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European Business Law

The concept of place of performance of the obligation forming the basis of the action has raised many concerns as to interpretation which Regulation No 44/2001 had tried to address by objectively defining that place for contracts for the sale of goods and provisions of services, which, from a statistical point of view, constitute the essential part of the contracts. However, the issue of determina …

Determining the place of performance of the obligation

The concept of place of performance of the obligation forming the basis of the action has raised many concerns as to interpretation which Regulation No 44/2001 had tried to address by objectively defining that place for contracts for the sale of goods and provisions of services, which, from a statistical point of view, constitute the essential part of the contracts. However, the issue of determination of the place of performance of the obligation at issue remains where it arises of another type of contract and the parties have not agreed thereto in advance . 

The Court of Justice, in the Tessili judgment , laid down the rule according to which the place in which the obligation was or should have be performed must be determined in accordance with the law that governs the obligation at issue, according to the rules of conflict of the court seized. Coming at a time when there were many divergences between the national laws in matters relating to a contract due to lack of unification of the applicable substantive law, the principle of referral to the rules of conflict of the court seized has been set out by the Court of Justice: the place of performance is determined pursuant to the rules of private international law of the Member State of the court seized, as well as to the substantive law , even where those rules refer to the application to the contract of provisions such as those of the Uniform Law on the International Sale of Goods, annexed to the Hague Convention of 1 July 1964 . The Court of Justice, which has consistently restated the principle of determination of the place of performance of the basic obligation in accordance with the law governing the obligation at issue, according to the rules of conflict of the court seized, justifies this solution by the need that “the competent court [be] the court of the place where the obligation in question is to be performed in accordance with the law applicable to it” and adds that by reason of the harmonization carried out within the Union , the law applicable to the determination of the place of performance is no longer likely to vary depending on the court seized . 

However the Tessili case law has the major disadvantage of leading to a fragmentation of the case and a dispersion of jurisdiction where there is more than one claim based on distinct contractual obligations . Therefore, where an action is founded on two obligations of equal ranking arising from the same contract, the court does not have jurisdiction to hear the whole of the action, where under the conflict rules of the State in which that court is situated the obligations are to be performed in another Member State . Thus, where the contractual obligation forming the basis of the claim consists in an obligation not to do something, applicable without any geographic limit, is not capable of fixing a single place of performance and where the multiplicity of courts having jurisdiction might encourage forum shopping on the part of the plaintiff, the Court prefers not to apply the Tessili case law and will designate the court having jurisdiction depending on the defendant's domicile .

In the case of the sale of goods, Regulation No 1215/2012, under the first indent of Article 7(1)(b), grants jurisdiction to the court of the place of performance where the goods were delivered or should have been delivered. The place of delivery of the goods, as autonomous linking factor, applies “to all claims founded on one and the same contract for the sale of goods rather than merely to the claims founded on the obligation of delivery itself” . Establishing the place of performance of “the tasks which characterize the contract” as the autonomous linking factor, the regulation excludes resorting to the rules of private international law of the Member States of the court seized, and to the substantive law which, under that law, would be applicable to determine the place of performance of the basic obligation in accordance with the De Bloos and Tessili case law .The place in which the goods were or should have been delivered under the contract must therefore be determined on the basis of the contractual provisions. The national court must take into account all the relevant contractual terms and clauses enabling the place of delivery to be clearly identified, including the terms and clauses generally recognized and applied in international commercial usage, such as Incoterms . Where it is impossible to determine the place of delivery of the goods on that basis, without reference to the substantive law applicable to the contract, that place is the place where the physical transfer of the goods took place, as a result of which the purchaser obtained, or should have obtained, actual power of disposal over those goods at the final destination of the sales transaction . In case of sale of goods involving several places of delivery within a single Member State, the plaintiff may sue the defendant in the court for the principal place of delivery, which must be understood as the place with the closest linking factor between the sales contract and the court having jurisdiction . Where the principal place of delivery cannot be determined, the plaintiff is free to choose the court for the place of delivery it wishes . 

In the case of the provision of services, the second indent of Article 7(1)( b) designates as the court having jurisdiction that of the place where the services were provided or should have been provided. According to the Court of Justice , the rules of special jurisdiction for the provision of services, where the services are provided at several places, cannot be applied a differentiated approach from that adopted in case of plurality of places of delivery of the goods, insofar as they have the same origin, pursue the same objectives and occupy the same place in the scheme established by the regulation. As a result, in case of air transport of persons from one Member State to another, the places of departure and arrival of the aircraft must be regarded as the principal place of the provision of services insofar as the air transport services consist, by their very nature, of services provided in an indivisible and identical manner. The court having jurisdiction to deal with a claim for compensation founded on an air transport contract will therefore be that, at the applicant's choice and in addition to that of the defendant's domicile, which has territorial jurisdiction over the place of departure or place of arrival of the aircraft. Where the claim for compensation for the long delay of a connecting flight is based on an irregularity which took place on the first leg of the flight operated by an air carrier which is not the contracting party of the passengers in question, the place of arrival of the second flight must be regarded as the place of performance of the flight in its entirety, where the carriage on both flights was operated by two different air carriers . Lastly, the Court has recently specified that the second indent of Article 7(1)(b) is applicable in the case of the provision of services in more than one Member States. In the context of a contract for the carriage of goods between Member States in several stages, with stops, and by a number of means of transport, both the place of dispatch and the place of delivery of the goods constitute places where transport services are provided, for the purposes of that provision . Thus, for a commercial agency contract implying the provision of the services in several Member States, the court having jurisdiction to hear and determine all the claims is the court within whose jurisdiction the place of the main provision of services is situated, determined on the basis of the provisions of the contract or, in the absence of such provisions, the actual performance of the contract or, where it cannot be determined on that basis, the place where the agent is domiciled . Similarly, where a credit institution grants a loan to two jointly and severally liable debtors, the place in a Member State where, under the contract, the services were provided or should have been provided, is, unless otherwise agreed, the place where that institution has its registered office, and this also applies with a view to determining the territorial jurisdiction of the court called upon to hear an action for recourse between those debtors .

Case 56/79 Zelger v Salinitri [1980] ECR 89, LawLex200900002029JBJ: the parties are free to agree on a place of performance for contractual obligations - forming the basis of jurisdiction of the court under Article 7(1) - which differs from that which would be determined under the law applicable to the obligation at issue, without having to comply with specific formal conditions regarding jurisdiction clauses, provided that the localization clause is valid under the law applicable to the contract; Case C-106/95 MSG v Les Gravières Rhénanes [1997] ECR I-911, LawLex200900000336JBJ: however, the parties cannot choose a fictitious place of performance which has no real connection with the reality of the contract and the obligations arising out thereof, as this would amount to agree on the jurisdiction of a court without complying with the formal conditions under the regulation relating to forum election clauses.

Case 12/76 Industrie Tessili italiana v Dunlop AG [1976] ECR 1473, LawLex200900001509JBJ: in this case, the obligation forming the basis of the claim in question consisted in a payment obligation which, according to the laws of the Member States, was payable at the debtor's domicile or at the creditor's domicile. From that finding, the Court favored the method of conflict of law and the 'lege causae' qualification which, if applicable, may lead to the application of a foreign substantive law, rather than the 'lege fori' qualification which, in Member States where the payment is due at the debtor's domicile would have resulted in removing all substance from the option recognized to the plaintiff-creditor in Article 7(1) (since the place of performance is, in such a case, necessarily superposed to the domicile of the defendant-debtor), whereas in the Member States where the payment is due at the creditor's domicile, the plaintiff (creditor) would have benefited from the possibility to sue the debtor in the court of his domicile [which the regulation intends precisely to avoid since it is not normally based on the criterion of the plaintiff's domicile].

Case C-381/08 Car Trim [2010] ECR I-1255, LawLex201100000407JBJ. 

Case C-87/10 Electrosteel Europe SA, Judgment of 9 June 2011, LawLex201100001090JBJ.

Case C-381/08 Car Trim [2010] ECR I-1255, LawLex201100000407JBJ.

Case C-386/05 Color Drack [2007] ECR I-3699, LawLex200900000623JBJ: the first indent of Article 7(1)(b) applies whether there is one place of delivery or several, in a same Member State, which "[is] without prejudice to the answer to be given where there are several places of delivery in a number of Member States". 

Case C-386/05 Color Drack [2007] ECR I-3699, LawLex200900000623JBJ.

Case C-204/08 Rehder [2009] ECR I-6073, LawLex201100000495JBJ.

Joined Cases C-274/16, C-447/16, C-448/16 Flightright GmbH, Judgment of 7 March 2018, LawLex201800000427JBJ.

Case C-88/17, Zurich Insurance plc, Metso Minerals Oy, Judgment of 11 July 2018, LawLex201900001329JBJ.

Case C-19/09 Wood Floor Solutions Andreas Domberger [2010] ECR I-2121, LawLex201000000966JBJ; Case C-64/17 Saey Home & Garden NV/SA, Judgment of 8 March 2018, LawLex201800000386JBJ.

Case C-249/16 Saale Kareda, Judgment of 15 June 2017, LawLex201700001073JBJ.

Vienna Convention of 11 April 1980 on the Contracts for the International Sale of Goods or the Hague Convention of 1 July 1964 relating to a Uniform Law on the International sale of Goods.

Case C-288/92 Custom Made Commercial v Stawa Metallbau [1994] ECR I-2913, LawLex200900002119JBJ. 

Rome Convention of 19 June 1980 on the Law Applicable to Contractual Obligations, replaced by Rome (I) Regulation, applicable to all contracts concluded from 17 December 2009.

Case C-440/97 GIE Groupe Concorde and others [1999] ECR I-6307, LawLex200900000831JBJ: to the Court of Cassation which was wondering whether the national courts might determine the place of performance of the obligation by seeking to establish, having regard to the nature of the relationship creating the obligation and the circumstances of the case, the place where the performance actually took place or should have taken place, without having to refer to the law which, under the rules on conflict of law, governs the obligation at issue, the ECJ answered that the reference, in Article 7(1) of the regulation, to the place of performance of the contractual obligations can only be understood as a referral to the applicable substantive law, pursuant to the conflict rules of the court seized, and such referral is even more justified because there is no risk that the law applicable to the determination of the place of performance will vary depending on the court seized, since the conflict rules enabling the law applicable to the contract to be determined have been standardized in the Member States.

Although most of the time the law governing the obligation that forms the basis of the claim is in fact the law of the contract, some obligations at issue may fall within a specific law - See on that issue, Case 14/76 De Bloos v Bouyer [1976] ECR 1497, LawLex200900001547JBJ, having retained that it is for the national court to ascertain whether, under the law applicable to the contract, the compensation sought penalizes the non-performance of an obligation arising out of the contract, or whether it is based on an independent obligation, even a public-order provision, with the consequence that, depending on whether the law applicable to the obligations at issue is that of the contract or another law, their place of performance may be localized in distinct States and therefore lead to grant jurisdiction to the courts of a Member State for certain claims, while another court will have international jurisdiction to hear other claims. 

Case C-420/97 Leathertex [1999] ECR I-6747, LawLex200900000774JBJ.

Case C-256/00 Besix [2002] ECR I-1699, LawLex200900001000JBJ. 

European Business Law

329. Determining the place of performance of the obligation

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329. Determining the place of performance of the obligation

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Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

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