CJEC, December 14, 1977, No 73-77

1 By judgment of 10 June 1977, received at the Court on 15 June 1977, the hoge raad der nederlanden referred for a preliminary ruling under articles 2 and 3 of the protocol of 3 June 1971 (oj l 204 of 2. 8. 1975, p.28) concerning 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 (jo l 299 of 31. 12. 1972, p.32) certain questions concerning the interpretation of article 16 down to the end of subparagraph (1) of the said convention.

2 The questions were raised within the context of a dispute between two Netherlands citizens, at present domiciled in the Netherlands, in relation to an agreement made in 1973 by which they arranged that one would take over from the other the running of a florist's business in a shop which the latter had leased at wuppertal-elberfeld in the federal Republic of Germany.

3 A dispute having arisen between the parties to the main action as regards the agreement which they had concluded and even as regards its existence the 'subtenant', sanders, who had refused to start running the business, was ordered to do so by judgment delivered in summary proceedings by the president of the arrondissementsrechtbank, Arnhem.

4 On appeal, the gerechtshof, Arnhem, found that the agreement in dispute did exist and that sanders owed to his lessor, van der Putte, a sum representing the rent due under the head-lease of the shop and a further sum representing the usufructuary lease as such of the business, and also the ' goodwill ' (the intangible elements of the business).

5 Sanders pleaded that the gerechtshof had no jurisdiction on the basis, in particular, of article 16 of the convention of 27 September 1968, the first paragraph of which provides that the following Courts shall have exclusive jurisdiction, regardless of domicile:

' (1) in matters relating to rights in rem in, or tenancies of, immovable property, the Courts of the contracting state in which the property is situated;

'

6 Sanders was unsuccessful on the ground that in the agreement in question the emphasis fell less on the rent or lease of immovable property than on the running of a business and that in that connexion the justification for the exclusive jurisdiction provided for in article 16 (1), namely that tenancies and rents of immovable property are generally governed by special legal provisions and it is preferable that such provisions should be applied by the Courts of the state in which they are in force, does not apply.

7 Sanders appealed from that judgment on a point of law to the hoge raad, which asks the following questions:

1. Must ' tenancies of immovable property ' within the meaning of article 16 down to the end of subparagraph (1) of the convention on jurisdiction and the enforcement of judgments in civil and commercial matters also include an agreement to rent under a usufructuary lease a retail business carried on in immovable property rented from a third person by the lessor?

2. If so does the exclusive jurisdiction of the Courts of the state where the immovable property is situated also apply to a claim on the basis of such an agreement for

(a) payment of the rent of the retail premises under the usufructuary lease; or

(b) payment by the tenant under the usufructuary lease of the head-rent owed by the lessor to the owner of the immovable property; or

(c) payment of consideration for the goodwill of the retail business?

3. Is the answer to the questions set out above affected by the fact that in the proceedings the defendant (the tenant under the usufructuary lease (pachter)) has contested the existence of the agreement?

The first two questions

8 Under the terms of article 2 of the convention and subject to any other provisions thereof, persons domiciled in a contracting state shall, whatever their nationality, be sued in the Courts of that state.

9 The convention admits of exceptions to the general rule by allowing the plaintiff in certain cases to sue the defendant before the Court of the state in which the latter is domiciled or before the Court of another contracting state, according to the special provisions in articles 5, 6, 8, 9, 10, 13 and 14 of the convention.

10 On the other hand, article 16 of the convention provides for exclusive jurisdiction, regardless of domicile.

11 As regards the matters listed under subparagraphs (2), (3), (4) and (5) of that article it is clear that the Courts which are given exclusive jurisdiction are those which are the best placed to deal with the disputes in question.

12 The same applies to the assignment of exclusive jurisdiction to the Courts of the contracting state in which the property is situated in matters relating to rights in rem in, or tenancies of, immovable property.

13 In fact, actions concerning rights in rem in immovable property are to be judged according to the rules of the state in which the immovable property is situated since the disputes which arise result frequently in checks, inquiries and expert assessments which must be carried out on the spot, with the result that the assignment of exclusive jurisdiction satisfies the need for the proper administration of justice.

14 Tenancies of immovable property are generally governed by special rules and it is preferable, in the light of their complexity, that they be applied only by the Courts of the states in which they are in force.

15 The foregoing considerations explain the assignment of exclusive jurisdiction to the Courts of the state in which the immovable property is situated in the case of disputes relating to tenancies of immovable property properly so-called, that is to say, in particular, disputes between lessors and tenants as to the existence or interpretation of leases or to compensation for damage caused by the tenant and to giving up possession of the premises.

16 the same considerations do not apply where the principal aim of the agreement is of a different nature, in particular, where it concerns the operation of a business.

17 Furthermore, the assignment, in the interests of the proper administration of justice, of exclusive jurisdiction to the Courts of one contracting state in accordance with article 16 of the convention results in depriving the parties of the choice of the forum which would otherwise be theirs and, in certain cases, results in their being brought before a Court which is not that of the domicile of any of them.

18 Having regard to that consideration the provisions of article 16 must not be given a wider interpretation than is required by their objective.

19 Therefore, the concept of ' matters relating to... Tenancies of immovable property ' within the context of article 16 of the convention must not be interpreted as including an agreement to rent under a usufructuary lease a retail business (verpachting van een winkelbedrijf) carried on in immovable property rented from a third person by the lessor.

20 In the light of the reply to the first question, the second question does not call for an answer.

The third question

21 The third question asks whether the reply to the questions set out above is affected by the fact that in the proceedings the defendant (the tenant under the usufructuary lease (pachter)) has contested the existence of the agreement.

22 It emerges from the clear terms of article 16 of the convention that the fact that there is a dispute as to the existence of the agreement which forms the subject of the action does not affect the reply given as regards the applicability of that article.

Costs

23 The costs incurred by the government of the united kingdom and the Commission of the European Communities, which have submitted observations to the Court, are not recoverable and 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 national Court, the decision on costs is a matter for that Court.

On those grounds,

The Court

In answer to the questions referred to it by the hoge raad der nederlanden by order of 10 june 1977, hereby rules:

1. The concept of ' matters relating to tenancies of immovable property ' within the context of article 16 Of the convention must not be interpreted as including an agreement to rent under a usufructuary lease a retail business (verpachting van een winkelbedrijf) carried on in immovable property rented from a third person by the lessor;