CJEC, 5th chamber, July 11, 1985, No 221-84

THE COURT (Fifth Chamber)

1 By an order of 28 june 1984, which was received at the court on 18 August 1984, the Bundesgerichtshof referred to the Court for a preliminary ruling under Article 3 of the protocol of 3 June 1971 on the interpretation by the Court of justice of the Convention of 27 September 1968 on jurisdiction and the enforcement of judgments in civil and commercial matters two questions on the interpretation of the first paragraph of Article 17 of the that Convention.

2 Those questions were raised in the context of litigation between Berghoefer GmbH (the plaintiff), whose registered office is at Monchenbladbach (Federal republic of Germany), and ASA (SA) (the defendant), whose registered office is at Villeurbanne (France), on the validity of a jurisdiction clause initially agreed in writing and subsequently amended orally.

3 For about 20 years, the plaintiff acted as agent ("Handelsvertreter") for the defendant. Following the termination of the agency contract, the plaintiff sought compensation from the defendant pursuant to paragraph 89 (b) of the German commercial code and an indemnity in respect of the restriction imposed on its right to compete.

4 The parties to the main proceedings disagreed as to whether the Landgericht (regional Court) Monchengladbach, before which the plaintiff had brought proceedings, had jurisdiction. Although the parties had agreed in the agency contract, concluded in 1964, that the Tribunal de commerce (commercial Court), Roanne (France), would have jurisdiction over any dispute, the plaintiff claimed that it had agreed orally with the defendant on 8 October 1975 to modify the initial jurisdiction agreement and to confer jurisdiction on the courts sitting at monchenbladbach, in return for which the plaintiff, rather than the defendant, would thereafter bear the costs of translation arising from their correspondence.

5 The plaintiff claimed to have confirmed that oral agreement by a letter of 27 October 1975 addressed to the defendant. According to the plaintiff, the defendant received that letter and expressed no disagreement with its contents. The defendant, on the other hand, denied that there had been any oral agreement and claimed that he had never received the letter which was supposed to have confirmed it.

6 By judgment of 19 February 1981, the Landgericht Monchengladbach declared that it had jurisdiction to settle the dispute since it considered that it was proven that the parties had in fact agreed orally to confer jurisdiction on the Courts at Monchengladbach and that the confirmation of that agreement had been received by the defendant.

7 On appeal, the Oberlandesgericht (higher regional Court) Dusseldorf decided, in a judgment of 12 March 1982, that even if the facts set out by the plaintiff were correct they would not constitute sufficient grounds for concluding that the courts sitting at Monchengladbach had jurisdiction since the written confirmation which the plaintiff claimed to have sent did not meet the requirements of the first paragraph of Article 17 of the Convention. In the view of the oberlandesgericht, an oral agreement conferring jurisdiction was only valid if it had been confirmed in writing by the party against whom it was to be raised in the event of a dispute. In this case however the written confirmation emanated from the plaintiff, the party for whose benefit the agreement was made, and not from the defendant, against whom it was being raised.

8 The plaintiff then brought an appeal on a point of law before the Bundesgerichtshof in which it disputed the Oberlandesgericht's conclusion. It contended firstly that, according to the letter and the spirit of the first paragraph of Article 17 of the Convention, a jurisdiction agreement could also be validly confirmed by the party for whose benefit it had been concluded. Secondly, it pleaded the bad faith of the defendant, which was now relying on the alleged formal defect in the jurisdiction agreement even though it had previously availed itself, without contesting the agreement, of the provision favourable to it which had been agreed on in consideration of the oral modification of the jurisdiction clause.

9 It was in those circumstances that the Bundesgerichtshof stayed the proceedings and referred the following two questions to the Court of justice for a preliminary ruling:

"(1) Are the requirements of the first paragraph of Article 17 of the Convention of 27 September 1968 on jurisdiction and the enforcement of judgments in civil and commercial matters relating to the formal validity of an oral jurisdiction agreement satisfied where the agreement has been confirmed in writing by the party for whose benefit it was concluded?

If question 1 is answered in the negative:

(2) Is the party against whom the jurisdiction agreement is raised estopped from pleading its formal invalidity where that party did not contradict the written confirmation of the agreement and has enjoyed the consideration given for it, and where moreover the parties, both commercial firms, have been doing business with each other continuously for a prolonged period ?"

10 In their observations to the Court the plaintiff in the main proceedings, the United Kingdom and the Commission all agree that the first question should be answered in the affirmative. In support of that proposition the following arguments were advanced: first, textual arguments based on the actual terms of the first paragraph of Article 17 of the Convention, on an analysis a contrario of the second paragraph of Article 1 of the protocol annexed to the said Convention and on an examination of the Convention of 9 October 1978, on the accession of the Kingdom of Denmark, Ireland and the United Kingdom of Great Britain and Northern Ireland to the Convention (Official Journal, L 304 of 30 October 1978); secondly, arguments based on an analysis of the working documents which preceded the adoption of the Convention, from which it appears that it is necessary to avoid excessive formality incompatible with commercial practice and that it is often difficult to determine for whose benefit a jursisdiction agreement has actually been concluded; thirdly, arguments based on an analysis of the Court's case-law on the purposes of the formal requirement laid down in the first paragraph of Article 17 of the Convention.

11 According to the first paragraph of Article 17 of the Convention: "if the parties, one or more of whom is domiciled in a contracting state, have, by agreement in writing or by an oral agreement evidenced in writing, agreed that a Court or the courts of a contracting 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 exclusive jurisdiction."

12 The Court observes that in order to give full effect to those provisions, reference should, in applying them, be made principally to the general scheme and the purposes of the Convention.

13 According to settled case-law (judgment of 14 December 1976 in Case 24-76, Salotti v Ruwa, (1976) ECR 1831; judgment of 14 December 1976 in Case 25-76, Segoura v Bonakdarian, (1976) ECR 1851; judgment of 6 May 1980 in Case 784-79, Porta-Leasing v Prestige international, (1980) ECR 1517; judgment of 19 June 1984 in Case 71-83, Tilly Russ v haven en Vervoerbedrijf Nova (1984) ECR 2417), the requirements set out in Article 17 governing the validity of jurisdiction clauses must be strictly construed since the purpose of Article 17 is to ensure that the parties have actually consented to such a clause and that their consent is clearly and precisely demonstrated.

14 It must be pointed out that, unlike the provisions concerning persons domiciled in Luxembourg contained in the second paragraph of Article 1 of the protocol annexed to the Convention, Article 17 of the Convention does not expressly require that the written confirmation of an oral argument should be given by the party who is to be affected by the agreement. Moreover, as the various observations submitted to the Court have rightly emphasized, it is sometimes difficult to determine the party for whose benefit a jurisdiction agreement has been concluded before proceedings have actually been instituted.

15 If it is actually established that jurisdiction has been conferred by express oral agreement and if confirmation of that oral agreement by one of the parties has been received by the other and the latter has raised no objection to it within a reasonable time thereafter, the aforesaid literal interpretation of Article 17 will also, as the Court has already decided in another context (see judgment of 19 June 1984, cited above), be in accordance with the purpose of that Article, which is to ensure that the parties have actually consented to the clause. It would therefore be a breach of good faith for a party who did not raise any objection subsequently to contest the application of the oral agreement. It is not necessary in this case to decide the question of whether and to what extent objections raised by the other party to the written confirmation of an oral agreement could, in an appropriate case, be taken into consideration.

16 The reply to the question referred to the Court must therefore be that the first paragraph of Article 17 of the Convention of 27 September 1968 on jurisdiction and the enforcement of judgments in civil and commercial matters must be interpreted as meaning that the formal requirements therein laid down are satisfied if it is established that jurisdiction was conferred by express oral agreement, that written confirmation of that agreement by one of the parties was received by the other and that the latter raised no objection.

17 Having regard to the reply to the first question submitted by the national Court, the second question no longer has any purpose.

Costs

18 The costs incurred by the united kingdom and by the Commission of the european communities, which have submitted observations to the Court, are not recoverable. As these proceedings are, in so far as the parties to the main proceedings are concerned, in the nature of a step in the proceedings pending before the national Court, the decision as to costs is a matter for that Court.

On those grounds,

The Court (Fifth Chamber),

In answer to the questions referred to it by the Bundesgerichtshof (first civil Chamber) by order of 28 June 1984, hereby rules:

The first paragraph of Article 17 of the Convention of 27 September 1968 on jurisdiction and the enforcement of judgments in civil and commercial matters must be interpreted as meaning that the formal requirements therein laid down are satisfied if it is established that jurisdiction was conferred by express oral agreement, that written confirmation of that agreement by one of the parties was received by the other and that the latter raised no objection.