CJEC, November 9, 1978, No 23-78

The court

1 By an order of 1 february 1978, which was received at the court registry on 27 february 1978, the bundesgerichtshof submitted pursuant to 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 (hereinafter referred to as ' ' the convention ' ') certain questions concerning the interpretation of article 17 of the convention.

2 The file shows that the undertaking nikolaus Meeth, window manufacturers and wood processors, established in piesport/mosel, federal republic of germany, the defendant in the main action and appellant on a point of law, entered into a contract with Glacetal s. A r. L., the plaintiff in the main action and respondent to the appeal, for the supply of glass by the french company to the german undertaking.

The parties agreed that the contract should be governed by german law, that the place of performance of the contract was piesport and that ' ' if Meeth sues Glacetal the french courts alone shall have jurisdiction. If Glacetal sues Meeth the german courts alone shall have jurisdiction ' '.

When Meeth failed to pay for certain deliveries effected by Glacetal the latter commenced proceedings to obtain payment of the sums due before the landgericht trier - the court having jurisdiction on the basis of the defendant ' s domicile - which ordered the german undertaking to make payment.

3 In the course of that procedure Meeth raised against Glacetal ' s claim a defence of set-off relating to the damage which it claimed to have suffered owing to delay or default on the part of the french company in performing its obligations under the contract.

The court of first instance, however, refused to allow that sum to be set off against the sale-price claimed by the french company since it considered that Meeth had failed to adduce sufficient proof in support of its claim for damages.

Meeth appealed against that judgment to the oberlandesgericht koblenz, which in turn found that the french undertaking was entitled to the payments it claimed, subject, however, to the effects of a composition in bankruptcy which had in the meantime been arranged.

With regard to the set-off between the selling price and the claim submitted by Meeth, the oberlandesgericht did not allow this defence on the ground that the clause conferring jurisdiction contained in the agreement between the parties did not permit a set-off to be claimed before the german courts.

An appeal was made against this judgment on a point of law to the bundesgerichtshof which considers that the answer to this question depends on the interpretation of article 17 of the convention and has referred two preliminary questions on this point to the court of justice.

The first question

4 The first question asks:

' ' Does the first paragraph of article 17 of the convention permit an agreement under which the two parties to a contract for sale, who are domiciled in different states, can be sued only in the courts of their respective states?

' '

5 According to the first paragraph of article 17 ' ' if the parties... Have 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 connexion with a particular legal relationship, that court or those courts shall have exclusive jurisdiction ' '.

With regard to an agreement conferring reciprocal jurisdiction in the form in which it appears in the contract whose implementation forms the subject- matter of the dispute, the interpretation of that provision gives rise to difficulty because of the fact that article 17, as it is worded, refers to the choice by the parties to the contract of a single court or the courts of a single state.

That wording, which is based on the most widespread business practice, cannot, however, be interpreted as intending to exclude the right of the parties to agree on two or more courts for the purpose of settling any disputes which may arise.

This interpretation is justified on the ground that article 17 is based on a recognition of the independent will of the parties to a contract in deciding which courts are to have jurisdiction to settle disputes falling within the scope of the convention, other than those which are expressly excluded pursuant to the second paragraph of article 17.

This applies particularly where the parties have by such an agreement reciprocally conferred jurisdiction on the courts specified in the general rule laid down by article 2 of the convention.

Although such an agreement coincides with the scope of article 2 it is nevertheless effective in that it excludes, in relations between the parties, other optional attributions of jurisdiction, such as those detailed in articles 5 and 6 of the convention.

6 The reply to the first question must accordingly be that the first paragraph of article 17 of the convention cannot be interpreted as prohibiting an agreement under which the two parties to a contract for sale, who are domiciled in different states, can be sued only in the courts of their respective states.

The second question

7 The second questions asks:

' ' Where an agreement permitted by the first paragraph of article 17 of the convention contains the clause mentioned in question 1, does it automatically rule out any off-set which one of the parties to the contract wishes to propose in pursuance of a claim arising under the said agreement in answer to the claim made by the other party in the court having jurisdiction to hear the latter claim?

' '

8 According to the first paragraph of article 17, jurisdiction is conferred on a given court or courts in order to settle any disputes which have arisen or which may arise ' ' in connexion with a particular legal relationship ' '.

The question of the extent to which a court before which a case is brought pursuant to a reciprocal jurisdiction clause, such as that appearing in the contract between the parties, has jurisdiction to decide on a set-off claimed by one of the parties on the basis of the disputed contractual obligation must be determined with regard both to the need to respect individuals ' right of independence, upon which article 17, as has been noted above, is based, and the need to avoid superfluous procedure, which forms the basis of the convention as a whole of which article 17 is part.

In the light of both of these objectives article 17 cannot be interpreted as preventing a court before which proceedings have been instituted pursuant to a clause conferring jurisdiction of the type described above from taking into account a claim for a set-off connected with the legal relationship in dispute if such court considers that course to be compatible with the letter and spirit of the clause conferring jurisdiction.

9 Accordingly the reply to the second question must be that where there is a clause conferring jurisdiction such as that described in the reply to the first question the first paragraph of article 17 of the convention cannot be interpreted as prohibiting the court before which a dispute has been brought in pursuance of such a clause from taking into account a set-off connected with the legal relationship in dispute.

Costs

10 The costs incurred by the government of the federal republic of germany and by the commission, which have submitted observations to the court, are not recoverable.

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

On those grounds,

The court

In answer to the questions referred to it by the bundesgerichtshof by an order of 1 february 1978, hereby rules:

1. 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 cannot be interpreted as prohibiting an agreement under which the two parties to a contract for sale, who are domiciled in different states, can be sued only in the courts of their respective states.

2. Where there is a clause conferrring jurisdiction such as that described in the reply to the first question the first paragraph of article 17 of the convention of 27 september 1968 cannot be interpreted as prohibiting the court before which a dispute has been brought in pursuance of such a clause from taking into account a set-off connected with the legal relationship in dispute.