EUPillar C-144/10 Berliner Verkehrsbetriebe (BVG), Anstalt des öffentlichen Rechts v JPMorgan Chase Bank NA, Frankfurt Branch (Third Chamber) [2011] ECR I-03961

Summary

This case on Arts 22(2), 23 and 27 of Brussels I was referred to the CJEU in proceedings between BVG and the Frankfurt Branch JPM concerning a financial derivative contract. JPM (an American investment bank having its seat in the US) and BVG (a legal person governed by public law whose seat is in Germany) concluded, by means of a trade confirmation, an ‘Independent Collateral Enhancement Transaction’ involving, inter alia, a swap contract. The contract contained a clause conferring jurisdiction on the English courts. Under the contract, BVG agreed inter alia to pay JPM sums of up to USD 220 million in the event of default on payment by certain third-party companies. Upon the default of some of those third-party companies, JPM demanded payment but BVG refused it. JPM’s London branch and UK subsidiary brought proceedings against BVG in England, relying on the jurisdiction clause under Art 23 of Brussels I. BVG opposed, inter alia, the jurisdiction of the English courts and, by relying on Art 22(2) of Brussels I, alleged that the German courts had jurisdiction to hear the case. After JPM brought an action in England, BVG brought a parallel action in Germany asking the German courts to declare the same contract void on the basis, in particular, that its subject-matter was said to be ultra vires in the light of BVG’s statutes. BVG contended that the German court’s jurisdiction was exclusive under Art 22(2) of Brussels I and thus it must conduct the proceedings brought before it and it could not stay the proceedings under Art 27(1). However, the German court decided to stay the proceedings. BVG appealed against that decision and the case came before the referring court which asked some questions to the CJEU. In the meantime in England, the English court dismissed the objection of BVG and the decision was upheld without awaiting the outcome of the present reference for a preliminary ruling. Leave was granted to appeal to the UK Supreme Court which referred questions to the CJEU in C-54/11. The first question in C-144/10 was on the applicability of Art 22(2) in the context of ‘a review, necessary only as a collateral question, of the effectiveness, under the statutes, of decisions of organs [of a company]’ since BVG pleaded that its own decisions were invalid as a collateral or preliminary issue. The CJEU first noted that there is a certain divergence among the various language versions of Art 22(2) and thus it interpreted the provision by taking account of matters other than its wording, in particular the purpose and the general scheme of Brussels I. Considering its interpretation on the Brussels Convention and the Jenard Report, the CJEU stated that Art 22(2) must be interpreted strictly. It observed that a broad interpretation of Art 22(2) would be contrary to the Brussels I’s purpose in Recital 11, ie the jurisdiction rules are to be highly predictable, and also to the principle of legal certainty. Referring to C-372/07 Hassett and Doherty, if Art 22(2) applied to all disputes relating to a decision by an organ of a company, that would in reality mean that legal actions brought against a company – whether in matters relating to a contract or to tort/delict, or any other matter – could almost always come within the exclusive jurisdiction of the courts of the MS in which the company has it seat. It added that a broad interpretation is not consistent with the specific objective of that provision, which consists simply in centralising jurisdiction to adjudicate upon disputes concerning the existence of a company or the validity of the decisions of its organs, in order to avoid conflicting judgments being given. It thus held that Art 22(2) does not apply to proceedings in which a company pleads that a contract cannot be relied upon against it because a decision of its organs which led to the conclusion of the contract is supposedly invalid on account of infringement of its statutes.