CJEC, October 6, 1976, No 14-76

The court

1 By order of 9 december 1975, received at the court registry on 13 february 1976, the cour d ' appel, mons, has referred to the court under the protocol of 3 june 1971 concerning the interpretation of the convention of 27 september 1968 on jurisdiction and the enforcement of judgments in civil and commercial matters (hereinafter referred to as ' the convention ') questions concerning the interpretation of article 5 (1) and (5) of the said convention.

2 From the order making the reference it appears that the case is at this stage concerned with the question whether the belgian court has jurisdiction to hear an action which the grantee of an exclusive distributorship contract, whose registered office is in belgium, has brought against the grantor, who is established in france.

3 Complaining of a unilateral breach, without notice, of the said contract, the grantee brought proceedings against the grantor before the belgian court seeking, in accordance with belgian law, the dissolution of the contract by the court, on the ground of the grantor ' s wrongful conduct, and the payment of damages.

4 When the belgian court of first instance decided that it had no jurisdiction to hear the case, the grantee appealed before the cour d ' appel, mons.

5 In the first question, the court is asked whether, in an action brought by the grantee of an exclusive sales concession against the grantor in which he claims that the latter has infringed the exclusive concession, the term ' obligation ' in article 5 (1) of the convention is to be interpreted as applying without distinction to any obligation arising out of the outline contract granting an exclusive sales concession or even arising out of the successive sales concluded in performance of the said contract, or as referring exclusively to the obligation forming the basis of the legal proceedings.

6 If the last-mentioned possibility is the correct one, the court is further asked to rule whether the word ' obligation ' in the aforementioned article 5 (1) refers to the original obligation, the obligation to provide the equivalent of the original obligation or to obligation to pay damages where the effect of the dissolution or termination of the contract is to render void the original obligation, or, finally, to the obligation to pay ' fair compensation ' or even ' additional compensation ' within the meaning of the belgian law of 27 july 1961.

7 Under article 5 (1) of the convention, a person domiciled in a contracting state may, in another contracting state, be sued:

' In matters relating to a contract, in the courts for the place of performance of the obligation in question. '

8 As stated in its preamble, the convention is intended to determine the international jurisdiction of the courts of the contracting states, to facilitate the recognition and to introduce an expeditious procedure for securing the enforcement of judgments.

9 These objectives imply the need to avoid, so far as possible, creating a situation in which a number of courts have jurisdiction in respect of one and the same contract.

10 Because of this, article 5 (1) of the convention cannot be interpreted as referring to any obligation whatsoever arising under the contract in question.

11 On the contrary, the word ' obligation ' in the article refers to the contractual obligation forming the basis of the legal proceedings.

12 This interpretation is, moreover, clearly confirmed by the italian and german versions of the article.

13 It follows that for the purposes of determining the place of performance within the meaning of article 5, quoted above, the obligation to be taken into account is that which corresponds to the contractual right on which the plaintiff ' s action is based.

14 In a case where the plaintiff asserts the right to be paid damages or seeks a dissolution of the contract on the ground of the wrongful conduct of the other party, the obligation referred to in article 5 (1) is still that which arises under the contract and the non-performance of which is relied upon to support such claims.

15 For these reasons, the answer to the first question must be that, in disputes in which the grantee of an exclusive sales concession charges the grantor with having infringed the exclusive concession, the word ' obligation ' contained in article 5 (1) of the convention of 27 september 1968 on jurisdiction and the enforcement of judgments in civil and commercial matters refers to the obligation forming the basis of the legal proceedings, namely the contractual obligation of the grantor which corresponds to the contractual right relied upon by the grantee in support of the application.

16 In disputes concerning the consequences of the infringement by the grantor of a contract conferring an exclusive concession, such as the payment of damages or the dissolution of the contract, the obligation to which reference must be made for the purposes of applying article 5 (1) of the convention is that which the contract imposes on the grantor and the non-performance of which is relied upon by the grantee in support of the application for damages or for the dissolution of the contract.

17 In the case of actions for the payment of compensation by way of damages, it is for the national court to ascertain whether, under the law applicable to the contract, an independent contractual obligation or an obligation replacing the unperformed contractual obligation is involved.

18 In the second question, the court is asked to rule whether, in circumstances where, on the one hand, the grantee of an exclusive sales concession is not empowered either to negotiate in the name of the grantor or to bind him and, on the other hand, is not subject either to the control or direction of the grantor, he should be regarded as being at the head of a branch, agency or other establishment of the grantor within the meaning of article 5 (5) of the brussels convention.

19 Under article 5 (5) of the convention, a person domiciled in a contracting state may, in another contracting state, be sued:

' As regards a dispute arising out of the operations of a branch, agency or other establishment, in the courts for the place in which the branch, agency or other establishment is situated. '

20 One of the essential characteristics of the concepts of branch or agency is the fact of being subject to the direction and control of the parent body.

21 It is clear from both the object and the wording of this provision that the spirit of the convention requires that the concept of ' establishment ' appearing in the said article shall be based on the same essential characteristics as a branch or agency.

22 It is, in consequence, impossible to extend the concepts of branch, agency or other establishment to the grantee of an exclusive concession whose operations are of the kind indicated by the national court.

23 For the foregoing reasons, the answer to the second question must be that, when the grantee of an exclusive sales concession is subject neither to the control nor to the direction of the grantor, he cannot be regarded as being at the head of a branch, agency or other establishment of the grantor within the meaning of article 5 (5) of the convention of 27 september 1968.

Costs

24 The costs incurred by the government of the united kingdom and by the commission of the european communities, which submitted observations to the court, are not recoverable.

25 As these proceedings are, in so far as the parties to the main action are concerned, a step in the action pending before the national court, the decision on costs is a matter for that court.

On those grounds,

The court

In answer to the question referred to it by the cour d ' appel, mons, by order of 9 december 1975, hereby rules:

1. In disputes in which the grantee of an exclusive sales concession is charging the grantor with having infringed the exclusive concession, the word ' obligation ' contained in article 5 (1) of the convention of 27 september 1968 on jurisdiction and the enforcement of judgments in civil and commercial matters refers to the contractual obligation forming the basis of the legal proceedings namely the obligation of the grantor which corresponds to the contractual right relied upon by the grantee in support of the application.

In disputes concerning the consequences of the infringement by the grantor of a contract conferring an exclusive concession, such as the payment of damages or the dissolution of the contract, the obligation to which reference must be made for the purposes of applying article 5 (1) of the convention is that which the contract imposes on the grantor and the non-performance of which is relied upon by the grantee in support of the application for damages or for the dissolution of the contract.

In the case of actions for payment of compensation by way of damages, it is for the national court to ascertain whether, under the law applicable to the contract, an independent contractual obligation or an obligation replacing the unperformed contractual obligation is involved.

2. When the grantee of an exclusive sales concession is not subject either to the control or to the direction of the grantor, he cannot be regarded as being at the head of a branch, agency or other establishment of the grantor within the meaning of article 5 (5) of the convention of 27 september 1968.