Klaus Oblin April 3 2018 Supreme Court's stance on applicability of agreements conferring jurisdiction OBLIN Attorneys at Law | Litigation - Austria Klaus Oblin Litigation OverviewSupreme Court rulingCommentThe Supreme Court recently ruled that as the applicability of the EU Brussels I Regulation is undisputed, the effectiveness of an agreement conferring jurisdiction must be decided based on Article 23 of the regulation (now Article 25 of the EU Brussels Ia Regulation).(1)OverviewUnder Article 23, the phrase 'agreement conferring jurisdiction' must be interpreted autonomously and is defined as an express agreement by the parties establishing jurisdiction. Where such an agreement exists, jurisdiction must be decided based on the specific circumstances.Such agreements, seen as indispensable under Article 23, must generally be proven by the parties seeking to rely on them to establish jurisdiction – as was true for the plaintiff in the case at hand.Article 23(1) sets out minimum requirements for contractual agreements. These formal requirements are not rules of evidence, but rather prerequisites for the validity of an agreement. In particular, the requirements seek to ensure that agreements conferring jurisdiction do not become part of the contract without the knowledge of all of the parties. Therefore, the contract must explicitly show that each party consented to the agreement. Further, it must be explicitly shown that the parties consented to a clause that deviates from the general rules on jurisdiction. These requirements must be narrowly interpreted.Supreme Court rulingIn the case at hand, the Supreme Court first had to consider whether the formal requirements in Article 23(1) had been met. The appellate court had previously found that they had not been.According to Article 23(1)(a), a declaration of intent must be provided in writing – either as a single document signed by all of the parties or in separate documents. This requirement can be met by referencing terms and conditions that include the agreement conferring jurisdiction if such a reference is explicitly made in the contract. If the contract is concluded through different offer and acceptance documents, the offer need only reference the terms and conditions containing the agreement conferring jurisdiction only if the other party:can follow up on this with reasonable diligence; andactually receives the terms and conditions.In the case at hand, the plaintiff submitted five individual orders. The sales negotiations preceding the orders were concluded with a summary of the results of the negotiations, setting out the terms for delivery, payment and packaging and the amount per carrier. The plaintiff's terms and conditions, including the agreement conferring jurisdiction, were not mentioned in that process.According to the Supreme Court, the defendant's employee (a customer service representative who was not involved in the preceding sales negotiations) not only accepted the August 5 2011 order – as could be seen from the email provided by the plaintiff – but also directly responded to it by conveying a new offer. In the subsequent correspondence and on direct questioning by the plaintiff's insurer, the employee explained that this was a standard procedure.Based on this information, the Supreme Court found that the formal requirement in Article 23(1)(a) had not been met.The Supreme Court confirmed the appellate court's November 18 2011 order. According to the appellate court's finding:based on a standard level of diligence, the defendant could not have been expected to assume that a reference to the agreement conferring judgment would be contained in the plaintiff's purchasing terms and conditions; andthe defendant had had no obligation to follow up on the matter.Further, while the defendant confirmed receipt of the order, it did not adhere to the form of acceptance prescribed by the plaintiff. According to the Supreme Court, the appellate court was right to rule that, considering all of the circumstances – as well as the intention behind Article 23 (ie, to avoid agreements conferring jurisdiction from slipping into a contract unnoticed) – the agreement between the parties was insufficiently clear and explicit.The Supreme Court also upheld the appellate court's finding that there was insufficient evidence to establish a practice, given:the low number of business transactions preceding the disputed orders (regarding which no identical approach could be determined – for example, the defendant had not provided a written response to the second order, dated November 17 2010); andthe fact that the business relationship had existed for only one-and-a-half years.'Practices' within the meaning of Article 23(1)(b) of the EU Brussels I Regulation means a regularly regarded practice between the specific parties.The formal alternative in Article 23(1)(c) of the EU Brussels I Regulation still requires an agreement between the parties; however, it assumes that this exists if:"Such an agreement conferring jurisdiction shall be... in a form which accords with a usage of which the parties are or ought to have been aware and which in such trade or commerce is widely known to, and regularly observed by, parties to contracts of the type involved in the particular trade or commerce concerned."The burden of proof lies with the party seeking to rely on the agreement.In the case at hand, the plaintiff argued that the international chemicals industry considers it sufficient to include agreements conferring jurisdiction in the terms and conditions referred to in orders, rather than including a clause that does so. According to the Supreme Court, while this corresponds to the above principle, it does not establish a specific trade practice. Further, the plaintiff failed to mention anything about the defendant's knowledge or requirement to know.CommentThe requirement to set out agreements conferring jurisdiction in writing can be met by referring to terms and conditions which contain such an agreement if such a reference is explicitly included in the contract. However, if the contract is concluded through different offer and acceptance documents, it is sufficient for the offer to refer to the terms and conditions which contain the agreement conferring jurisdiction, as along as the other party can follow up on this using regular diligence and actually receives the terms and conditions.For further information on this topic please contact Klaus Oblin at Oblin Melichar by telephone (+43 1 505 37 05) or email ([email protected]). The Oblin Melichar website can be accessed at www.oblin.at.Endnotes(1) Supreme Court, January 24 2018, Case 7 Ob 183/17p.