In Scottish & Newcastle International Limited v. Othon Ghalanos Limited  UK HL 11 (previously referred to in the January 2007 Bulletin) the House of Lords upheld the decision of the Court of Appeal that the English Court had jurisdiction to entertain the action. The dispute arose in respect of the sale of 11 consignments of cider shipped from Liverpool to Limassol. The Defendants did not pay for the cider and the Claimant sued them for the price.
Under Article 2(1) Council Regulation (EC) 44/2001, the general rule is that persons domiciled in a member state must, irrespective of their nationality, be sued in the courts of their home state. This is qualified by a number of special rules, for example that in Article 5(1) which provides that, in matters relating to contract, a person domiciled in a member state may be sued in the courts for the place of performance of the obligation in question. In paragraph (1) (b) it is stated that the place of performance of the obligation in question shall be, in the case of the sale of goods, the place in a member state where, under the contract, the goods were delivered or should have been delivered.
In this case the terms of the contract were CFR, and the court analysed the terms of the arrangement between the parties to determine the agreed place of delivery: In this case the Claimant sellers were to pay the freight and to obtain the bills of lading from the carriers. They were then to forward the documents to the Defendants immediately after shipment. The bills were, however, to be made out to the Defendants, as consignee, and were to be non- negotiable. The Claimant did not reserve any right of disposal of the cider and it was therefore clear that the property in the cider passed to the Defendants on shipment. It was therefore held that, notwithstanding the provision in the printed form invoice that Limassol was “the place of delivery”, the cider was delivered on shipment in Liverpool, and accordingly the English High Court had jurisdiction.
There are conflicting judgments from the House of Lords as to whether the place of shipment is the place of delivery for the purposes of Article 5(1)(b) in all types of FOB contracts, including those which provide for the seller to retain the bills of lading, for instance until the buyer has paid for the goods.