CJEU judgment in case C-375/15 (Harald Kolassa v Barclays Bank PLC)

Introduction

On 28 January 2015, the Court of Justice of the European Union (CJEU) decided the so called ‘Kolassa case’, delivering a judgment of paramount importance for the future handling of investor claims.

The facts

An Austrian investor domiciled in Vienna, Mr Kolassa, who had purchased financial instruments issued by the British Barclays Bank (established in London) through the local investment firm Bank direktlange.at AG, filed a lawsuit for damages against Barclays Bank before an Austrian court after his financial investment had lost all its value.

The claim for damages was based, among others, on the issuer’s prospectus liability and the alleged breaches of information and control obligations towards investors1.

Mr Kolassa submitted that the Handelsgericht Wien had jurisdiction on the basis of Article 15(1)(c) of the Council Regulation (EC) No. 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (the “Brussels I Regulation”) or, in the alternative, on the basis of Article 5(1)(a) and (3) of that Regulation2.

Before the referring court, Barclays Bank disputed not only Mr Kolassa’s substantive allegations but also the jurisdiction of the court seised. The Austrian court questioned whether it had jurisdiction to hear the case and submitted a reference for a preliminary ruling on the interpretation of the Brussels I Regulation.

The CJEU Judgment

No contract between the issuer of the certificates and the investor

The CJEU first decided that the prospectus liability did not relate to a consumer contract under Article 15 of Brussels I Regulation.

This Article applies if three conditions are met: first, a party to a contract is a consumer who is acting in a context which can be regarded as being outside his trade or profession; second, the contract between such a consumer and a professional has actually been concluded; and, third, such a contract falls within one of the categories referred to in Article 15(1)(a) to (c). Those conditions must all be fulfilled, so that if one of the three conditions is not met, jurisdiction cannot be determined under the rules relating to consumer contracts (judgment in Česká spořitelna, EU:C:2013:165).

In that regard, the Court held that the first and third conditions were met in the present case, while the second condition, requiring the conclusion of a contract with the professional concerned, had not been satisfied in circumstances such as those in the main proceedings. In fact, there was no contract between Barclays Bank and Mr Kolassa, for the latter was not the bearer of the bonds, those bonds being held by direktanlage.at as covering assets in its own name.

Moreover, the CJEU clarified that Article 15(1) of the Brussels I Regulation must be strictly interpreted (see judgment in Česká spořitelna, EU:C:2013:165) for the purpose of ensuring that the attribution of jurisdiction is as predictable as possible. Consequently, the requirement of the conclusion of a contract with the professional concerned is not satisfied when there is a chain of contracts through which certain rights and obligations of the professional in question are transferred to the consumer.

In other words, the CJEU held that Article 15 of Brussels I Regulation is not applicable to a case where a consumer purchased a financial instrument not directly from the issuer but from a professional intermediary.

Absence of legal obligations freely undertaken by the bank

Focusing then on Article 5(1), which states that “a person domiciled in a Member State may, in another Member State, be sued: (a) in matters relating to a contract, in the courts for the place of performance of the obligation in question”, the CJEU held that - in contrast to the requirement laid down in Article 15 - the conclusion of a contract is not a condition for its application. It is nevertheless essential, for the provision to apply, that a legal obligation can be identified, since jurisdiction is determined by the place of performance of this obligation.

Thus, the application of the rule of special jurisdiction provided for ‘matters relating to a contract’ in Article 5(1)(a) presupposes the establishment of a legal obligation freely consented to by one person towards another and on which the claimant’s action is based (see the judgment in Česká spořitelna, EU:C:2013:165).

It follows that in the present case, although Barclays Bank had certain obligations towards Mr Kolassa, there was no such legal obligation freely consented to by Barclays. Therefore, in circumstances such as those of the case in the main proceedings, investors may not invoke jurisdiction under Article 5(1)(a) of Brussels I Regulation as the issuer had not freely assumed an obligation towards them, at least not with regard to the accurateness of the content of the prospectus.

Localization of damage to the investor’s bank account where he suffered the financial loss

After that, the Court concentrated on Question no 3 concerning whether prospectus liability incurred by the issuer and breach of obligations to protect and advise consumers could be considered a matter related to “rights in tort, delict or quasi-delict” within the meaning of Article 5(3) of Brussels I Regulation, giving an affirmative answer to such question.

For the purpose of localising the harmful event as defined by Article 5(3), the Court recalled that the expression ‘place where the harmful event occurred or may occur’ in that provision is either the place where the damage occurred or the place of the event giving rise to the damage (which in this case was where Barclays has its seat), so that the defendant may be sued, at the option of the applicant, in the courts in either of those places (judgment in Coty Germany, EU:C:2014:1318).

The CJEU then called attention to its judgment in the Kronhofer case (C-168/02), where it ruled that the phrase ‘place where the harmful event occurred’ did not refer to the applicant’s place of domicile by reason only of the fact that he had suffered financial damage there resulting from the loss of part of his assets which arose and was incurred in another Member State (judgment in Kronhofer, C‑168/02, EU:C:2004:364). By contrast, such an attribution of jurisdiction is justified if the applicant’s domicile is in fact the place where the events giving rise to the loss took place or the loss occurred.

In the specific circumstances:

  • with regard to the event causing the loss claimed, the CJEU denied that it took place in Austria (at Mr Kolassa’s domicile) because all relevant decisions concerning the arrangement for the investment proposed by Barclays and the content of the relevant prospectus had been taken in the Member State where Barclays had its seat (the UK), where the prospectus had originally been drafted and distributed;
  • as regards the localisation of damage, the CJEU stated that the courts in the country where the investor is domiciled have jurisdiction “in particular when the loss occurred itself directly in the applicant’s bank account held with a bank established in the area of jurisdiction of those courts” (margin no 55).

In other words, the CJEU held that the court at the place where the investor is domiciled and has its bank account is competent to decide on the claim under Art 5(3) Brussels I Regulation. Since the damage occurred in Mr Kolassa's Austrian bank account, the Austrian courts have jurisdiction for this tort claim.

Evidence-collection obligations of national courts to determine jurisdiction

Finally, particularly noteworthy is the CJEU ruling on a point of general interest whose relevance goes beyond prospectus liability cases.

By Question no 4, the referring court asked whether it is necessary, in the context of the determination of international jurisdiction under Brussels I Regulation, to conduct a comprehensive evidence collection in relation to disputed facts that are relevant both for the question of jurisdiction and for the existence of the claim or whether it is, instead, to be considered that the allegations of the applicant in the main proceedings alone are correct for the purposes of the decision on jurisdiction.

Initially, the CJEU pointed out that Brussels I Regulation does not explicitly define the extent of the verification obligations to which national courts are subject while determining their international jurisdiction.

Then, since the aim of legal certainty requires the national court seised to be readily able to decide whether it has jurisdiction, without having to consider the substance of the case (see the judgment in Benincasa, C‑269/95, EU:C:1997:337), the CJEU held that a court hearing a contractual dispute may examine, even of its own motion, the essential preconditions for its jurisdiction, having regard to conclusive and relevant evidence adduced by the party concerned establishing whether in fact the contract exists (judgment in Effer, 38/81, EU:C:1982:79).

On the other hand, in relation specifically to Article 5(3) of Brussels I Regulation, the Court held that the court seised may regard as established, solely for the purpose of ascertaining whether it has jurisdiction under that provision, the applicant’s assertions as regards the conditions for liability in tort, delict or quasi-delict (judgment in Hi Hotel HCF, C‑387/12, EU:C:2014:215).

In conclusion, the CJEU ruled that in order to determine the international jurisdiction under Brussels I Regulation, the national courts seised do not have to enter into a comprehensive evidence collection at this early stage of the procedure and may examine their international jurisdiction in the light of all the information available to it, including, where appropriate, the allegations made by the defendant.