the concept of “close connection” in Art 6(2) be interpreted differently?

The difficult interrelationship between the Directive and the Rome Convention has been the focus of academic attention.244 Although space does not permit discussion either of the potential conflicts between the Directive and the Convention, or the actual tensions between the implementing national legislation and the Rome Convention,245 it is worth examining how the criterion of “close connection” has been interpreted and how it should be construed by Member States. Two approaches are possible.246

The first possibility, reflecting the fact that Community Directives are binding only as to the result to be achieved, and leave Member States free to choose the form and method of their implementation, is that it is for the latter themselves to establish the circumstances in which a close connection between them and the contract exists.247 The danger of such an approach, however, is twofold: first, each Member State may transpose the term or requirement of a “close connection” in a different way; second, the minimum harmonisation character of the Unfair Contract Terms Directive may lead to different levels of protection. Thus, conflicts between the different implementing statutes may exist.

Alternatively, one could argue that the expression “close connection” has to be interpreted in accordance with the Rome Convention. Therefore there will be a close connection between the contract and the territory of a Member State whenever the uniform conflicts of laws rules provided for in the Rome Convention lead to the application of the law of a Member State as governing the contract, regardless of the existence of a choice of law clause.248 Insofar as this latter approach is taken, two possible situations must in turn be distinguished: first, when the consumer contract falls within the ambit of application of Art 5; second, when it falls outside of it and the general rules of the Rome Convention apply.

In the first case, the consumer contract will be required to comply with all the conditions of application provided for in Art 5, which are similar to those provided for in Art 15 BIR (note, however, that Art 5 still has a limited scope of application while Art 15 BIR has been modified to cover all consumer contracts). Furthermore, the consumer has to be a “passive” consumer. Subject to these conditions, Art 5 establishes that, in the absence of choice of law, the contract shall be governed by the law of the country in which the consumer has his habitual residence: – if in that country the conclusion of the contract was preceded by a specific invitation addressed to him or by advertising, and he [the consumer] had taken all the steps necessary on his part for the conclusion of the contract, or; – if the other party or his agent received the consumer’s order in that country, or; – if the contract is for the sale of goods and the consumer travelled from that country to another country and there gave his order, provided that the consumer’s journey was arranged by the seller for the purpose of inducing the consumer to buy. Thus, whenever the consumer is resident or domiciled in a Member State and the conditions of its application are fulfilled, the provisions in the Directive will have a mandatory character, since there is a close connection between the contract and the State of the consumer’s habitual residence.

In the example used to illustrate the situation at stake (English consumer solicited by American supplier; non-Member State jurisdiction clause), all these conditions are fulfilled. The consumer contract was covered by the definition in Art 15 BIR; the consumer domiciled in England was a “passive” consumer solicited by an American firm. Therefore, if all those circumstances are met, the consumer should be protected against a non-Member State jurisdiction clause. The court dealing with the matter should consider the jurisdiction clause as unfairly relying on its national implementing statute.

In the second type of case, where the consumer contract falls outside Art 5, the general rules of the Rome Convention apply. As noted above, Art 4 of the latter establishes that in the absence of choice of law, the contract is governed by the law of the country with which it is most closely connected. This country is presumed to be the place of residence or the place of business of the person who is to effect the performance which is characteristic of the contract (Art 4(1) RC). Therefore when the supplier has his place of business in a Member State, a close connection exists between the contract and that State. This situation, however, need not concern us since the supplier here will not be domiciled in a non-Contracting State.

Thus, it may be concluded that, whenever the contract has been entered into by a “passive” consumer (as defined in Art 5 of the Rome Convention)249 and the supplier defendant is domiciled in a non-Member State, a jurisdiction clause in favour of the courts of a non-Member State can be considered potentially unfair (letter q of the Annex interpreted in conjunction with Art 6(2)). It should be noted, however, that the territorial conditions provided for by Art 5 of the Rome Convention are nowadays obsolete. Accordingly, it is submitted that it is necessary to modify them to reflect the changes introduced by the Brussels I Regulation, and in particular by Art 15 BIR, which, as has been examined, establishes that “in all other cases, the contract has been concluded with a person who pursues commercial or professional activities in the State of the consumer’s domicile or, by any means, directs such activities to that State or to several States including that State, and the contract falls within the scope of such activities.” The Community legislator may use Art 65 TEC to transform the Rome Convention into a Regulation and take that opportunity to modify Art 5 of the Rome Convention.250

3.3. The implementing statutes

The Member State legislation implementing the Directive will now be examined in order to identify, first, the way in which the States have (if at all) implemented letter q of the Annex of the Directive, and secondly, the different implementations of Art 6(2) of the Directive.

3.3.1. Implementation of letter q of the Annex of the Directive

The implementation of letter q of the Annex differs from one State to another. A complete analysis of the different national statutes goes beyond the scope of this article. We will focus on the English and the Spanish implementation.

The United Kingdom has transposed the provision verbatim into letter q of Schedule 3 of the Unfair Terms in Consumer Contracts Regulations 1999. Therefore, our interpretation of letter q of the Annex of the Directive could be extended mutatis mutandis to the English provision.

Other States by contrast have elaborated upon the circumstances in which a forum selection clause may be considered as unfair. The new Spanish statute on General Conditions251 adds a provision to the Consumer Protection Act252 which reads as follows: “A choice of forum agreement granting jurisdiction to the courts other than the courts of the place of the consumer’s domicile or the place of execution of the contract…shall be regarded as unfair.” (Disposición Adicional 28, hereinafter DA 28)

The implementation of letter q of the Annex by stressing those jurisdiction clauses which may be regarded as unfair is an option compatible with the Directive. However, a provision like the one in the Spanish Consumer Protection Act (hereinafter LGDCU) raises several questions of interpretation both with regard to jurisdiction clauses covered, and those not covered, by the Brussels I Regulation. First, it should be noted that the provision in DA 28 LGDCU is inconsistent with Section IV BIR since it does not exclude from its ambit of application those jurisdiction clauses covered by Art 17 of the Brussels I Regulation. The Spanish provision establishes the unfairness of a choice of forum clause giving jurisdiction to a court different from the consumer’s domicile or the place of execution of the contract. A jurisdiction clause valid according to Art 17 of the Brussels I Regulation may still be regarded as unfair if the chosen court is not the one expressly stated in the Spanish rule. This result goes beyond the Directive and the Brussels I Regulation and is therefore incompatible with EC law.

Furthermore, when the jurisdiction agreement falls outside the Brussels I Regulation it shall, acccording to the Spanish implementing Act, be regarded as unfair when it confers jurisdiction on courts other than the courts of the place of the consumer’s domicile or the place of execution of the contract. Therefore, by implication, a jurisdiction clause granting jurisdiction to the courts of the place of execution of the contract is valid. This outcome might be harmful for the consumer and exclude or hinder his right to take legal action, since such action would then be contrary to the Directive. By assuming the validity of jurisdiction clauses in consumer contracts in such cases, the Spanish Consumer Protection Act has restricted the protection afforded by the Directive. In order to restore such protection, a Spanish court would be required to interpret the Spanish rule both in accordance with the Directive and the Brussels I Regulation.

The consequences of declaring a jurisdiction clause unfair will be, in most cases, that the term will not be binding on the consumer (Art 6(1) of the Directive). If this is the case, the jurisdiction of the seised court will then be determined according to the national rules on jurisdiction.

3.3.2. Implementation of Art 6(2) of the Directive

As has been stated, Art 6(2) is contained in a Directive, a form of Community legislation which requires implementation through domestic legislation enacted by Member Sates. Therefore the aim of Art 6(2) must be reflected in the implementing national statute. Some Member States have transposed the objective pursued by Art 6(2) through a unilateral conflict of laws rule; others through a rule indicating the overriding character of the statute.

The different national implementation statutes give rise to many difficult questions.253 As will be shown, Member States have transposed Art 6(2) of the Directive in different ways. Disparities among the national implementing statutes may lead to a non-uniform attitude among the European courts with regard to jurisdiction clauses in favour of non-Member States. Furthermore, conflicts among national statutes may appear (making it difficult to determine the law applicable to the contract). This undesired outcome might jeopardise the aim pursued by Art 6(2) in conjunction with letter q of the Annex. A complete comparison of the national implementing statutes is beyond the scope of this article. For this reason the focus will be on only some of the domestic implementations.

Three questions need to be analysed. First, which international situations connected to non-Member States are covered by the implementing statutes? Secondly, how has the connecting factor ‘close connection’ been transposed? Finally, which law should be applied to determine the unfairness of the jurisdiction clause in favour of the court of a non-Member State?

The majority of the Member States have implemented Art 6(2) as covering only those consumer contracts in which the parties have chosen the law of a non-Member State as the proper law of the contract.254 This is true, for instance, of the implementation carried out by the United Kingdom in Section 9 of the Unfair Terms in Consumer Contracts Regulations 1999, which provides that “[t]hese Regulations shall apply notwithstanding any contract term which applies or purports to apply the law of a non-Member State, if the contract has a close connection with the territory of the Member States.” The use of the words “any contract terms” implies the existence of an agreement between the parties, and therefore an express choice made by them. Following this implementing method only when the parties have chosen the law of a non-Member State as the applicable law to the contract, will the relevant statutory provision be engaged, allowing the jurisdiction clause to be struck down as unfair. It is, however, important to note that for some legal systems the existence of a jurisdiction agreement might be considered as evidence of an implied choice in favour of the law of the chosen court.

Other Member States, by contrast, have adopted an approach based on a limitation of party autonomy in any case. This approach implies that it is not only where the parties have chosen the law of a non-Member State as the proper law of the contract that the case is covered, but also when the law chosen is that of a Member State. This is the situation in relation to the Spanish Consumer Protection Act.255 According to the new Art 10 bis par. 3 of the LGDCU (Consumer Protection Act) the unfair contract terms rules for the protection of consumers shall apply, notwithstanding the law chosen by the parties, in the terms provided for by Art 5 of the Rome Convention on the Law Applicable to Contractual Obligations. Therefore, in the example from earlier of a contract between an American supplier and a Spanish consumer which contains a clause giving jurisdiction to the courts of New York, the validity of the jurisdiction agreement will be determined (by the Spanish court) according to the Spanish Consumer Protection Act notwithstanding the law chosen by the parties, even if the parties have chosen, for example, English law as the law governing the contract. This system goes beyond the Directive since, insofar as there is harmonization, there is no need to limit the possibility of choosing the law of a Member State.

Finally, some implementing statutes extend the mandatory character of the national rules to any consumer contract closely connected to the Community. An example is the Greek implementing statute, according to which the law governing standard terms is applicable when the place of conclusion or performance of the contract is Greece, even if the contract itself is not governed by Greek law (Art 2(9)).256 Again this kind of provision is contrary to the Directive and may conflict with other implementing statutes such as the Spanish and English ones.

The second question which arises is how the connecting factor ‘close connection’ has been transposed by the different Member States. While some of the implementing provisions retain this term without elaboration,257 others attempt to define the circumstances in which there will be a close link between the contract and the Community.258 In the latter case, however, the definition proposed varies from one State to the next.

The first method has been followed by Section 9 of the Unfair Terms in Consumer Contracts Regulations 1999.259 It appears that, under this legislation, the UK legislator is content to leave to the seised court the application in casu of the “close connection” test. This approach has the advantage of its flexibility and versatility. It may, however, carry the risk of inviting forum shopping as far as the courts of the different Member States may diverge in their interpretations of the close connection test.

In the case of the Spanish Consumer Protect Act, art. 10 bis (3) establishes that the Unfair contract terms rules for the protection of consumers shall apply, notwithstanding the law chosen by the parties, in the terms provided for in Art 5 of the Rome Convention on the Law Applicable to Contractual Obligations. The reference to Art 5 of the Rome Convention should be understood as going to the territorial conditions of application and not to the substantive scope of application.260 Therefore, the Spanish Consumer Protection Act will apply whenever the consumer has his habitual residence in Spain and two other conditions are fulfilled. First, the conclusion of the contract must have been preceded in Spain by a specific invitation addressed to the consumer or by advertising and, secondly, the consumer must take all the steps necessary on his part for the conclusion of the contract in Spain. This method of implementation gives rise to several questions of interpretation. In the first place, the express reference to Art 5 of the Rome Convention could involve difficulties if, as proposed here, the Rome Convention is subsequently transformed into a Regulation. Secondly, as it only protects the passive consumer resident in Spain, what is the position if an English consumer travels to Spain and is solicited there by an American firm? The Spanish law fails to implement the objectives of the Directive since it does not protect the active consumer and, as stated earlier, this was one of the aims pursued by Art 6(2) of the Directive.

A different definition of the circumstances in which there is such a close link between the contract and the Community can be found in the new German statute on distance contracts and other questions of consumer law of 27 June 2000 (which amends the German Civil Code).261 According to Art 29a “(1) when a contract, by reason of a choice of law, is not subject to the law of a Member State, or to the law of a State within EEA, but has a close connection with the territory of one of those States, the law in force in that State implementing the Directives on consumer protection shall apply.

(2) A close connection will be implied to exist if

  • 1. the contract was entered into by a public offer, public advertisement or a similar business activity exercised in the territory of a Member State of the EU or a State party to the EEA and
  • 2. the other party had its seat or habitual residence at the time of his contractual declaration in a Member State of the EU or a State party to the EEA….”262

Although the territorial conditions provided for in Art 29a(2) of the German statute recall the ones established in Art 5 of the Rome Convention, there is an important difference. In particular, the connecting factors need not to be placed in the selfsame State, ie it is not necessary that the supplier’s offer or publicity, the consumer’s reply and the consumer’s habitual residence are all placed in the same Member State. Thus, this method of implementation resolves one of the difficulties pointed out with regard to the Spanish implementation, since it protects the active European consumer.

Although there are important differences between the national implementing statutes as regards the circumstances in which a close connection is deemed to exist between the consumer contract and the Community, such a connection is likely to be found in the vast majority of cases when the consumer is a ‘passive consumer’. That is to say, cases where he was solicited in the State of his domicile and it was there that he also took the necessary steps for the conclusion of the contract. Nevertheless disparities between the different national implementing statutes have been identified, which, as stated, may lead to different outcomes depending on the applicable statute. It would have been prefereable if the Member States had implemented Art 6(2) in a more uniform manner.

Finally, it should be noted that the majority of the Member States have used the unilateral technique, that is to say, the implementing Statute determines the circumstances in which the system, of which the Statute forms part, applies. The new German Statute adopts, however, a multilateral method since it provides for the applicability of the law of the State closely connected to the consumer contract (i.e. not necessarily German law). As Lagarde points out, this issue was a controversial one.263 According to some authors the harmonization of the laws of the Member States permits the use of the unilateral technique having the advantage of its simplicity since the seized court would apply the lex fori.264 It should be noticed, however, that the minimum harmonization technique, followed in the consumer protection Directives, gives freedom to Member States to set higher standards protection. In this regard, the German approach constitutes a recognition that the consumer could lose protection with the application of the lex fori.

The above analysis leads to the conclusion that, notwithstanding the aim pursued by the Directive through letter q of the Annex and Art 6(2) of protecting the consumer against harmful jurisdiction clauses in favour of the courts of a non-Member States, this purpose may not always be met. As has been shown it will depend on the applicable domestic legislation implementing the Directive .

4. Conclusions

1. Jurisdiction clauses in international consumer transactions may harm the consumer, the weaker party to the contract. The lack of bargaining power may lead the supplier to impose on the consumer a forum which benefits the supplier’s interests. Through a forum selection clause the supplier may seek to discourage the consumer from taking legal action, where the chosen court is far from the consumer’s domicile. In addition, jurisdiction clauses may be used as an indirect way of avoiding the application of consumer protection law. For these reasons freedom of bargaining power in cross-border consumer transactions should be restricted.

2. Section IV of the Brussels I Regulation on Jurisdiction, Recognition and Enforcement of Foreign Judgements in Civil and Commercial matters establishes special protective fora and limits the operation of jurisdiction clauses in certain consumer contracts. The material scope of application of Section IV has been extended by the BIR and, as a result of the amendment, the definition of consumer acquires great significance in the determination of the cases in which the protective fora will apply.

The analysis of the European Court of Justice’s decisions with regard to the concept of consumer (in Art 13 BC) leads us to the following conclusion. The term ‘consumer’ within Art 15 of the Brussels I Regulation should be interpreted in a uniform way common to all Member States. Although the ECJ has not yet developed a complete autonomous definition of the term consumer, it has provided some guidelines so as to identify the proper scope of application of Section IV. First, a teleological cannon of construction requires Section IV to be interpreted according to its protective objectives. These include the protection of an final private consumer not engaged in any trade or profession. Secondly, Section IV should be interpreted in a restrictive way, so as to cover only the consumer who really needs to be protected. Additionally, in principle only individuals (natural persons) should be regarded as consumers. Finally, the consumer must be a party to the proceedings and must be bound by one of the consumer contracts covered by Art 15 BIR.

3. Section IV only applies when the defendant is domiciled in a Member State. Art 15(2) BIR is intended to mitigate the negative effects of such restriction by establishing an exception according to which, when a consumer enters into a contract with a party not domiciled in a Member State but with a branch, agency or other establishment in one of the Member States, that party shall, in disputes arising out of the operations of the branch, agency or establishment, be deemed to be domiciled in that State. The protective aim pursued by Art 15(2) BIR could be jeopardised if the provision is construed in accordance with the interpretation of Art 5(5) BIR given by the ECJ. Accordingly, in this article, a more flexible interpretation of Art 15(2) BIR has been suggested, which takes into consideration its protective objective. It has been argued that the exception in Art 15(2) BIR has to afford the consumer the possibility of bringing proceedings within the Community, granting him a defendant who is deemed to be domiciled in a Member State.

4. As is well known, a choice of forum agreement has two effects: it prorogates the jurisdiction of the chosen court (prorogatio fori) and it derogates negatively from the natural jurisdiction (derogatio fori). Jurisdiction clauses in consumer contracts are restricted in the sense that the parties can only derogate from the protective fora provided for in Art 16 BIR when one of the conditions laid down in Art 17 BIR is fulfilled. Therefore, Art 17 BIR limits the negative, derogative effects of a jurisdiction clause inserted in a consumer contract covered by Section IV. It does not, however, regulate the positive effects of such a clause. Thus, even where a jurisdiction clause is valid under Art 17 BIR, it must, if it is to apply positively, fulfil the further requirements laid down in Art 23 BIR. Under Art 23 BIR a jurisdiction agreement must satisfy both formal and substantive conditions. With regard to the formalities, only the requirement according to which the agreement must be in writing or evidenced in writing is relevant to jurisdiction agreements in consumer contracts; the other formal conditions were provided for commercial transactions.

Art 23 BIR only applies to jurisdiction agreements in favour of the courts of a Member State. When both parties to the contract are domiciled in the Community and the choice of forum clause grants jurisdiction to the courts of a non-Member State, the Member State’s court faced with such a clause may only enforce it if it complies with one of the conditions under Art 17 BIR. This is because, as stated Art 17 BIR is directed at the derogative effects of jurisdiction clauses in consumer contracts. Thus, the restrictions laid down in Art 17 BIR apply both in the case where the chosen court is the court of a Member State and in the case where the chosen court is the court of a non-Member State.

Therefore in those consumer contracts covered by Section IV, the consumer is fully protected against harmful jurisdiction clauses.

5. Finally, when the supplier defendant is domiciled in a non-Member State, and the consumer intends to sue him in the courts of the consumer’s domicile in breach of a jurisdiction clause in favour of the courts of a non-Member State, the seised court will have to determine its jurisdiction according to its own rules. Here, there is the need for a Community rule which harmonises the attitude of the European courts faced with a harmful jurisdiction clause in favour of a court in a non-Member State. The Directive on Unfair Contract Terms in Consumer Contracts contains an indicative list of clauses which may be regarded as unfair. It is suggested that letter q of the Annex should be construed as rendering unfair any harmful jurisdiction clause in favour of a non-Member State that is not covered by Art 17 BIR. Such an interpretation would be in accordance with Art 6(2) of the Directive, which aims to protect the consumer when the parties have chosen the law of a non-Member State as the law applicable to the contract, provided that there is a close connection between the contract and the Community. Thus, Art 6(2) grants the provisions of the Directive international mandatory character. Choice of forum clauses are often accompanied by choice of law clauses and, in the absence of an express choice, the jurisdiction agreement might be considered as evidence of an implied choice in favour of the law of the chosen court. The above-mentioned considerations lead to this article final conclusion: the court of a Member State faced with a jurisdiction clause in favour of the court of a non-Member State may hold the jurisdiction clause to be unfair on the ground that it hinders the consumer’s right to take legal action, provided that there is a close connection between the contract and the Community.

Given that Directives require implemention by the Member States in their national legislation, attention must be paid to the implementing statutes. Unfortunately there are many disparities between the domestic implementing statutes and therefore the suggested outcome will depend on the applicable implementing statute.

List of Abbreviations

BC –Brussels Convention
BIR –Brussels I Regulation
BtoC– Business to Consumer contracts
CLJ– Cambridge Law Journal
CMLR– Common Market Law Review
ELR– European Law Review
ICLQ– International and Comparative Law Quarterly
LMCLQ —Lloyd’s Maritime & Commercial Law Quarterly
LQR– Law Quarterly Review
OJLS– Oxford Journal of Legal Studies
Rec des Cours– Recueil des Cours
Rec. Dalloz– Recueil Dalloz
REDI– Revista Española de Derecho Internacional
Rev. crit. dr. int. pr.– Revue Critique de Droit International Privé
Riv.dir.int.priv.proc.– Rivista di Diritto Internazionale Privato e Processuale

Table of Cases

European Community Cases

– Case 14/76 Ets. A. De Bloos. S.P.R.L. v Société en commandite par actions Bouyer [1976] ECR 1497
– Case Salotti v RÜWA [1976] ECR 1831
– Case 150/77 Société Bertrand v Paul Ott KG [1978] ECR 1431
– Case 33/78 Somafer SA v Saar-Ferngas AG [1978] ECR 2183
– Case 139/80 Blackaert & Willems PVBA v Luise Trost [1981] ECR 819
– Case 201/82 Gerling v Italian Treasure [1983] ECR 2503
– Case 22/85 Anterist v Crédit Lyonnais [1986] ECR 1951
– Case 218/86 SAR Schotte v Parfums Rothschild [1986] ECR 4905
– Case 89/91 Shearson Lehamn Hutton v TVB Treuhandgesellschaft für Vermögensverwaltung und Beteiligungen mbH [1993] ECR I-139
– Case 318/93 Wolfgang Brenner and Peter Noller v Dean Witter Reynolds Inc. [1994] ECR I-4275
– Case 269/95 Benincasa v Dentalkit Srl [1997] ECR I-3767
– Case 99/96 Hans-Herman Mietz v Intership Yachting Sneek BV [1999] ECR I-2277
– Case C-412/98 Group Josi Reinsurance Company SA v Universal General Insurance Company (UGIC) [2000] ECR I-5940
– Case C-381/98 Ingmar GB Ltd v Eaton Leonard Technologies Inc. [2000] ECR I-9325
– Joined Cases C-240/98 to C-244/98 Océano Grupo Editorial SA v Rocío Murciano Quintero [2000] ECR I-4941
– Case C-96/00 Rudolf Gabriel (unreported)
– Joined Cases C- 541/99 and C-542/99 Cape Snc v Idealservice Srl (unreported)

English Cases

Arkwright Mutual Insurance Co v Bryanston Insurance Co Ltd [1990] 2 QB 649
S & W Berisford plc v New Hamshire Insurance Co [1990] 2 QB 631
Harrods Buenos Aires Re [1992] Ch 72
Nile Rhapsody, The [1994] Lloyds’ Rep, 382

Spanish Cases

Tribunal Supremo 23-7-1993 (Ar 6476)
Tribunal Supremo 20-7-1994 (Ar 6518)
Tribunal Supremo 2-7-1996 (Ar 5580)
Tribunal Supremo 23-9-1996 (Ar 6721)
Tribunal Supremo 8-11-1996 (La Ley, 30-12-1996, 4)
Tribunal Supremo 25-11-1996 (AC nº 10, 605)

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– H Gaudemet-Tallon, ‘Les frontières extérieures de l’espace judiciaire européen: quelques repères’ in A Borras, (ed), E Pluribus Unum. Liber Amicorum Georges A.L. Droz, ‘On the Progressive Unification of Private International Law (1996) 85.
– H Gaudemet-Tallon, Note to the case Bruno v Soc. Citibank, Ct. App. Versailles, 1991, in (1992) Rev.crit.dr.int.priv. 333.
– H Gaudemet-Tallon ‘Le “forum non conveniens” une menace pour la Convention de Bruxelles? (A propos de trois arrêts anglais récents)’ Rev.crit.dr.int.priv. (1991) 491.
– L Gillies. ‘A Review of the New Jurisdiction Rules for Electronic Consumer Contracts within the European Union’, 2001 (1) The Journal of Information, Law and Technology http://elj.warwicick.ac.uk/jilt/01-1/gillies.html
– Giuliano/Lagarde Report on the 1980 Rome Convention on the Law Applicable to Contractual Obligations [1980] OJ C 282.
– M Guzmán Zapater, ‘La Prórroga de la competencia en los contratos de venta internacional concluidos por consumidores’ (1987) 39 REDI 447.
– J Harris, ‘Jurisdiction Clauses and Void Contracts’ (1998) 23 ELR 279.
– T Hartley, ‘The Brussels Convention and forum non conveniens’ (1992) ELR 553.
– G Howells and T Wilhelmsson, EC Consumer Law (1997).
– Imhoff-Sheier, Protection du consommateur et contrats internationaux, Etudes suisses de droit international/Schweizer Studien zum internationalen Rech (1981).
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– Jenard Report on the 1968 Brussels Convention ([1979] OJ C59/1).
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– K Juenger, ‘La Convention de Bruxelles du 27 September 1968 et la courtosie internationale. Réflexions d’un Américain’ (1983) Rev.crit.dr.int.priv. 37
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– H Tagaras, 1-2 (1995) Cahiers de Droit Européen 170.
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Footnotes

* Phd, Mst, LLM. Lecturer in Private international Law at the Law Faculty of the University of Tarragona (Spain)

1 A Rodriguez Benot, Los acuerdos atributivos de competencia judicial internacional en derecho comunitario europeo (1994) 41.

2 Council Regulation (EC) No 44/2001 of 22 December 2000 on jurisdiction and recognition and enforcement of judgments in civil and commercial matters, [2001] OJ L12/1. The United Kingdom and Ireland, in accordance with Art 3 of the Protocol on the position of the United Kingdom and Ireland annexed to the Treaty on European Union and to the Treaty of the European Community, have opted to take part in the adoption of the BIR (Recital 20 BIR). By contrast, Denmark does not participate in the adoption of the BIR, and is therefore not bound by it nor subject by its application (Recital 21 BIR). Therefore, in the BIR the term “Member State” shall mean Member States with the exception of Denmark (Art 1(3) BIR). See on the Brussels I Regulation: G AL Droz and H Gaudemet-Tallon, ‘La transformation de la Convention de Bruselles du 27 septembre 1968 en Règlement du Conseil concernant la compètence judiciaire, la reconnaissance et l’exécution des décisions en matière civil et commerciale’ (2001) 4 Rev.crit.dr.int.priv. 601; JP Beraudo, ‘Le Règlement (CE) du Conseil du 22 décembre 2000 concernant la compétence judiciaire, la reconnaissance et l’execution des décisions en matière civil et commerciale’ (2001) 4 Journal du Droit International 1033 ; A Nuyts, ‘La communitarisation de la Convention de Bruxelles. Le règlement 44/2001 sur la compétence judiciaire et l’effet des décisions en matière civil et commercial’ 6035 (2001) Journal des tribunaux 13; Ch Bruneau, ‘Le Traité d’Amsterdam et la coopération judiciaire en matière civil. Transformation en règlements communautaires de quatre conventions européennes’ 43-44 (2000) La Semaine Juridique 1955; Ch Bruneau, ‘Les règles européennes de compétence en matière civil et commerciale’ (2001) 11 La Semaine Juridique 533.

3 In fact there are five Brussels Conventions. The original one signed in 1968 ([1978] OJ L 304/36); Brussels Convention on the Adhesion Convention 1978 (Convention of 9 October 1978 on the Association of the Kingdom of Denmark, Ireland and the United Kingdom of Great Britain and Northern Ireland to the Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters) ([1978] OJ L 304); The Greek Accession Convention ([1982] OJ L388/1346); San Sebastian Convention providing for the accession of Spain and Portugal ([1989] OJ L285/1); The Brussels Convention providing for the accession of Austria, Finland and Sweden ([1997] OJ C15/1). The Brussels Convention has been incorporated into English law through the Civil Jurisdiction and Judgments Act 1982 (Amendment) Order 1990: SI 1990/2591. We will refer to the provisions of the Brussels Convention and not of the Act unless there is a difference.

4 On the impact of the Treaty of Amsterdam with regard to the private international law of the Member states see: J Basedow, ‘The Communitarization of the Conflict of Laws under the Treaty of Amsterdam’, (2000) 37 CMLR 687; A Borrás, ‘Derecho internacional privado y Tratado de Amsderdam’ (1999) 2 REDI 383; C Kohler, ‘Interrogations sur les sources du Droit international privé européen après le Traité d’Amsterdam’, (1999) Rev.crit.dr.int.pr. 1; O Remien, ‘European Privat International Law, the European Community and its Emerging Area of Freedom, Security and Justice’ 38 (2001) 1 Common Market Law Review 53.

5 The word supplier is used in this context as a general term to cover all kind of professionals, traders, lenders, etc.

6 M Guzmán Zapater, ‘La Prórroga de la competencia en los contratos de venta internacional concluidos por consumidores’ (1987) 39 REDI 451.

7 G Howells and T Wilhelmsson, EC Consumer Law (1997) 259.

8 Green Paper on Access of Consumers to Justice and the Settlement of Consumer Disputes in the Single Market COM (93) 576 Final.

9 See the Draft programme of measures for implementation of the principle of mutual recognition of decisions in civil and commercial matters, OJ C 12/1.

10 See the Green Paper on Legal aid in civil matters: the problems confronting the cross-border litigant, COM (2000) 51 Final. See also the Proposal for a Council Directive to improve access to justice in cross-border disputes by establishing minimum common rules relating to legal aid and other financial aspects of civil proceedings, COM(2002) 13 Final.

11 A good example could be the English small claims system. See on this particular system D Oughton and J Lowry, Textbook on Consumer Law (1997) 74–75. See as well, in general the Commission Green Paper on Access of Consumers to Justice and the Settlement of Consumer Disputes in the Single Market (COM (93) 576 Final).

12 Rome Convention on the Law Applicable to Contractual Obligations [1980] OJ L 266/1 (hereinafter Rome Convention). The Rome Convention has been incorporated into English law through the Contracts (Applicable Law) Act 1990.

13 We are conscious of the existence of some differences. For instance, the United Kingdom has made a reservation for the application of Art 7(1) of the Rome Convention.

14 As said above only applies to certain consumer contracts. It has a limited material scope of application and only protects the so-called passive consumer as defined in Art 5.

15 H Micklitz and S Weatherill, ‘Consumer Policy in the European Community: Before and After Maastricht’ (1993) Journal of Consumer Policy 287.

16 G Howells and T Wilhelmsson, EC Consumer Law (1997) 259.

17 Case C-89/91 Shearson Lehamn Hutton v TVB Treuhandgesellschaft für Vermögensverwaltung und Beteiligungen mbH [1993] ECR I-139 point 13.

18 In fact, every version of the Brussels Convention has its own Report. Prof Jenard made the report to the original one signed in 1968; Prof. Schlosser made the one for the Convention of 9 October 1978 on the Association of the Kingdom of Denmark, Ireland and the United Kingdom of Great Britain and Northern Ireland to the Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters; Profs. Evrigenis and Kerameus did the report to the Greek Accession Convention and finnally, Profs. Desantes and Almeida made the report for the San Sebastian Convention providing for the accession of Spain and Portugal.

19 A Borrás, ‘Hacia la supresión del exequátur en Europa’, (2001) 4 Cooperación Jurídica en materia civil. El Convenio de Bruselas. Cuadernos de Derecho Judicial 33.

20 Giuliano/Lagarde Report on the 1980 Rome Convention on the Law Applicable to Contractual Obligations [1980] OJ C 282, (hereinafter Giuliano/Lagarde Report).

21 Giuliano/Lagarde Report 23.

22 C Joustra, ‘Jurisdiction in consumer disputes under the Brussels Convention’ in K Boele-Woelki, (ed), Comparability and Evaluation; Essays on Comparative Law, Private International Law and International Commercial Arbitration (1994) 234.

23 First and Second Protocol on the Interpretation by the Court of Justice of the European Communities of the Convention on the Law Applicable to Contractual Obligations opened for signature on 9 June 1980 [1989] OJ L48.

24 In this section we will refer to the provisions of the Brussels Convention when interpreted by the ECJ. We will also put in brackets the corresponding articles of the Brussels I Regulation.

25 Case 150/77 Société Bertrand v Paul Ott KG [1978] ECR 1431. Although the case was based on the original Art 13 BC the ruling held by the Court is applicable to the current Art 13 BC version. See Schlosser Report p 117 where it is pointed out how the drafters of the Adhesion Convention were influenced by this judgment.

26 Art 35(1) BIR provides that a judgment shall not be recognised if it conflicts with the provisions of Section IV.

27 [1978] ECR 1431 at point 14.

28 Ibid.

29 Case C-89/91 Shearson Lehman Hutton v TVB [1993] ECR I-139; Case C-269/95 Benincasa v Dentalkit Srl [1997] ECR I-3767.

30 Case C-269/95 Benincasa v Dentalkit Srl [1997] ECR I-3767.

31 For instance the definition of consumer in the Unfair Contract Terms Act 1977 (1977, c. 50) and the Unfair Terms in Consumer Contracts Regulations 1999 SI 1999 No 2083 is not the same. The Unfair Contract Terms Act 1977 defines the concept consumer in the following terms in s 12: “(1) A party to a contract ‘deals as consumer’ in relation to another party if_

– he neither makes the contract in the course of a business nor holds himself out of doing so; and

– the other party does make the contract in the course of a business; and

– in the case of a contract governed by the law of sale of goods or hire-purchase, or by section 7 of this Act, the goods passing under or in pursuance of the contract are of a type ordinarily supplied for privet use or consumption.

(2) But on a sale by auction or by competitive tender the buyer is not in any circumstances to be regarded as a consumer.

(3) Subject to this, it is for those claiming that a party does not deal as consumer to show that he does not.”

The Unfair Terms in Consumer Contracts Regulations 1999 states that the term ‘consumer’ means any natural person who, in contracts covered by this Regulations, is acting for purposes which are outside his trade, business or profession.

32 Case C-89/91 Shearson Lehman Hutton v TVB [1993] ECR I-139 at point 16.

33 H Tagaras, (1995) 1-2 Cahiers de Droit Européen 170.

34 Case C-89/91 Shearson Lehman Hutton v TVB [1993] ECR I-139 at point 17.

35 Ibid at point 18.

36 Note that we are not dealing with collective actions but with individual claims. So the term ‘person’ will only be examined in this later sense.

37 From a linguistic viewpoint the English wording of Art 15 BIR seems to differ from other versions. Indeed, the English version defines the consumer as the person who concludes a contract “for a purpose which can be regarded as being outside his trade or profession. Both the French and the Spanish version use the term ‘use’ (“usage”; “uso”) instead of ‘purpose’. The meaning given to the notion of ‘consumer’ could vary since the term ‘purpose’ could imply a ‘subjective’ test of the aim of the contract while the term ‘use’ implies an ‘objective’ one. It can be argued, however, that the term ‘purpose’ has been used in English statutes as meaning that the goods or services acquired by the consumer should be intended for non-business use (Unfair Terms in Consumer Contracts Regulation 1999, reg 3(1)). Therefore, the word ‘purpose’ does not necessarily imply a ‘subjective’ test of the aim of the contract. Thus, it is preferable to interpret the English version in accordance to the others.

38 Opinion of Advocate General Ruiz-Jarabo Colomer at point 38.

39 JM Bischoff, (1998) 2 Journal du Droit International 583.

40 We will discuss below which consumer contracts are covered by Section IV.

41 Case C-269/95 Benincasa v Dentalkit Srl [1997] ECR I-3767.

42 Facts expressed by Advocate General Ruiz-Jarabo Colomer at points 3-19.

43 Case C-269/95 Benincasa v Dentalkit Srl [1997] ECR I-3767 at point 16.

44 Advocate General Ruiz-Jarabo Colomer at point 38.

45 J Harris, ‘Jurisdiction Clauses and Void Contracts’ (1998) 23 ELR 280.

46 Case C-269/95 Benincasa v Dentalkit Srl [1997] ECR I-3767 at point 17.

47 Advocate General Ruiz-Jarabo Colomer at point 50.

48 JM Bischoff, (1998) 2 Journal du Droit International 584.

49 Ibid.

50 Ibid.

51 D Oughton and J Lowry, Textbook on Consumer Law (1997) 2-3.

52 Guiliano/Lagarde Report 23.

53 Ibid.

54 Ibid.

55 Guiliano/Lagarde Report 23.

56 CA Esplugues Mota, ‘Noción de consumidor. Delimitación de la misma en el artículo 13 del Convenio de Bruselas de 1968 sobre competencia judicial internacional, reconocimiento y ejecución de resoluciones judiciales en material civil y mercantil’ (1993) Comunidad Europea Aranzadi 33, footnote 26.

57 LF Carrillo Pozo, ‘Competencia en materia de contratos celebrados por consumidores’ in AL Calvo Caravaca, (ed), Comentario al Convenio de Bruselas relativo a la competencia judicial y a la ejecución de resoluciones judiciales en materia civil y mercantil (1994) 273.

58 Case C-89/91 Shearson Lehman Hutton v TVB [1993] ECR I-139 at point 18.

59 Case 150/77 Société Bertrand v Paul Ott KG [1978] ECR 1431, at paragraph 14; Case C-89/91 Shearson Lehman Hutton v TVB [1993] ECR I-139, at para 20-22; Case C-269/95 Benincasa v Dentalkit Srl [1997] ECR I-3767, at para 15.

60 Schlosser Report 117.

61 Vienna Convention on Contracts for the International Sale of Goods of 11 April 1980.

62 Case C-89/91 Shearson Lehman Hutton v TVB [1993] ECR I-139.

63 Opinion of Advocate General Darmon at point 164.

64 R Arenas, ‘Tratamiento jurisprudencial del ámbito de aplicación de los foros de protección en materia de contratos de consumidores del Convenio de Bruselas de 1968’ (1996) 1 REDI 46.

65 Other International Conventions expressly exclude stocks, shares, investments securities, negotiable instruments or money, or sales on commodity or future exchanges: see, for instance, the Hague Convention on the Law Applicable to Certain Consumer Sales 1980, Art 4(c) and (d), which is however not in force. The Rome Convention 1980 only excludes obligations arising out of negotiable instruments to the extent that the obligations under such other negotiable instruments arise out of their negotiable character (Art 2(c)).

66 R Arenas, ‘Tratamiento jurisprudencial del ámbito de aplicación de los foros de protección en materia de contratos de consumidores del Convenio de Bruselas de 1968’ (1996) 1 REDI 47.

67 A Bercovitz Rodiguez-Cano, ‘Ambito de aplicación y derechos de los consumidores en la Ley General para la Defensa de los Consumidores y Usuarios’ in Estudios jurídicos sobre protección de los consumidores (1987) 123-124; LF Carrillo Pozo, ‘Competencia en materia de contratos celebrados por consumidores’ in AL Calvo Caravaca, (ed), Comentario al Convenio de Bruselas relativo a la competencia judicial y a la ejecución de resoluciones judiciales en materia civil y mercantil (1994) 273.

68 R Arenas, ‘Tratamiento jurisprudencial del ámbito de aplicación de los foros de protección en materia de contratos de consumidores del Convenio de Bruselas de 1968’ (1996) 1 REDI 47.

69 Ibid.

70 P Nygh refers to three German cases in which the courts treated such contracts as capable of falling within the definition: OLG Cologne ZIP 1989, 839; Dusseldorf OLG IPRax 1997, 115 et seq. He also mentions a US case in which the Supreme Court expressed the need to protect the small investor from the unintended and unfair results of a choice of law. P Nygh, Autonomy in International Contracts (1999) 147, footnote 42.

71 A requirement such as this appears in the Unfair Contract Terms Act 1977, s 12(1)(b), and the Unfair Terms in Consumer Contracts Regulations 1999, r 3(1).

72 Guiliano/Lagarde Report 23.

73 P Nygh, Autonomy in International Contracts (1999) 148.

74 The Council Directive (EEC) 93/13 on Unfair Terms in Consumer Contracts [1993] OJ L 95 defines the consumer as “any natural person who, in contracts covered by this Directive is acting for purposes which are outside his trade, business or profession”. See on the definition of consumer in Art 2(b) of the Directive the ECJ decision in Joined Cases C-541/99 and C-542/99 Cape Snc v Idealservice Srl (unreported). The Unfair Terms in Consumer Contracts Regulations 1999 expressly refers to ‘natural’ person.

75 LF Carrillo Pozo, ‘Competencia en materia de contratos celebrados por consumidores’ in AL Calvo Caravaca, (ed), Comentario al Convenio de Bruselas relativo a la competencia judicial y a la ejecución de resoluciones judiciales en materia civil y mercantil (1994) 273.

76 P Kaye, Civil Jurisdiction and Enforcement of Foreign Judgments (1987) 829.

77 P Kaye gives some examples of companies acting outside its trade or profession.One is where a company hires a hall and engages caterers in order to organise a party for one of its executives on an isolated occasion as a reward to that person and pays the bill for the food in instalments. Although the purpose can be considered as being not for some business, and is one which is not regularly made by that company, it is difficult to maintain that the company is not acting in a business capacity. In that respect see what is said here in respect of certain borderline situations, P Kaye, Civil Jurisdiction and Enforcement of Foreign Judgments (1987) 829.

78 Ibid.

79 Ibid.

80 Case C-89/91 Shearson Lehman Hutton v TVB [1993] ECR I-139.

81 Ibid at point 22.

82 Ibid at point 24.

83 C Kassedjian, ‘L’Action en justice des assotiations de consommateurs et d’autres organisations représentatives d’intérêts collectifis en Europe’ (1997) 2 Riv.dir.int.priv.proc. 282.

84 See L Boré, ‘L’Action en représentation conjointe: class action française ou action mort-née?’ (1995) Rec. Dalloz 267; Green Paper on Access of Consumers to Justice and the Settlement of Consumer Disputes in the Single Market COM (93) 576 Final.

85 See Council Directive (EC) 98/27 on Injunctions for the Protection of Consumer’s Interests [1998] OJ L166.

86 With regard to the possibility of applying Section IV of the Convention to injunctions, see C Kassedjian, ‘L’Action en justice des assotiations de consommatuers et d’autres organisations représentatives d’intérêts collectifis en Europe’ (1997) 2 Riv.dir.int.priv.proc. 287-288.

87 C Kassedjian, ‘L’Action en justice des assotiations de consommatuers et d’autres organisations représentatives d’intérêts collectifis en Europe’ (1997) 2 Riv.dir.int.priv.proc. 288. See Case C-89/91 Shearson Lehman Hutton v TVB [1993] ECR I-139 at point 24.

88 Sweden made a proposal to include a specific section regarding injunctions (Document 6248/98 LIMITE JUSTCIV12, 27th of February) rejected in the fifth meeting of the ad hoc Working Party on the Revision of the Brussels and Lugano Convention (Interlaken, 14 to 17 September 1998).

89 AL Calvo Caravaca and J Carrascosa González, Conflictos de leyes y conflictos de jurisdicción en Internet (2001) 85.

90 Case 150/77 Société Bertrand v Paul Ott KG [1978] ECR 1431.

91 Schlosser Report at para 157.

92 Case 99/96 Hans-Herman Mietz v Intership Yachting Sneek BV [1999] ECR I-2277.

93 Ibid at point 31.

94 Ibid.

95 On the interpretation of the former conditions with regard to the conclusion of the contract provided for in Art 13 BC, see ECJ ruling in Case C-96/00 Rudolf Gabriel (unreported). The decision is available at http://curia.eu.int.

96 On this subject see: L Gillies. ‘A Review of the New Jurisdiction Rules for Electronic Consumer Contracts within the European Union’, 2001 (1) The Journal of Information, Law and Technology http://elj.warwicick.ac.uk/jilt/01-1/gillies.html; AL Calvo Caravaca and J Carrascosa González, Conflictos de leyes y conflictos de jurisdicción en Internet (2001); P De Miguel Asensio, Derecho privado de Internet (2 ed, 2001); J Dickie, Internet and Electronic Commerce Law in the European Union (1999).

97 On the former conditions, with regard to the conclusion of the contract of Art 13(3) BC and the difficulties to uscertain those conditions in BtoC contracts, see: P A de Miguel Asensio, Derecho privado de Internet, 2nd ed, 2001, Civitas, 433-442.

98 N Rosner ‘Internactional Jurisdiction in European Union e-commerce” in http://www.llrx.com/features/eu-ecom.htm

99 AL Calvo Caravaca and J Carrascosa González, Conflictos de leyes y conflictos de jurisdicción en Internet (2001) 85.

100 G AL Droz and H Gaudemet-Tallon, ‘La transformation de la Convention de Bruselles du 27 septembre 1968 en Règlement du Conseil concernant la compètence judiciaire, la reconnaissance et l’exécution des décisions en matière civil et commerciale’ (2001) 4 Rev.crit.dr.int.priv. 638.

101 The statement has not been published but it can be found at http:/ue.eu.int/en/summ, the relevant document can be located in “access to documents/registaer”, and is numbered 13742/00 JUSTCIV 131.

102 G AL Droz and H Gaudemet-Tallon, ‘La transformation de la Convention de Bruselles du 27 septembre 1968 en Règlement du Conseil concernant la compètence judiciaire, la reconnaissance et l’exécution des décisions en matière civil et commerciale’ (2001) 4 Rev.crit.dr.int.priv. 639.

103 N Rosner‘Internactional Jurisdiction in European Union e-commerce” in http://www.llrx.com/features/eu-ecom.htm

104 The rules on jurisdiction provided by Art 14 will only be discussed to the extent necessary to ascertain their scope of application.

105 Jenard Report 18.

106 O’Malley and A Layton, European Civil Practice (1989) 379, point 16.05 and footnote 12. He refers to three exceptions, one of them being Art 14(1) second alternative.

107 Jenard Report 18.

108 Art 24, Art 17 and Art 15(2) of the Brussels I Regulation.

109 O’Malley and A Layton, European Civil Practise (1989) 509.

110 In addition to that, Art 16(3) states that “This Article shall not affect the right to bring a counter-claim in the court in which, in accordance with this Section, the original claim is pending.”

111 H Gaudemet-Tallon, ‘Les frontières extérieures de l’espace judiciaire européen: quelques repères’ in A Borras, (ed), E Pluribus Unum. Liber Amicorum Georges A.L. Droz, ‘On the Progressive Unification of Private International Law (1996) 88.

112 L Collins, ‘Forum Non Conveniens and the Brussels Convention’ (1990) 106 LQR 539.

113 Re Harrods Buenos Aires [1992] Ch 72.

114 P Kaye, Civil Jurisdiction and Enforcement of Foreign Judgments (1987) 1244-1245; L Collins ‘Forum Non Conveniens and the Brussels Convention’ (1990) 106 LQR 535-539; T Hartley, ‘The Brussels Convention and forum non conveniens’ (1992) ELR 553-561; W Kennet, ‘Forum non conveniens in Europe’ (1995) 54 CLJ 552-577; G Fentiman, ‘Jurisdiction, Discretion and the Brussels Convention’ (1993) Cornell International Law Journal 59-81; H Gaudemet-Tallon, ‘Le “forum non conveniens” une menace pour la Convention de Bruxelles? (A propos de trois arrêts anglais récents)’ (1991) Rev.crit.dr.int.priv. 491-524; F Garcimartín Alférez, ‘Caben reducciones teleológicas o “abuso de derecho” en las normas sobre competencia judicial internacional? (Nota a R Caro, “Forum Non Conveniens y Convenio de Bruselas: Quiebras a un modelo de atribución de competencia judicial internacional”, REDI, 1995 pp. 53 y ss (sic))’ (1995) 47 REDI 123-135. Against this school of thought see, among others, R Caro, ‘Forum Non Conveniens y Convenio de Bruselas: Quiebras a un modelo de atribución de competencia judicial internacional’ (1995) 47 REDI 53-79, A Briggs and P Rees, Norton Rose on Civil Jurisdiction & Judgements (1993); A Briggs, ‘Forum Non Conveniens and the Brussels Convention Again’ (1991) 107 LQR 181-182; P North, ‘La liberté d’appreciation de la compétence (jurisidictional discretion) selon la Convention de Bruxelles’ in Nouveaux itinéraires en droit. Hommages à François Rigaux (1993) 373-385; S & W Berisford plc v New Hamshire Insurance Co [1990] 2 QB 631; Arkwright Mutual Insurance Co v Bryanston Insurance Co Ltd [1990] 2 QB 649.

115 Case C-412/98 Group Josi Reinsurance Company SA v UniversalGeneralInsuranceCompany (UGIC) [2000] ECR I-5940.

116 Case C-412/98 Group Josi Reinsurance Company SA v UniversalGeneralInsuranceCompany at point 61.

117 G AL Droz and H Gaudemet-Tallon, ‘La transformation de la Convention de Bruselles du 27 septembre 1968 en Règlement du Conseil concernant la compètence judiciaire, la reconnaissance et l’exécution des décisions en matière civil et commerciale’ (2001) 4 Rev.crit.dr.int.priv. 609.

118 R Arenas, ‘Tratamiento jurisprudencial del ámbito de aplicación de los foros de protección en materia de contratos de consumidores del Convenio de Bruselas de 1968’ (1996) 1 REDI 54.

119 Art 4(1) and (2), in relation to Art 15(1) BIR.

120 Art 14 of the French Civil Code allows the French courts to have jurisdiction whenever the plaintiff is a French national. The possibility of applying long-arm jurisdiction rules to defendants domiciled outside any Member State has been highly criticised by American authors. In this context see K Juenger, ‘La Convention de Bruxelles du 27 September 1968 et la courtosie internationale. Réflexions d’un Américain’ (1983) Rev.crit.dr.int.priv. 37-51.

121 Case C-318/93 Wolfgang Brenner and Peter Noller v Dean Witter Reynolds Inc. [1994] ECR I-4275. The question also arose in Shearson Lehman Hutton v TVB case, but since the plaintiff was not himself a consumer the ECJ did not answer that question.

122 The German court asked the ECJ to clarify the meaning of the term consumer within Art 13(1) BC; however the Court, finding that Section IV was not applicable, did not rule on the matter.

123 German Supreme Court.

124 Since the ECJ denied the applicability of the Brussels Convention, only the first (applicability of the Brussels Convention) of the four questions was answered.

125 Case C-318/93 Wolfgang Brenner and Peter Noller v Dean Witter Reynolds Inc [1994] ECR I-4275 point 11.

126 Ibid at point 15.

127 Ibid at point 16.

128 Ibid at point 20. It should be noted, however, that some commentators have argued that Art 4 is not applicable in the case of an exclusive jurisdiction clause (Art 17), nor in the case of a defendant entering a defence (Art 18); see P Kaye, Civil Jurisdiction and Enforcement of Foreign Judgments (1987) 680; H Gaudemet-Tallon, ‘Les frontières extérieures de l’espace judiciaire européen: quelques repères’ in A Borras, (ed), E Pluribus Unum. Liber Amicorum Georges A.L. Droz, On the Progressive unification of Private International Law (1996) 90.

129 That was also the case in Shearson Lehman Hutton v TVB .

130 For an analysis of the non-application of the German exorbitant fora see R Arenas, ‘Tratamiento jurisprudencial del ámbito de aplicación de los foros de protección en materia de contratos de consumidores del Convenio de Bruselas de 1968’ (1996) 1 REDI 39, 55 (footnote 58).

131 Art 22 LOPJ (rules on civil procedure).

132 R Arenas, ‘Tratamiento jurisprudencial del ámbito de aplicación de los foros de protección en materia de contratos de consumidores del Convenio de Bruselas de 1968’ (1996) 1 REDI 54.

133 R Arenas, ‘Tratamiento jurisprudencial del ámbito de aplicación de los foros de protección en materia de contratos de consumidores del Convenio de Bruselas de 1968’ (1996) 1 REDI 54. Both arguments have been given by the same author which is odd since, in the present writer’s view, they are incompatible.

134 In this section we follow the reasoning of C Joustra in ‘Jurisdiction in consumer disputes under the Brussels Convention”, in K Boele-Woelki, (ed), Comparability and Evaluation; Essays on Comparative Law, Private International Law and International Commercial Arbitration (1994) 246.

135 Art 13(2) was introduced by virtue of Art 10 of the 1978 Accession Convention, see Schlosser Report 119 for an explanation of the reasons which led to the amendment.

136 C Joustra in ‘Jurisdiction in consumer disputes under the Brussels Convention” in K Boele-Woelki, (ed), Comparability and Evaluation; Essays on Comparative Law, Private International Law and International Commercial Arbitration (1994) 246.

137 Commission opinion in Case C-89/91 Shearson Lehman Hutton v TVB [1993] ECR I-139.

138 This mechanism is an alternative to forum actoris. In relation to this issue in European Consumer Law see G Howells/T Whilhelmsson, EC Consumer Law (1997) 277.

139 Case 33/78 Somafer SA v Saar-Ferngas AG [1978] ECR 2183 at point 7.

140 Commission opinion in Case C-89/91 Shearson Lehman Hutton v TVB [1993] ECR I-139.

141 Case 14/76 Ets. A. De Bloos. S.P.R.L. v Société en commandite par actions Bouyer [1976] ECR 1497; Case 33/78 Somafer SA v Saar-Ferngas AG [1978]ECR 2183.

142 Case 14/76 Ets. A. De Bloos. S.P.R.L. v Société en commandite par actions Bouyer [1976] ECR 1497 at point 20.

143 Case 33/78 Somafer SA v Saar-Ferngas, C 33/78 [1978] ECR 2183 at point 12.

144 Case 139/80 Blackaert & Willems PVBA v Luise Trost [1981] ECR 819 at point 12. For a further analysis of the Court decisions with regard Art 5(5) see Dicey & Morris, The Conflicts of Laws (12th edn, 1993) 364-366.

145 C Joustra in ‘Jurisdiction in consumer disputes under the Brussels Convention” in K Boele-Woelki, (ed), Comparability and Evaluation; Essays on Comparative Law, Private International Law and International Commercial Arbitration (1994) 244.

146 The ECJ in Case 218/86 SAR Schotte v Parfums Rothschild [1986] ECR 4905, widened the interpretation of the concept of branch, stating that a legal entity established in a Member State which maintains no dependent branch, agency or other establishment in another Member State, but nevertheless pursues its activities there through an independent company with the same name and identical management, and which negotiates and conducts in its name and which it uses as an extension of itself, must be regarded as a branch within Art 5(5). As has been pointed out by De Lousanof, this interpretation does not help the consumer since, usually, “the brokerhouse makes it very clear that the intermediary only has a limited function and that the contractual relationship only exists with the brokerhouse”, quoted by C Joustra in ‘Jurisdiction in consumer disputes under the Brussels Convention” in K Boele-Woelki, (ed), Comparability and Evaluation; Essays on Comparative Law, Private International Law and International Commercial Arbitration (1994) 244.

147 Case 33/78 Somafer SA v Saar-Ferngas, C 33/78 [1978] ECR 2183 point 13.

148 Ibid.

149 Ibid.

150 Advocate General Opinion, at point 24. The same reasoning was expressed by AG in Shearson Lehman Hutton v TVB case, see paragraph 58.

151 A Briggs, ‘The Brussels Convention’ [1993] Yearbook of European Law 516; R, Arenas ‘Tratamiento jurisprudencial del ámbito de aplicación de los foros de protección en materia de contratos de consumidores del Convenio de Bruselas de 1968’ (1996) 1 REDI 54; C Joustra, ‘Jurisdiction in consumer disputes under the Brussels Convention” in K Boele-Woelki, (ed), Comparability and Evaluation; Essays on Comparative Law, Private International Law and International Commercial Arbitration (1994) 246.

152 C Joustra, ‘Jurisdiction in consumer disputes under the Brussels Convention” in K Boele-Woelki, (ed), Comparability and Evaluation; Essays on Comparative Law, Private International Law and International Commercial Arbitration (1994) 246.

153 A Briggs, ‘The Brussels Convention’ [1993] Yearbook of European Law 516.

154 C Joustra, ‘Jurisdiction in consumer disputes under the Brussels Convention” in K Boele-Woelki, (ed), Comparability and Evaluation; Essays on Comparative Law, Private International Law and International Commercial Arbitration (1994) 246.

155 With regard this question see, Ibid 247-248.

156 Art 23 forms part of Section VII entitled “Prorogation of Jurisdiction”.

157 See on Art 17 BC, Dicey & Morris, The Conflicts of Laws (13th edn, 2000) 431-441; A Briggs and P Rees, Civil Jurisdiction and Judgments (2nd edn, 1997) 63-79; P Kaye, Civil Jurisdiction and Enforcement of Foreign Judgments (1987) 1031-1115; A Rodriguez Benot, Los acuerdos atributivos de competencia judicial internacional en derecho comunitario europeo (1994).

158Dicey & Morris, The Conflicts of Laws (13th edn, 2000) 431. Case Salotti v RÜWA [1976] ECR 1831.

159 Art 17(3) BIR, however, is intended to protect the supplier.

160 O’Malley and A Layton, European Civil Practice (1989) 513.

161 Ibid.

162 cf P Kaye, Civil Jurisdiction and Enforcement of Foreign Judgments (1987).

163 O’Malley and A Layton, European Civil Practice (1989) 514.

164 Ibid.

165 M Guzman Zapater, ‘La prórroga de competencia en los contratos de venta internacional concluidos por consumidores’ (1987) REDI 463.

166 In the Spanish version of the Brussels I Regulation the word “litigio” is used, which implies the institution of proceedings. However, other versions, such as the English and French, adopt more flexible terms, which do not necessarily imply the institution of proceedings: “dispute”, “différend”. On the other hand a strict interpretation would deprive Art 15(2) of much of its effectiveness.

167 P Kaye, Civil Jurisdiction and Enforcement of Foreign Judgments (1987) 851.

168The Jenard Report expressly states, with regard to the jurisdiction agreements in insurance contracts (Art 12 BC), that “after a dispute has arisen, that is to say “as soon as the parties disagree on a specific point and legal proceeding are imminent or contemplated”, the parties completely regain their freedom.”

169 P Kaye, Civil Jurisdiction and Enforcement of Foreign Judgments (1987) 851.

170 LF Carrillo Pozo, ‘Competencia en materia de contratos celebrados por consumidores’ in AL Calvo Caravaca, (ed), Comentario al Convenio de Bruselas relativo a la competencia judicial y a la ejecución de resoluciones judiciales en materia civil y mercantil (1994) 315; P Kaye, Civil Jurisdiction and Enforcement of Foreign Judgments (1987) 841.

171 This is the interpretation of the previous Art 13 and 18 BC given by: A Briggs and P Rees, Civil Jurisdiction and Judgments (2nd edn, 1997) 61; O’Malley and A Layton, European Civil Practice (1989) 496; P Kaye, Civil Jurisdiction and Enforcement of Foreign Judgments (1987) 841.

172 For a further discussion of this definition problem, see P Kaye, Civil Jurisdiction and Enforcement of Foreign Judgments (1987) 851, who suggests a flexible interpretation according to which “once the consumer has become aware -or ought reasonably to have become so- of differences between himself and the other party concerning interpretation or performance or the contract, or as to remedies to which a party is to be held to be entitled on breach by the other party of the contract, the consumer should be regarded to be on his own”. This broad interpretation (including the case where the consumer ought reasonably have been aware) has been criticised since it could contravene the protective objective of the Convention. In this regard see LF Carrillo Pozo, ‘Competencia en materia de contratos celebrados por consumidores’ in AL Calvo Caravaca, (ed), Comentario al Convenio de Bruselas relativo a la competencia judicial y a la ejecución de resoluciones judiciales en materia civil y mercantil (1994) 315, footnote 27.

173 The jurisdiction agreement entered into by the parties at the “informal stage” will still have to comply with the formal requirement laid down in Art 17. As will be seen, the agreement will be formally valid “only when the agreement is written or confirmation in writing is given.”

174 According to P Kaye “a non-consumer defendant would remain entitled to bring a counterclaim against the plaintiff in the chosen forum under Art 14, para 3, which, to that extent, would not amount to a provision of Section 4 which had, in the words of Art 15, been ‘departed from’.” P Kaye, Civil Jurisdiction and Enforcement of Foreign Judgments (1987) 852.

175 In this sense P Kaye, Civil Jurisdiction and Enforcement of Foreign Judgments (1987) 852.

176 LF Carrillo Pozo, ‘Competencia en materia de contratos celebrados por consumidores’ in AL Calvo Caravaca, (ed), Comentario al Convenio de Bruselas relativo a la competencia judicial y a la ejecución de resoluciones judiciales en materia civil y mercantil (1994) 316.

177 As is pointed out by the Jenard Report with regard to the first version of art 15(3) BC, “in actions brought by a seller or a lender, it is rather difficult to determine jurisdiction where the buyer or borrower establishes himself abroad after the contract has been concluded. To protect these persons, they should ideally be sued only in the courts of the state where they have established their new domicile. For reasons of equity the Committee has however provided that where the seller and buyer, or the lender and borrower are both domiciled or at least habitually resident in the same state when the contract is concluded, they may confer on the courts of that State jurisdiction.”

178 LF Carrillo Pozo, ‘Competencia en materia de contratos celebrados por consumidores’ in AL Calvo Caravaca, (ed), Comentario al Convenio de Bruselas relativo a la competencia judicial y a la ejecución de resoluciones judiciales en materia civil y mercantil (1994) 317.

179 According to Spanish law (Art 54(1) Ley de Enjuiciamiento Civil 2000) these agreements are not valid. See, on this issue and its relationship to the international jurisdiction rules, C González Beilfuss, ‘La adaptación de las normas de competencia territorial: Arts 50, 52 y 54 de la nueva LEC’ (2001) 1 Anuario Español de Derecho Internacional Privado 339.

180 J Jodlowski, ‘Le Conventions relatives à la prorrogation et à la derogation à la compétence internationale en matière civile (1974) Rec. des Cours 483.

181 cf P Kaye, Civil Jurisdiction and Enforcement of Foreign Judgments (1987) 853.

182 When the agreement does not comply with those conditions it does not mean that the agreement is invalid, but that Art 23 BIR is not applicable.

183 The Schlosser Report at point 161 states that, “although Art 13 [BC] is not expressed to be subject to Art 17 [BC], the Working Party was unanimously of the opinion that agreements on jurisdiction must, in so far as they are permitted at all, comply with the formal requirements of Art 17”. Further it observes that since the form is not governed by Section IV, it must be governed by Art 17.

184 O’Malley and A Layton, European Civil Practice (1989) 513; A Briggs and P Rees, Civil Jurisdiction and Judgments (2nd edn, 1997) at point 2.78. Against this interpretation see P Kaye, Civil Jurisdiction and Enforcement of Foreign Judgments (1987) 853-855.

185 In Case 201/82 Gerling v Italian Treasure [1983] ECR 2503, the ECJ held with regard to an insurance contract that, “where in a contract of insurance a clause conferring jurisdiction is inserted for the benefit of the insured who is not a party to the contract but a person distinct from the policy-holder, it must be regarded as valid within the meaning of Article 17 of the Convention provided that, as between the insurer and the policy-holder, the condition as to writing laid down therein has been satisfied and provided that the consent of the insurer in that respect has been clearly and precisely manifested”, at para 20.

186 For an argument against this interpretation, see P Kaye, Civil Jurisdiction and Enforcement of Foreign Judgments (1987) 853-854.

187 Art 17(1)(b) and (c) where introduced by the Adhesion Convention 1978.

188 This a new paragraph introduced by the BIR.

189 See Schlosser Report at para 179.

190 P Kaye, Civil Jurisdiction and Enforcement of Foreign Judgments (1987) 854.

191 See Case 22/85 Anterist v Crédit Lyonnais [1986] ECR 1951, with regard Art 17(4).

192 cf P Kaye, Civil Jurisdiction and Enforcement of Foreign Judgments (1987) 854.

193 O’Malley and A Layton, European Civil Practice (1989) 513 and 557 suggest that, “It would be contrary to the spirit of the Convention (and particularly this section) for jurisdiction agreements to be more readily valid in the special case of consumer contracts than in other cases. Furthermore if confirmation is needed it is to be found in the preamble where it is made clear that the Convention determines the international jurisdiction of the courts of the Member State.” See also A Rodriguez Benot, Los acuerdos atributivos de competencia judicial internacional en derecho comunitario europeo (1994) 537.

194 This interpretation is analogous to the Schlosser Report approach with regard to Art 17.

195 This principle was established in The El Amria [1981] 2 Lloyd’s Rep. 119, 123 (CA) approving The Elepftheria [1970] P. 94, 99. See on this rule Dicey & Morris, The Conflicts of Laws (13th edn, 2000) 442-443; E Peel, ‘Exclusive jurisdiction agreements: purity and pragmatism in the conflicts of laws’ [1998] LMCLQ 217.

196 See other circumstances which will take into account in The Elepftheria [1970] P. 94, 99.

197 Art 17 only applies when the “parties…have agreed that a court or the courts of a Member State are to have jurisdiction.”

198 According to the Schlosser Report, “[i]n cases where the parties agree to bring their disputes before the courts of a State which is not a party to the 1968 Convention there is obviously nothing in the 1968 Convention to prevent such courts from declaring themselves competent, if their law recognises the validity of such an agreement. The only question is whether and, if so, in what form such an agreement are capable of depriving Community courts of jurisdiction which is stated by the Convention to be exclusive or concurrent. There is nothing in the 1968 Convention to support the conclusion that such an agreement must be inadmissible in principle. However, the 1968 Convention does not contain any rules as to their validity either. If a court within the Community is applied to despite such an agreement, its decision on the validity of the agreement depriving it of jurisdiction must be taken in accordance with its own lex fori. In so far as the local rules of conflicts of laws support the authority of provisions of foreign law, the latter will apply. If, when these tests are applied, the agreement is found to be invalid, then the jurisdictional provisions of the 1968 Convention become applicable” at para 176.

199A Briggs and P Rees, Civil Jurisdiction and Judgments (2nd edn, 1997) at para 2.233.

200 Against this interpretation it has been held that when the defendant is domiciled in a Member State, Art 2 should apply and the jurisdiction clause is ineffective. In this regard see the case Bruno v Soc. Citibank, Ct. App. Versailles, 1991 in (1992) Rev.crit.dr.int.priv. 333, noted by Gaudemet-Tallon.

201 In favour of this interpretation see A Briggs and P Rees, Civil Jurisdiction and Judgments (2nd edn, 1997) at para 2.233; Dicey & Morris, The Conflicts of Laws (12th edn, 1993) 425; Arkwright Mutual Insurance Co v Bryanston Insurance Co Ltd [1990] 2 QB 649; Nil Rhapsody [1994] Lloyds’ Rep 382.

202 On the forum non conveniens doctrine and its relationship with the Brussels Convention see above 53 and footnote 109.

203 A Briggs and P Rees, Civil Jurisdiction and Judgments (2nd edn, 1997) at para 2.233.

204 Case 318/93 Brenner and Noller v Dean Witter Reynolds Inc [1994] ECR I-4275.

205 Art 13(1) read in conjunction with Art 4.

206 In this respect it would be desirable to have a more universal rule on jurisdiction clauses in consumer contracts, such as, for example, that inserted in The Hague Preliminary Draft Convention on Jurisdiction and Foreign Judgments in Civil and Commercial Matters, adopted by the Special Commission on 30 October 1999, in http:/www.hcch.net/e/conventions/draft36e.html.

207 There is, of course, the question of the potential non-recognition and enforcement of the decision of the courts of the Member State in a non-Member State. Again, it would be very useful to have a universal convention on jurisdiction and foreign judgements in civil and commercial matters. See The Hague Preliminary Draft Convention on Jurisdiction and Foreign Judgments in Civil and Commercial Matters, adopted by the Special Commission on 30 October 1999, in http:/www.hcch.net/e/conventions/draft36e.html.

208 See the Green Paper on European Consumer Protection, where the Commission sets out an analysis of the current situation and possible options for the future, COM(2001) 531 Final.

209 Council Directive (EEC) 85/577 on the Protection of Consumers in Respect of Contracts Negotiated Away from Business Premises [1985] OJ L 372/131; Council Directive (EEC) 87/102 on Consumer Credit [1987] OJ L42; Council Directive (EEC) 87/102 on Consumer Credit (EEC) 90/88 amending Directive 87/102 on Consumer Credit [1990] OJ L61; Council Directive (EC) 98/7 amending Directive 87/102 on Consumer Credit [1998] OJ L 101; Council Directive (EEC) 90/314 on Package Travel, Package Holidays and Package Tours [1990] OJ L 158/59; Council Directive (EEC) 93/13 on Unfair Terms in Consumer Contracts [1993] OJ L 95/29; Council Directive (EC) 94/47 on the Protection of Purchasers in Respect of Certain Aspects of Contracts Relating to the Purchase of the Right to Use Immovable Properties on a Timeshare Basis [1994] OJ L 280/83; Council Directive (EC) 97/7 on the Protection of Consumer in Respect of Distant Contracts [1997] OJ L 144/19; Council Proposed Directive on the Sale of Consumer Goods and Associated Guaranties [1996] OJ C 307/8.

210 M Fallon and S Francq, ‘Towards Internationally Mandatory Directives for Consumer Contracts?’, in Basedow, Jürgen, Meier, Isaak, Schnyder, K Anton, T Einhorn and D Gisberger, (edds), Private Law in the International Arena. Liber Amicorum Kurt Siehr, (TMC Asser Press The Hague 2000), 155, 157.

211 M Fallon and S Francq, ‘Towards Internationally Mandatory Directives for Consumer Contracts?’, in Basedow, Jürgen, Meier, Isaak, Schnyder, K Anton, T Einhorn and D Gisberger, (edds), Private Law in the International Arena. Liber Amicorum Kurt Siehr,(TMC Asser Press The Hague 2000), 155, 158. See, however, the ECJ decision in Case C-381/98 Ingmar GB Ltd v Eaton Leonard Technologies Inc. [2000] ECR I-9325, in which it upheld the international mandatory character of Arts 17 and 18 of Council Directive 86/653/EEC on agency contracts.

212 A good example accepting jurisidiction clauses in consumer contracts can be found in the United States Supreme Court’s decision in Carnival Cruise v. Eulala Shute and another, [1993] ILPR. See F Garcimartín Alférez, ‘Las cláusulas de elección de foro: fallos del mercado y abuso del derecho’ (1998) 2 REDI 93-119.

213 The new Proposal for a Directive of the European Parliament and of the Council on the harmonization of the laws, regulations and administrative provisions of the Member States concerning credit for consumers (a directive which would replace Directive 87/102/EEC) introduces a Private international law rule in Art 30(5), COM (2002) 443 Final.

214 M Fallon and S Francq, ‘Towards Internationally Mandatory Directives for Consumer Contracts?’, in Basedow, Jürgen, Meier, Isaak, Schnyder, K Anton, T Einhorn and D Gisberger, (edds), Private Law in the International Arena. Liber Amicorum Kurt Siehr,(TMC Asser Press The Hague 2000), 155, 158.

215 Council Directive (EEC) 93/13 on Unfair Terms in Consumer Contracts [1993] OJ L 95/29. The Directive has been implemented in England through the Unfair Terms in Consumer Contracts Regulations 1994. The Directive is not, however, without prejudice to the Unfair Contract Terms Act 1977. For a discussion of the English implementation see C Willet, ‘The directive on Unfair Terms in Consumer Contracts and its implementation in the United Kingdom’ (1997) 2 European Review of Private Law 223-236; L Collins, ‘Good Faith in European Contract Law’ (1994) OJLS 229; Micklitz, ‘Directive 93/13 In Action: A Report on A Research Project on Unfair Terms in Consumer Sales Contracts’ in Willet, (ed), Aspects of Fairness in Contract (1996) 75.

216 Council Directive (EC) 97/7 on the Protection of Consumer in Respect of Distant Contracts [1997] OJ L 144/19.

217 Council Directive (EC) 99/44 on certain aspects of the sale of consumer goods and associated guarantees [1999] OJ L 171/12.

218 Directive (EC) 2002/65 concerning the distance marketing of consumer finacial services and amending Council Directive 90/619/eec and Directives 97/7/EC and 98/27/EC [2002] OJ L 271/16.

219 Council Directive (EC) 90/314 on package travel, package holidays and package tours [1990] OJ L158/59.

220 Council Directive (EC) 94/47 on the Protection of Purchasers in Respect of Certain Aspects of Contracts Relating to the Purchase of the Right to Use Immovable Properties on a Timeshare Basis [1994] OJ L 280/83.

221 Directive (EC) 2000/31 on certain aspects of information society services, in particular electronic commerce, in the internal market (Directive on electronic commerce) [2000] OJ L 178, at Whereas 23. For a further analysis see M Fallon and S Francq, ‘Towards Internationally Mandatory Directives for Consumer Contracts?’, in Basedow, Jürgen, Meier, Isaak, Schnyder, K Anton, T Einhorn and D Gisberger, (edds), Private Law in the International Arena. Liber Amicorum Kurt Siehr,(TMC Asser Press The Hague 2000), 155, 162-165; M Wilderspin and X Lewis, ‘Les relations entre le droit communautaire et les règles de conflits de lois des États membres’ (2002) 2 Rev. crit.dr. int. pr. 289, 298-307.

222 Art 1(1).

223 Austria: Federal Statute to amend the General Civil Code, the Consumer Protection Act, the act on Insurance Contracts, and the Federal Statute on the Enlarged protection of Traffic Victims (BGB1 I 1997/6), translation of the title of the Statute by W Posh, ‘The implementation of the EC Directive on Unfair Contract Terms into Austrian Law’ (1997) 2 European Review of Private Law, 139, footnote 30; Belgium: Statute 03.04.1997 and Statute 07.12.1998 amending the Loi du 14 julliet 1991 sur les practiques du commerce et sur l’information et la protection du consommateur. See (1998) 4 Revue Européenne de Droit de la Consommation 317; Finland: Act 16.12.1994/1259 amending the Consumer Protection Act of 1978 (Act 20.01.1978/38), reference found in T Wilhelmsson, ‘The implementation of the EC directive on unfair contracts terms in Finland’ (1997) 2 European Review of Private Law, 152, footnote 4; France: Loi nº 95-96 du 01.02.1995 concernant les clauses abusives et la présentation des contrats régissant diverses activités d’ordre économique et commercial (Journel Officiel, 1755, 02.02.1995), see on this Statute H Davo, ‘Clauses abusives: loi du février 1995 transposant la directive 93/13/CEE en droit français’ (1997) 2 European Review of Private Law 157-164; Germany: Act of 19 July 1996 (Bundesgesetzblatt (BGB1) Jahrgang 1996 I 1013), see on this Act N Reich, ‘The implementation of Directive 93/13/EEC on unfair terms in consumer contracts in Germany’ (1997) 2 European Review of Private Law 165-172; Micklits, ‘German Unfair Contract Terms Act and the EC Directive 93/13’ in Lonbay, (ed), Enhancing the Position of the European Consumer (1997) 173-187; Greece: Act 2251/94 (Official Journal A, 191, 16.11.1994), see on this Act E Alexandridou, ‘Implementation of the EC directive on unfair contract terms in Greece’ (1997) 2 European Review of Private Law 173-180; Ireland: EC/Unfair Terms in Consumer Contracts Regulations of 1995 (SI nº27, 1995); Italy: Art 25 of the 1994 Community Act which modifies the Civil Code, introducing Art 1469bis-sexies, reference found in G Alpa, ‘The implementation of the EC directive on unfair contract terms in Italy’ (1997) 2 European Review of Private Law 181-184; Portugal: Decreto-lei nº 220/95 de 31.08.1995 (Diário da República I, Série A, aviso nº 201 5469, 31.08.1995), see RM Moura Ramos, ‘Remarques sur les développements récents du droit international privé portugais en matière de protection des consommateurs’ in E Pluribus Unum, A. Borras, (ed) 235-251; Spain: Statute 7/1998 on General Conditions (BOE núm. 89, 14.04.1998) which modifies the Consumer Protection Act (Ley General para la Defensa de Consumidores y Usuarios); Sweden: Swedish Act on Consumer Contract Terms (AVLK 15.12.1994, 1994:1512) reference found in U Bernitz, ‘Swedish standard contracts law and the EEC Directive on contract terms’ (1997) 2 European Review of Private Law 213-222.

224 There are a number of contracts which are excluded. Art 1(2) of the Directive states that “The contractual terms which reflect 0mandatory statutory or regulatory provisions and the provisions or principles of international conventions to which the Member States or the Community are party, particularly in the transport area, shall not be subject to the provisions of this Directive.” See also Schedule 1 of the Unfair Terms in Consumer Contracts Regulations 1994 entitled “Contracts and Particular Terms Excluded from the Scope of these Regulations.”

225 G Howells and T Whilhelmsson, EC Consumer Law (1997) 88.

226 Art 3.

227 Art 3(3) and Annex to the directive. For a general overview of the directive see the discussion in G Howells and T Whilhelmsson, EC Consumer Law (1997) 88-120.

228 Emphasis added.

229 cf E Peel, ‘Exclusive jurisdiction agreements: purity and pragmatism in the conflicts of laws’ [1998] LMCLQ 217.

230 The OFT is the English body in charge of investigating the unfairness of terms in consumer contracts. Since 1996 the OFT issues guidance of the terms they consider unfair in the Unfair Contract Terms, OFT bulletin. The bulletins are published and can also be found in the web page of the OFT, http://www.oft.gov.uk. See in particular bulletin nº4.

231 See inter alia the Supreme Court decisions: 23-7-1993 (Ar 6476); 20-7-1994 (Ar 6518); 12-7-1996 (Ar 5580); 23-9-1996 (Ar 6721); 8-11-1996 (La Ley, 30-12-1996, 4); 25-11-1996 (AC nº 10, 605). In those decisions the Spanish Supreme Court applies the Directive (although it was not yet implemented in Spain) to declare a choice of forum clause as unfair, (translation by the author).

232 Joined cases C-240/98 to C-244/98, Océano Grupo Editorial SA v Rocío Murciano Quintero [2000] ECR I-4941, at point 22 and 24.

233 Ibid.

234 M Fallon, ‘Le droit applicable aux clauses abusives après la transposition de la directive nº 93/13 du 5 avril 1993’ (1996) 1 Revue Européenne de Droit de la Consommation 13.

235 Art 6 (2) has been implemented in the Unfair Terms in Consumer Contracts Regulation in rule 7 entitled Choice of law clause and which provides “[t]hese Regulations shall apply notwithstanding any contract term which applies or purports to apply the law of a non-Member State, if the contract has a close connection with the territory of the member States.”

236 M Fallon, ‘Le droit applicable aux clauses abusives après la transposition de la directive nº 93/13 du 5 avril 1993’ (1996) 1 Revue Européenne de Droit de la Consommation 13.

237 It should be noted that the final version of the Directive did not follow the amended draft of the Commission which stated that the Directive was applicable “notwithstanding the applicable law to the contract.”

238 The restricted material scope of application is very similar to that of the former Art 13 of the Brussels Convention.

239 Some commentators have argued that the aim pursued by Art 6(2) of the Directive is already achieved by the application of the Rome Convention, and therefore that there is no need for the Member States to implement such a rule. See in this regard, E Jayme and C Kohler, ‘L’interaction des règles de conflit contenues dans le droit dérivé de la Communauté européenne et des conventions de Bruxelles et de Rome’ (1995) Rev.crit.dr.int.priv. 23; L Fumagalli, ‘Le clausole abusive nei contratti con i consumatori tra diritto comunitario e diritto internazionale privato’ (1994) Riv.dir.int.pr.proc 15-32; S Knöfel, ‘EC Legislation on Conflicts of Laws: Interactions and Incompatibilities between conflict rules’ (1998) ICLQ 439-445.

240 Dicey & Morris, The Conflicts of Laws (12th edn, 1993).

241 M Fallon, ‘Le droit applicable aux clauses abusives après la transposition de la directive nº 93/13 du 5 avril 1993’ (1996) 1 Revue Européenne de Droit de la Consommation 15-16.

242 See the specific presumptions in Art 4(3) and (4).

243 E Jayme and C Kohler, ‘L’interaction des règles de conflit contenues dans le droit dérivé de la Communauté européenne et des conventions de Bruxelles et de Rome’ (1995) Rev.crit.dr.int.priv. 17.

244 Ibid.; L Fumagalli, ‘Le clausole abusive nei contratti con i consumatori tra diritto comunitario e diritto internazionale privato’ (1994) Riv.dir.int.pr.proc15-32; L Cannada-Bartoli, ‘A propos de l’art. 6.2 de la directive’ (1995) European Review of Private Law 347.

245 E Jayme and C Kohler, ‘L’interaction des règles de conflit contenues dans le droit dérivé de la Communauté européenne et des conventions de Bruxelles et de Rome’ (1995) Rev.crit.dr.int.priv. 17.

246 M Fallon, ‘Le droit applicable aux clauses abusives après la transposition de la directive nº 93/13 du 5 avril 1993’ (1996) 1 Revue Européenne de Droit de la Consommation 16-17.

247 Ibid.

248 E Jayme and C Kohler, ‘L’interaction des règles de conflit contenues dans le droit dérivé de la Communauté européenne et des conventions de Bruxelles et de Rome’ (1995) Rev.crit.dr.int.priv. 17.

249 In fact Art 5 of the Rome Convention and Art 13 of the Brussels Convention differ in how they define ‘passive consumer’. It would be desirable for there to be a common Community definition of ‘passive consumer’.

250 See the proposal for modification of Art 5 of the Rome Convention in B Añoveros, Los contratos de consumo intracomunitarios: problemas de Derecho aplicable, Marcial Pons (book in press).

251 Ley 7/1998 sobre Condiciones Generales de la Contratación (BOE núm. 89, de 14 de abril de 1998) which adds a new provision (Disposición adicional primera) to the Ley General para la Defensa de Consumidores y Usuarios.

252 Consumer Protection Act (Ley 26/1984 para la Defensa de Consumidores y Usuarios (BOE núm. 176, de 24 de julio de 1984)).

253 See, on the difficult relationship between the Rome Convention and Art 6(2), E Jayme and C Kohler, ‘L’interaction des règles de conflit contenues dans le droit dérivé de la Communauté européenne et des conventions de Bruxelles et de Rome’ (1995) Rev. crit. dr. int. pr 1-40; L Fumagalli, ‘Le clausole abusive nei contratti con i consumatori tra diritto comunitario e diritto internazionale privato’ (1994) Riv.dir.int.pr.proc. 15-32; L Cannada-Bartoli, ‘A propos de l’art. 6.2 de la directive’ (1995) European Review of Private Law 347; M Fallon in ‘Le droit applicable aux clauses abusives après la transposition de la directive nº 93/13 du 5 avril 1993’ (1996) 1 Revue Européenne de Droit de la Consommation.

254 The same method has been followed by Denmark, Sweden and Ireland.

255 The same approach is adopted by Art 23 of the Portuguese Act, which reads as follows “notwithstanding the law chosen by the parties as the proper law of the contract, the provisions in this act will apply when the contract is closely connected to the territory of the Member States of the European Union.” See on this provision RM Moura Ramos, ‘Remarques sur les développements récents du droit international privé portugais en matière de protection des consommateurs’ in A Borras, (ed), E Pluribus Unum. Liber Amicorum Georges A.L. Droz, ‘On the Progressive unification of Private International Law (1996) 235-251.

256 On this provision see E Alexandridou, ‘Implementation of the EC directive on unfair contract terms in Greece’ (1997) 2 European Review of Private Law 179.

257 In the case of Ireland, Section 7 of the EC (Unfair Terms in Consumer Contracts) Regulations 1995 does not mention the necessity of a close connection between the contract and the Community: “These Regulations shall apply notwithstanding any contract terms which applies or purports to apply the law of a country other than a Member State and would thereby deprive a consumer of the protection under the Council Directive.” For a similar approach, see, for instance, the Portuguese statute.

258 Emphasis added. See in this regard, the provisions adopted by Germany, France, Greece, and Spain.

259 The same method has been followed by the Portuguese Law.

260 B Añoveros, Los contratos de consumo intracomunitarios: problemas de Derecho aplicable, Marcial Pons (book in press).

261 For a French version of the German statute, see (2000) 4 Rev. crit. dr. int pr. 924 and the commentary by P Lagarde at 925-929. As pointed out by Lagarde, the German legislator has made use of the implementation of the Directive on distance selling to unify the private international law rules implementing other consumer protection Directives (for example, the Unfair Contract Terms Directive) in a unique provision.

262 Translation by the author from the French version in (2000) 4 Rev. crit. dr. int pr. 924.

263 P Lagarde (2000) 4 Rev. crit. dr. int pr. 926, 925-929.

264 P Mayer, ‘La protection de la partie faible en droit international privé’, in J Ghestin and M Fontaine La protection de la partie faible dans les rapports contractuels. Comparisons franco-belges (L.G.D.J. París 1996) 513-552, 538.

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