C-14/76

JUDGMENT OF 6. 10. 1976 - CASE 14/76

right relied upon by the grantee in In the case of actions for the payment support of the application. of compensation by way of damages, In disputes concerning the it is for the national court to ascertain consequences of the infringement by whether, under the law applicable to the grantor of a contract conferring an the contract, an independent exclusive concession, such as the contractual obligation or an obligation payment of damages or the replacing the unperformed contrac­ dissolution of the contract, the tual obligation is involved. obligation to which reference must be 3. When the grantee of an exclusive made for the purposes of applying sales concession is not subject either$$$ sans . . Article 5 (1) of the Convention is that to the control or to the direction of which the contract imposes on the the grantor, he cannot be regarded as grantor and the non-performance of being at the head of a branch, agency which is relied upon by the grantee or other establishment of the grantor in support of the application for within the meaning of Article 5 (5) of damages or for the dissolution of the the Convention of 27 September contract. 1968.

In Case 14/76

Reference to the Court under Article 1 of the Protocol concerning the interpretation by the Court of Justice of the Convention of 27 September 1968 on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters by the Cour d'Appel of Mons, for a preliminary ruling in the action pending before that court between

ETS. A. DE BLOOS, S.P.R.L., Leuze, Belgium,

gives the following

DE BLOOS v BOUYER

JUDGMENT

Facts

The facts and the arguments developed agreement should be dissolved on the by the parties during the written ground of the grantor's wrongful procedure may be summarized as conduct; follows: — the payment of damages, pursuant to the Belgian Law of 27 July 1961, as amended by the Law of 13 April I — Facts and written procedure 1971 (M.B. 29. 12. 1961 and 21. 4. 1971), concerning the unilateral 1. Under an agreement of 24 October revocation of exclusive sales 1959, the Etablissements Bouyer S.A. concessions of indefinite duration. (hereinafter referred to as 'Bouyer'), whose registered office is at Tomblaine, 3. Bouyer objected inter alia that by virtue of the 'Convention on jurisdiction Meurthe-et-Moselle (France), granted to Etablissements A. De Bloos S.P.R.L. and the enforcement of Judgments in Civil and Commercial Matters', which (hereinafter referred to as 'De Bloos'), whose registered office is at Leuze was signed in Brussels on 27 September (Belgium), the exclusive right to 1968 by the Member States of the distribute their products bearing the Community in its original form, ratified 'Bouyer' mark for Belgium, the Grand in Belgium by the Law of 13 January 1971, and which entered into force on Duchy of Luxembourg and the Belgian Congo (which has since become the 1 February 1973 (hereinafter called the Democratic Republic of Zaire). 'Brussels Convention"), the court before which proceedings had been brought had The agreement was notified to the no territorial jurisdiction' in the matter. Commission of the European Articles 2 and 5 of the Brussels Communities pursuant to Articles 4 and Convention provide as follows: 5 of Regulation No 17 of the Council of 16 February 1962. By registered letter of Article 2 (first paragraph): 28 April 1969, the Commission declared that the exclusive distributorship 'Subject to the provisions of this agreement fell within the provisions of Convention, persons domiciled in a Regulation No 67/67 of the Commission Contracting State shall, whatever their of 22 March 1967 and could take nationality, be sued in the courts of that State.' advantage of the provisions of Article 85 (3) of the Treaty. Article 5:

the place in which such branch, — reasonable additional compensation agency or other establishment is because the sales concession appears situated.' to have been terminated by the grantor on grounds other than The Tribunal commercial de Tournai misconduct by the grantee. found, inter alia: — that the place where the goods were In this connexion, the Cour d'Appel, to be delivered was, regardless of the Mons, held that Belgian legal doctrine as mode of dispatch, at all times the well as Belgian case-law are divided as to registered office of Bouyer; the nature of this compensation: a — that the goods were accepted at the normal obligation under the registered office and that all bills distributorship contract, something were payable there, ancillary to the main obligation or a new and independent obligation... The and concluded that it lacked jurisdiction forum solutionis could differ according on the ground that 'the place where the to which of these alternatives was chosen. obligations arose and were due to be Furthermore, the documents produced performed was ... in France where the give no indication whether De Bloos was defendant has its registered office'. subject to the direction or control of Bouyer or whether it had the power to 4. By notice of 5 September 1974, De negotiate in the name of the grantor and Bloos appealed against this decision to bind the latter. The Mons court has the Cour d'Appel, Mons. Called upon to therefore also judged it necessary to ask rule on the question of jurisdiction, the whether, in this case, the grantee was a court at first rejected the contention that 'branch', an 'agency' or an 'establishment there was jurisdiction by consent under of the grantor' within the meaning of Article 17 of the Brussels Convention, Article 5 (5) of the Brussels Convention. because there was no agreement to that effect between the parties in respect of 5. Pursuant to the Protocol concerning disputes concerning the contract itself, the jurisdiction of this Court in the with which the proceedings are solely interpretation of the Brussels Convention concerned. (hereinafter called 'the Protocol') especially Articles 1 (2), 2 (2) and 3 (2) Going on to consider the conditions for thereof, the Cour d'Appel, Mons, by any application of Article 5 (1) of the judgment of 9 December 1975, Brussels Convention, the Cour d'Appel, accordingly decided to stay the Mons, attempted, on the basis of Belgian proceedings and to refer the following law, including the abovementioned Law questions to the Court of Justice of the of 27 July 1961, to define the obligations Communities:

be applied without distinction to establishment of the grantor within each of the obligations set out the meaning of Article 5 (5) of the below or must its application to Brussels Convention? any of them be excluded: 1. Any obligation arising out of 6. A certified copy of the order making the outline contract granting an the reference was received at the Court exclusive sales concession or Registry on 13 February 1976. even arising out of the successive sales concluded in The United Kingdom, represented by performance of this outline W. H. Godwin, and the Commission of contract; the EEC, represented by its principal 2. The obligation in dispute or legal adviser, Paul Leleux, submitted forming the basis of the legal written observations pursuant to Article 5 proceedings and, if so, of the Protocol and to Article 20 of the (a) the original obligation (such Protocol on the Statute of the Court of as the obligation not to sell Justice of the EEC. to others in the territories agreed upon or the After hearing the report of the obligation to give reasonable Judge-Rapporteur and the views of the notice in the event of Advocate-General, the Court decided to unilateral breach); open the oral procedure without a (b) or the obligation to provide preparatory enquiry. the equivalent of the original obligation (to pay In letters of 31 May and 4 June 1976, the compensation or damages); Court requested the views of the Member (c) or the obligation to pay States and of the Commission on the damages where the effect of question whether the Member States novation arising from the. which were not signatories of the dissolution or termination of Protocol could take part in the the contract is to render proceedings before the Court on the void the original obligation; interpretation of the Brussels (d) or, finally, the obligation to Convention. The Governments which pay 'fair compensation' or replied to this request under the even 'additional compen­ procedure appropriate to the present sation', provided for in case, namely the Danish, Belgian, British Articles 2 and 3 of the and Irish Governments, as well as the Belgian Law of 27 July 1971 Commission, indicated their agreement concerning the unilateral to such participation. termination of exclusive sales concessions of indefinite duration, as II — Written observations amended by the Law of 13 submitted pursuant to April 1971; Article 20 of the Protocol on the Statute of the Court II — Where, on the one hand, the of Justice grantee of an exclusive sales concession is not empowered A — Observations submitted by the either to negotiate in the name of United Kingdom the grantor or to bind him and, on the other hand, he is not subject Although not yet a party to the either to the control or direction of Convention of 27 September 1968 or to the grantor, is such a person at the the Protocol of 3 June 1971, the United head of a branch, agency or other Kingdom states that it has a considerable

interest in the application of those of the national law, to determine what instruments particularly in view of law governs the contract. This law could Article 63 of the Convention which be the law of the forum itself, the law of requires the Convention to be accepted another Member State of the Community as a basis for negotiation between the or even the law of a non-Community contracting parties and every State which State. Applying that law to the contract, becomes a member of the Community, the national court should then determine and in view of its obligation to accede to the nature of the obligations which flow the Convention as required by Article 3 from the contract, which of them are at (2) of the Act annexed to the Treaty of issue in the proceedings, and the place Accession of 22 January 1972. where those obligations are to be

Negotiations on a should be followed in the present case Convention which would provide such inasmuch as the Convention touches on uniform rules are in progress. many aspects of the internal law of the Member States, so that a judgment which On the other hand, the assignment to did not keep within the limits of the the Court of Justice of jurisdiction to Court's jurisdiction would have determine the place of performance of far-reaching and unforeseeable obligations arising under particular types repercussions on the substantive national of contract would lead to unacceptable law, going far beyond aspects of the law results. In giving its rulings, the Court concerning assumption of jurisdiction or would determine the place of recognition of judgments.

For practical purposes each necessary guidance on the method to be ruling would thus take effect as a ruling followed in arriving at these definitions. on the substantive law of the Member States governing the category of contracts To this end, the national court before in question. which proceedings are brought should apply its own law, and primarily the rules Moreover, the consequences of contracts of private international law forming part would be rendered less certain, as the

place of performance of every obligation question and the place where it is to would become a matter which could one be performed are to be determined day be submitted for the determination by the national court in which of the Court of Justice and might then proceedings are instituted by be found to differ from the previously applying its national law, including accepted law on the basis of which the the choice of legal rules which form contract had been made. part of that law, to the contract before the court; Finally, in a comment on the obligation (iii) that in identifying the particular to pay damages, referred to by the court obligation arising from the terms of making the reference, the United the contract which is in issue in the Kingdom submits that only an obligation proceedings before the referring which forms part of the agreement court, any consequential duty between the parties can constitute an imposed by national law to pay 'obligation' within the meaning of Article damages or compensation for breach 5 (1) of the Convention. A remedy which of the contract should be left out of can be sought under the national law for consideration.' breach of the provisions of the contract cannot arise from an obligation coming B — Written observations submitted under the said Article. The basic rule of by the Commission of the the Convention, expressed in Article 2, is European Communities that a person is to be sued in the courts of the State where he is domiciled. Other The Commission makes the preliminary bases of jurisdiction, such as the comment that, in the present state of the plaintiff's domicile, nationality or international law of contract, the residence, are expressly barred by Article determination of the place for 3. However, a general exception to the performance of a contractual obligation principle in Article 2 is contained in can be effected only in terms of national Article 5 (1) which, however, applies only law. After applying the rule of the lex to the place of performance of the fori the national court must, in the light obligation. If such an exception were also of the substantive law governing the legal to apply to an obligation to pay damages, relationship in question, ascertain the this would mean that, in nearly every place for performance of the obligation case based on breach of contract, the imposed on one or other of the parties. plaintiff could, on the basis of such an Only after this has been done can it 'obligation', sue in the courts of his decide whether or not it has jurisdiction domicile; that Article 3 of the under Article 5 (1) of the Brussels Convention would be frustrated; and that Convention.

The Belgian Law of 27 July 1961 as internal law dealing with the obligation amended on 13 April 1971 determined or obligations in question. In view of the with mandatory effect the consequences international context in which the of a unilateral termination of an Convention and the abovementioned exclusive sales concession of indefinite provision are placed, it is also necessary duration: there must be either reasonable to ascertain whether each and every notice or fair compensation together solution provided by the internal law with, as necessary, additional applicable is or is not compatible with compensation representing, inter alia, the meaning and scope of the word any increase in goodwill. 'obligation' which appears in Article 5

for compensation. Another view is that which courts have the requisite powers compensation (including any additional under the Convention, was seised of the compensation) is a self-contained dispute. The only way of reducing this obligation which is independent of the risk is specifically by avoiding any main obligation, in which case the unnecessary increase in the available obligation to compensate, being an choice of national courts open to obligation to pay money which, under litigants. This is why the concept of

As this is a question involving the jurisdiction of The foregoing does not however mean the courts, this term must refer to the that the application of Article 5 (1) of the 'obligation on which the application Convention on the question of the sales is based', namely the obligation concession is governed exclusively by the which lies on the defendant as a

party to the contract In particular — sales effected under the contract there must be no confusion between entail specific obligations which may the 'obligation' as defined above and give rise to disputes which do not call the 'remedy' or 'remedies' claimed by into question the main obligations of the plaintiff, which, even in the case the contract of concession; of an exclusive sales concession, may — the main obligation of the grantor very considerably from the legislation may give rise to disputes on various of one country to that of another. grounds. If the grantor does not The correctness of this interpretation comply with his obligation the fact of the word 'obligation' is moreover that the law can, if need be, replace confirmed by several considerations, or complete the contract so as to in particular by the wording of determine the effect of this or that Article 5 (1) itself considered in the aspect of his conduct is not very light of the German and Italian important: it is at all times the same versions, by the report on the obligation on which the application Convention submitted to the is based or which is in dispute. governments and by the preparatory work now in progress for the It should not be possible for the accession of the new Member States. idiosyncracies or, more especially, the legal terminology of the national law It is true that, especially in the case of a applied by the court before which the contract of sale, the disputed obligation proceedings are brought to modify these would differ according to whether the principles. The Belgian Law of 27 July defendant in the action is the seller or 1961 itself seems to demonstrate the the buyer: in one case, delivery of the irrelevance of such terminology for the goods, in the other, payment. purposes of applying Article 5 (1) of the Nevertheless, the fact that in bilateral Convention: whether the compensation contracts the obligations of the parties provided for under Article 2 of the Law are different ought not to produce results constitutes an obligation ancillary to that which conflict with the proper to give notice or compensation under administration of justice by breaking general law for a wrongful unilateral down the obligations of one of the breach of the contract, what remains at parties into various facets, with the result issue is the effect of the failure by the that jurisdiction is shared between the grantor duly to carry out his principal courts of several countries depending obligation before it has been validly upon the different heads of claim which discharged. In either case, it is of course arise from the defendant's principal this obligation which is 'at issue'. obligation. The Commission contends that a

concession, the Belgian court has — an obligation the place of undoubted jurisdiction in the matter. But performance of which entails the it would not have jurisdiction concerning jurisdiction of the court of that place the second head of claim, the payment of cannot consist of any kind of damages, since the outcome of this obligation capable of being created depends on the decision to be taken on by the outline contract and its the first head. In that case, jurisdiction conditions, but must constitute the on the second head would devolve on the contested obligation on which the court of the defendant's domicile in application is based; because of this, France. Such an outcome would not only obligations arising, in particular, from do nothing to solve international sales concluded in fulfilment of the disputes but would also conflict with the contract cannot be taken into account spirit of the Convention, one of the in case of a dispute concerning the objects of which is precisely to ensure observance of an exclusive right; that jurisdiction is concentrated in a — it is the original obligation of the single court. grantor, namely, to honour the exclusive right granted to the grantee, Furthermore, although the Convention is which is at issue and at the root of concerned only with the jurisdiction of each and every application the courts, it would not be unreasonable concerning the consequences, to resolve this jurisdiction in terms flowing from the contract or from the which accord with the corresponding law, to be drawn from legislative powers. It is generally accepted non-observance of this obligation, that, if the contract is silent on the and this is so whatever the nature or subject, an exclusive sales concession is the specific classification under subject to the law of the country where it national law of the compensation is to be performed. This principle has applied for; it is of little moment been adopted in the Convention under whether, under the substantive law preparation on 'the law applicable to applicable, those consequences do or contractual and non-contractual do not mean the extinction of the obligations' the preliminary draft of original obligation.' Article 4 of which refers, in default of an express or implied choice in the contract, to 'the law of the country with which it is III — Oral procedure most closely connected'. The United Kingdom, represented by Mr On the basis of the foregoing Pinkerton, and the Commission of the considerations, the Commission submits European Communities presented oral that the questions referred should be observations at the hearing on 30 June answered as follows: 1976.

3 Complaining of a unilateral breach, without notice, of the said contract, the grantee brought proceedings against the grantor before the Belgian court seeking, in accordance with Belgian law, the dissolution of the contract by the court, on the ground of the grantor's wrongful conduct, and the payment of damages.

4 When the Belgian court of first instance decided that it had no jurisdiction to hear the case, the grantee appealed before the Cour d'Appel, Mons.

5 In the first question, the Court is asked whether, in an action brought by the grantee of an exclusive sales concession against the grantor in which he claims that the latter has infringed the exclusive concession, the term 'obligation' in Article 5 (1) of the Convention is to be interpreted as applying without distinction to any obligation arising out of the outline contract granting an exclusive sales concession or even arising out of the successive sales concluded in performance of the said contract, or as referring exclusively to the obligation forming the basis of the legal proceedings.

6 If the last-mentioned possibility is the correct one, the Court is further asked to rule whether the word 'obligation' in the aforementioned Article 5 (1) refers to the original obligation, the obligation to provide the equivalent of the original obligation or to obligation to pay damages where the effect of the dissolution or termination of the contract is to render void the original obligation, or, finally, to the obligation to pay 'fair compensation' or even 'additional compensation' within the meaning of the Belgian Law of 27 July 1961.

11 On the contrary, the word 'obligation' in the article refers to the contractual obligation forming the basis of the legal proceedings.

12 This interpretation is, moreover, clearly confirmed by the Italian and German versions of the article.

13 It follows that for the purposes of determining the place of performance within the meaning of Article 5, quoted above, the obligation to be taken into account is that which corresponds to the contractual right on which the plaintiff's action is based.

14 In a case where the plaintiff asserts the right to be paid damages or seeks a dissolution of the contract on the ground of the wrongful conduct of the other party, the obligation referred to in Article 5 (1) is still that which arises under the contract and the non-performance of which is relied upon to support such claims.

DE BLOOS v BOUYER

15 For these reasons, the answer to the first question must be that, in disputes in which the grantee of an exclusive sales concession charges the grantor with having infringed the exclusive concession, the word 'obligation' contained in Article 5 (1) of the Convention of 27 September 1968 on jurisdiction and the enforcement of Judgments in Civil and Commercial Matters refers to the obligation forming the basis of the legal proceedings, namely the contractual obligation of the grantor which corresponds to the contractual right relied upon by the grantee in support of the application.

JUDGMENT OF 6. 10. 1976 — CASE 14/76

20 One of the essential characteristics of the concepts of branch or agency is the fact of being subject to the direction and control of the parent body.

21 It is clear from both the object and the wording of this provision that the spirit of the Convention requires that the concept of 'establishment' appearing in the said article shall be based on the same essential characteristics as a branch or agency.

22 It is, in consequence, impossible to extend the concepts of branch, agency or other establishment to the grantee of an exclusive concession whose operations are of the kind indicated by the national court.

23 For the foregoing reasons, the answer to the second question must be that, when the grantee of an exclusive sales concession is subject neither to the control nor to the direction of the grantor, he cannot be regarded as being at the head of a branch, agency or other establishment of the grantor within the meaning of Article 5 (5) of the Convention of 27 September 1968.

Costs

DE BLOOS v BOUYER

exclusive concession, the word 'obligation' contained in Article 5 (1) of the Convention of 27 September 1968 on jurisdiction and the enforcement of Judgments in Civil and Commercial Matters refers to the contractual obligation forming the basis of the legal proceedings namely the obligation of the grantor which corresponds to the contractual right relied upon by the grantee in support of the application.

In disputes concerning the consequences of the infringement by the grantor of a contract conferring an exclusive concession, such as the payment of damages or the dissolution of the contract, the obligation to which reference must be made for the purposes of applying Article 5 (1) of the Convention is that which the contract imposes on the grantor and the non-performance of which is relied upon by the grantee in support of the application for damages or for the dissolution of the contract.

In the case of actions for payment of compensation by way of damages, it is for the national court to ascertain whether, under the law applicable to the contract, an independent contractual obligation or an obligation replacing the unperformed contractual obligation is involved.

2. When the grantee of an exclusive sales concession is not subject either to the control or to the direction of the grantor, he cannot be regarded as being at the head of a branch, agency or other establishment of the grantor within the meaning of Article 5 (5) of the Convention of 27 September 1968.

Lecourt Kutscher O'Keeffe Donner Mertens de Wilmars