knowledge 10 October 2016 |

EC Court Confirms that Submission to Jurisdiction can Override Contractual Choice of Forum

In Taser International Inc v SC Gate 4 Business SRL,¹ Taser a company established in the USA, entered into a number of distribution agreements with Gate 4, a company established in Romania, containing provisions conferring jurisdiction exclusively on a court in the USA.

Following an alleged breach by Gate 4 by way of failure to assign trade mark registrations, Taser brought proceedings against Gate 4 in Romania. Gate 4 entered an unconditional appearance before the Romanian court without challenging its jurisdiction. The Romanian first instance court held in favour of Taser, and that judgment was affirmed on appeal. On a further appeal to the Romanian High Court of Cassation by Gate 4, the court raised of its own motion the question of whether the Romanian courts had jurisdiction in the circumstances having regard to the provisions of the contract, which explicitly conferred exclusive jurisdiction on a different court.

On the reference under Article 267 TFEU, the CJEU held:

i) that the Brussels I Recast Regulation and its predecessors² apply in a dispute between a defendant domiciled in a Member State and an applicant from a third country;³

ii) that Article 26 of Brussels I Recast, which provides that “a court of a Member State before which a defendant enters an appearance shall have jurisdiction. This rule shall not apply where appearance was entered to contest the jurisdiction, or where another court has exclusive jurisdiction by virtue of Article 24” implies that the entry of an unqualified appearance by a defendant amounts to tacit acceptance of the jurisdiction of the court and thus a choice of jurisdiction;⁴

iii) this tacit submission to jurisdiction (by not raising a challenge at appearance stage) is sufficient to engage the jurisdiction of the court except in the cases mentioned in Article 24, where Brussels I Recast confers jurisdiction exclusively on the courts of a particular Member State. A choice of jurisdiction agreement is not within those exceptions, ie it can be over-ridden by a later submission to the jurisdiction of a court not chosen in the contract.

iv) Where no such exception applies, the court seised must accept jurisdiction where the defendant enters an unconditional appearance and cannot decline jurisdiction of its own motion – because the rules of jurisdiction require certainty.⁵

Accordingly, the defendant could be sued in Romania because it was “domiciled” in Romania. Although the defendant could have contested jurisdiction on the basis of the choice of jurisdiction clause in the contracts, it had chosen not to do so and should therefore be regarded as having made a fresh choice in favour of the Romanian courts, sufficient to engage their jurisdiction. In those circumstances, the Romanian courts could not decline jurisdiction.

Comment

This judgment reflects what has been established law in Ireland,⁶ but operates as a useful reminder that the inclusion of a choice of jurisdiction clause in a commercial agreement does not make it mandatory that all other courts must refuse jurisdiction. They will usually decline jurisdiction where jurisdiction is challenged on the basis of the contractual provision. However, if there is no challenge, that will be treated as an implicit choice to submit to the jurisdiction of the court in which proceedings have been brought.