The Rotterdam District Court recently ruled that it lacked authority to hear a dispute between the buyer and seller of an item of machinery transported from Germany to the Netherlands, holding that the actual place of delivery was outside its jurisdiction. It follows from the decision that the mere mention in Incoterms of a specific city is by no means a guarantee that a dispute will be heard by a court in that city.

Facts

The claimant, a Dutch recycling company, bought an item of machinery from the defendant, based in Germany. The machine was transported to the Netherlands, but was subsequently found to be defective. The parties disagreed on the place of delivery. The defendant argued that Germany was the place of delivery, as that was where the machine had been handed over to the carrier. However, the claimant maintained that the point of delivery was Rotterdam, the only place mentioned in the contract.

The claimant sought damages from the defendant for, among other things, the cost of hiring replacement machinery. The claimant brought the case before the Rotterdam District Court, but the defendant contested the court's jurisdiction on two grounds:

  • The defendant's general terms and conditions contained a jurisdiction clause specifying a court in Germany; and
  • In the event that the jurisdiction clause could not be enforced, and since the goods had been delivered in Germany, the German courts had jurisdiction pursuant to Article 7(1)(b) of the EU Recast Brussels Regulation (1215/2012).

The agreement between the two parties contained an Incoterms clause stipulating "Pricing ex-works: Carriage Paid To Rotterdam (CPT)" and "Delivery time around 2 weeks: delivery after full payment". 'CPT' is a commercial term denoting that the seller will deliver the goods to a carrier or another person nominated by the seller at a place mutually agreed upon by the buyer and seller, and that the seller will pay the freight charges to transport the goods to the specified destination.

The claimant argued that it had never accepted the defendant's general terms and conditions, and that the jurisdiction clause thus could not be enforced. Furthermore, it maintained that it had been agreed that the goods would be delivered in Rotterdam, so that the Rotterdam District Court would have jurisdiction pursuant to Article 7(1)(b).

Decision

The court held that it had not been established whether the general terms and conditions (including the jurisdiction clause for the court in Germany) formed part of the agreement between the parties. The remaining part of the decision therefore turned on whether Rotterdam should be regarded as the place of delivery within the meaning of Article 7(1)(b).

The claimant argued that the parties had agreed that the machine would be delivered in Rotterdam at the defendant's expense. The defendant, meanwhile, contended that, pursuant to the Incoterm CPT Rotterdam agreement, delivery took place when the machine was handed over by the seller to the carrier and that, as this handover took place in Germany, the Court of Rotterdam did not have jurisdiction.

The claimant noted that the Incoterm CPT Rotterdam agreement was mentioned only in that paragraph of the agreement addressing cost. It argued that in Electrosteel (C-87/10), the European Court of Justice (ECJ) held that in order to determine the place of delivery, all terms and conditions of the agreement should be taken into account. Since Rotterdam was the only place mentioned in the entire agreement, the claimant argued that Rotterdam should be regarded as the place of delivery within the meaning of Article 7(1)(b).

The court held that it follows from the ECJ decisions in Electrosteel and in Car Trim (C-381/08) that in case of distance selling, the place where the goods were delivered pursuant to the contract must be determined on the basis of that contract. In order to verify whether the place of delivery was determined under the contract, all relevant terms and clauses capable of clearly identifying that place, including Incoterms, must be taken into account. When Incoterms are included in the agreement, it is necessary to determine whether the specific Incoterm provision was included only in order to divide the risk of transportation and/or cost, or also to determine the place of delivery.

If it is impossible to determine the place of delivery on this basis without referring to the substantive law applicable to the contract, the place of delivery is the place where the physical transfer of the goods took place, as a result of which the purchaser obtained - or should have obtained - actual power of disposal over those goods at the final destination under the sales transaction.

The court held that in this case, aside from the clause mentioning CPT Rotterdam, there were no other relevant clauses capable of identifying the place of delivery. Consequently, the court held that this clause in itself was insufficient to conclude that the place of delivery was indeed Rotterdam.

In the context of this agreement, the court found that the Incoterm CPT Rotterdam agreement was specifically included in order to divide cost, because the Incoterm was placed after the words 'Pricing ex-works' and because the agreement included another clause addressing delivery, although this determined only the moment of delivery (after full payment), and not the place of delivery.

In the end, the court disagreed with both parties and concluded that it was impossible to determine the place of delivery on the basis of the contract. Therefore, it held that the place of delivery would be the place where physical transfer of the goods took place - which, as evidenced by the relevant bill of lading, was the Dutch city of Waddinxveen. As this city lies outside its jurisdiction, the court declared that it lacked jurisdiction to hear the case.

Comment

It follows from this decision that in case of distance selling, mention in Incoterms of a specific city by no means guarantees that jurisdiction will fall to a court in that city. In order to avoid any doubt about the place of delivery – and the consequences for jurisdiction – it is advisable to include the place of delivery explicitly in agreements and/or general terms and conditions.

For further information on this topic please contact Jan Appel at AKD by telephone (+31 88 253 50 00) or email (jappel@akd.nl). The AKD website can be accessed at www.akd.nl.

This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide. Register for a free subscription.