At the beginning of the month the Court of Justice (CJEU) gave a decision about jurisdiction in Reliantco, an investment trading case which could, despite the very different fields, have ramifications for other cross border disputes, such as personal injury cases, in which the claimant is acting as a consumer.
Jurisdiction within the EU is governed by the recast Brussels I regulation, which will continue to apply across the UK until the end of the implementation period.
In the latest case (AU v Reliantco Investments, C-500/18) decided by the CJEU at the beginning of this month the claimant, who was domiciled in Romania, contracted to open an online financial trading account with Reliantco Investments, a company incorporated in Cyprus with a subsidiary in Romania. He did that from the domain name of a commercial company and had had exchanges with Reliant Co as director of that company. The contract included a clause by which disputes were subject to Cypriot law and Cypriot jurisdiction.
He made a series of profitable trades involving large sums and then used the platform to speculate on falls in price of petrol, as a result of which he lost around $2m. He brought an action arguing that he was the victim of manipulation and sought damages from Reliantco for non-compliance with EU consumer protection legislation and contended that parts of the contract with Reliantco amounted to unfair terms.
He started proceedings in Romania, asserting he was a consumer and therefore jurisdiction was conferred on the courts of his domicile – ie Romania – by the consumer contract provisions of Brussels I (at chapter II, section 4). Unsurprisingly, Reliantco challenged jurisdiction on the basis of the exclusive jurisdiction clause in the contract and disputed that the claimant should not be classed as a consumer, arguing he was acting in the course of a trade or professional activity. Furthermore, the claimant’s action was brought as a non-contractual claim, ie in tort, whereas the consumer provisions of Brussels I recast apply to actions brought by a consumer on the basis of a contract.
Parts of the claimant’s argument drew on Directive 93/13/EEC on unfair terms in consumer contracts and on Directive 2004/39 which relates to markets and financial instruments (often referred to as MIFID) and which provides certain protections to investors when dealing with investment firms as well as categorising investors into ‘professional clients’ and ‘retail clients’ for those purposes. The Romanian court asked the CJEU to answer the following questions:
- whether the concept of a ‘retail client’ was to be interpreted using the same criteria as the concept of a consumer, and
- if not, whether a ‘retail client’ could nevertheless have consumer status, and
- whether carrying out a high volume of transactions within a short period involving the investment of very large sums of money are relevant criteria for assessing consumer status, and
- can or should the court deciding jurisdiction take into account the legal basis on which the claim is formulated.
The court examined the first three together. The answers to these would determine whether the claimant could be classed as a consumer and thus whether the courts of his domicile would have jurisdiction over his claim. The CJEU’s discussion and resolution of these points sheds further light on the criteria to apply when determining jurisdiction under the consumer contract provisions of Brussels I recast.
The court noted that the term consumer affords a special rule of jurisdiction and therefore must be interpreted restrictively and in relation to the particular contract in question. The test in section 4 of chapter II of the regulation was whether the conclusion of the contract by the person who claims to be a consumer “can be regarded as falling outside his trade or profession” (article 17 of the Brussels regulation), which would be a matter for the court seised of the dispute to resolve.
Recent case law of the CJEU Court (Petruchova, C-208/18) had held that trading financial instruments could fall within the scope of being consumer. The case law also established that whether or not the person was a ‘retail client’ for other purposes (ie under MIFID) was irrelevant for those purposes, as was the behaviour of that person (meaning in Reliantco that the high value and volume of the transactions was irrelevant).
On the fourth question, the CJEU stated that the special jurisdictional gateway afforded by the consumer contract provisions of Brussels I may be used only where a contract exists, since article 17 refers specifically to “matters relating a contract concluded” between consumer and seller or supplier.
There was a contract in the present case (at least with the principal if not the subsidiary company) but the claim was not brought in contract and instead was made on a non-contractual basis, ie in tort. Did that preclude the application of article 17?
In resolving this, the court drew from decisions on nearly identical provisions in the predecessor Convention to Brussels I in which it had held those could not be interpreted to result in certain claims under a contract concluded by a consumer falling within special jurisdiction rules but other actions that are linked so closely to the contract as to be indissociable from it being subject to other rules.
This interpretation was justified in order to avoid, as far as possible, creating a situation in which a number of courts might have jurisdiction in respect of one and the same contract depending on how the claims associated with it were framed. To do otherwise would risk placing the party deemed to be the weaker, ie the consumer, at a disadvantage. In summary, the CJEU decided that:
- how a party behaves within the contract is irrelevant to determining whether or not they are to be classified as a consumer, the test is whether or not the contract falls outside the person’s professional activity; and
- all causes of action indissociably linked to the consumer contract can be brought within the jurisdictional gateway provided by the consumer contract provisions of Brussels I and not just those based on the contract.
The court also indicated that establishing whether the action is “indissociably linked” to the contract was a matter for the referring court. Although that does make sense as it will always a factual matter, maybe the phrase might signpost a future area of dispute before national courts?
At first sight, the decision in Reliantco would appear to have the effect of widening the scope of those consumers entitled to the special jurisdiction rules allowing them to sue in their home state rather than where the defendant is domiciled. That solution already applies to claims arising out of package holidays, to motor claims and to other cases where the law applying to the liability insurance policy allows for direct actions. Where there is no direct action against the liability insurer, the defendant is uninsured or has a gap in cover, claimants may look to the consumer contract provisions to bring proceedings in their home court. That encompasses a wide variety of businesses which a consumer may visit when abroad, such as restaurants, cafes, and adventure and sports activities.