The issue of jurisdiction was at the centre of a recent action in the Limassol District Court, which dismissed the claimant's case at an early stage after hearing an application filed by the defendant challenging the jurisdiction of the Cyprus court.(1) The court based its ruling on Article 7(1) and (2) of the EU Brussels Regulation (1215/2012) on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (recast), which replaced the original EU Brussels Regulation (44/2001) with effect from January 10 2015.
The facts – according to the statement of claim filed by the claimant, a company operating in Cyprus – were as follows:
- The claimant purchased goods from a company in India. After receiving the goods in Cyprus, the claimant sought to pay for them and instructed its bank in Cyprus to transfer funds to a bank account, the details of which were shown on an invoice which it understood to have been issued by the Indian supplier of the goods. After leaving the claimant's bank account, the funds were ultimately transferred to the defendant, a banking institution in the United Kingdom, through two intermediary banks – one of which was located in the United Kingdom and one in Germany.
- After transferring the funds, the claimant became aware that the invoice showing the bank details had not been issued by the Indian supplier of the goods, but rather by fraudsters, and that the UK bank account in which the funds ended up was not owned or controlled by the Indian supplier.
- The claimant informed its bank in Cyprus about the alleged fraud, which in turn contacted the UK bank to inform it of the fraud and to ask for the funds to be returned to the claimant's bank account in Cyprus.
- The UK bank replied that by the time it had received the notification and the request for the funds to be returned, they had already been withdrawn from the account to which they had been sent according to the claimant's initial instructions.
The claimant filed proceedings in Cyprus against the UK bank requesting damages on the grounds that:
- there had been a contract between the claimant and the defendant, which the defendant had breached;
- the defendant had been negligent in paying away the funds; and
- by its actions or omissions, the defendant had induced the claimant to breach its contract with the Indian supplier.
The court noted that a fundamental precept of the EU Brussels Regulation is that a party should be sued in the member state of its domicile.(2) This is not an absolute rule, but is subject to exceptions set out in the regulation.
Among these exceptions to the general rule are those contained in Articles 7(1) and (2) of the recast regulation, which read as follows:
"A person domiciled in a Member State may be sued in another Member State:
(1)(a) in matters relating to a contract, in the courts for the place of performance of the obligation in question;
(b) for the purpose of this provision and unless otherwise agreed, 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 the case of the provision of services, the place in a Member State where, under the contract, the services were provided or should have been provided;
(c) if point (b) does not apply then point (a) applies;
(2) in matters relating to tort, delict or quasi-delict, in the courts for the place where the harmful event occurred or may occur."
In reaching its decision, the court relied on European Court of Justice case law decided under the EU Brussels Regulation 2001, as the provisions of the recast regulation set out above are identical to the corresponding provisions of the earlier regulation.(3) It found as follows:
- The transfer of funds from the claimant's bank account in Cyprus to an account maintained with the defendant in the United Kingdom did not entail the occurrence of a material fact in Cyprus, such as to give the Cyprus court jurisdiction.
- Since the bank account at the centre of the dispute was located in the United Kingdom, which was also the place where the defendant was established and provided its services, any service provided by the defendant in connection with the facts of the case was provided in the United Kingdom. Therefore, according to the regulation, the United Kingdom was the appropriate place for the defendant to be sued.
- For the purposes of Article 7(2) of the recast regulation, the place where the harmful event had occurred was the United Kingdom, as the defendant's alleged negligence in treating the claimant's funds had taken place in the United Kingdom.
- In this respect, there was no difference between the place where the damage had occurred and the place where the events giving rise to the damage had taken place.
The decision clarifies the case law relating to the interpretation of Article 7(2) of the recast EU Brussels Regulation. It reaffirms the general principle that civil actions are to be brought against individuals and companies in the courts of the place where they are domiciled except in specific instances where derogations from the general rule apply. These derogations are to be interpreted strictly so as not to create jurisdiction for the courts of the claimant's domicile unless the rule clearly produces that result.
In order to rely on the derogation provided in Article 7(2) of the recast EU Brussels Regulation, the claimant must establish that the harmful event or series of events giving rise to the damage took place in the EU member state where proceedings have been instituted.
For further information on this topic please contact Andreas Christofides at Elias Neocleous & Co LLC by telephone (+357 25 110 110) or email (email@example.com). The Elias Neocleous & Co LLC website can be accessed at www.neo.law.
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