C-73/77

The assignment, in the interests of the concept of 'matters relating to ... proper administration of justice, of tenancies of immovable property' within exclusive jurisdiction to the courts of one the context of Article 16 of the Contracting State in accordance with Convention must not be interpreted as Article 16 of the Convention results in including an agreement to rent under a depriving the parties of the choice of the usufructuary lease a retail business forum which would otherwise be theirs (verpachting van een winkelbedrijf) and, in certain cases, results in their carried on in immovable property rented being brought before a court which is from a third person by the lessor. The not that of the domicile of any of them. fact that there is a dispute as to the Having regard to that consideration the existence of such an agreement does not provisions of Article 16 must not be affect the reply given as regards the given a wider interpretation than is applicability of Article 16 of the required by their objective. Therefore, the Convention.

In Case 73/77

Reference to the Court under Articles 2 and 3 of the Protocol of 3 June 1971 (OJ L 204 of 2. 8. 1975, p. 28) 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 (JO L 299 of 31. 12. 1972, p. 32) by the Hoge Raad der Nederlanden (Supreme Court of the Netherlands) for a preliminary ruling in the action pending before that court between

1 — Language of the Case: Dutch.

JUDGMENT OF 14. 12. 1977 - CASE 73/77

Advocate-General: H. Mayras Registrar: A. Van Houtte

gives the following

JUDGMENT

Facts and issues

The facts of the action, the course of the parties in relation to the contract which procedure and the written observations they had concluded and even as to its submitted under Article 20 of the existence. Sanders, who finally refused to Protocol on the Statute of the Court of begin to run the business, was forced to Justice of the EEC may be summarized do so by judgment delivered in summary as follows: proceedings by the President of the Arrondissementsrechtbank (Regional Court), Arnhem (the Netherlands), on 14 I — Facts and written procedure April 1973 before consideration by the court of the substance of the action. Van der Putte and Sanders agreed in 1973 that the latter would take over the On appeal the Gerechtshof (Regional running of a florist's business in a shop Court of Appeal), Arnhem, found that an which the former had rented at agreement really existed between the Wuppertal-Elberfeld (Federal Republic of parties under which Sanders is, inter Germany). alia, bound to pay to Van der Putte, in respect of various periods, a sum Even before Sanders began to run the representing the rent due under the business a dispute arose between the head-lease of the shop and a further sum

SANDERS v VAN DER PUTTE

property are generally governed by The judgment referring the questions to special legal provisions which make it the Court was received at the Court on preferable that they be applied by the 15 June 1977. courts of the countries in which they are in force, does not apply (cf. Commentary Upon hearing the report of the on the Convention by P. Jenard and the Judge-Rapporteur and the views of the Report of the Committee of Experts who Advocate-General the Court decided to

carried out the preparatory work on the open the oral procedure without any Convention). preparatory inquiry.

Sanders appealed on a point of law from the judgment of the Gerechtshof, II — Summary of the written Arnhem, alleging, inter alia, that Article observations submitted to 16 of the said Convention had been the Court under Article 5 infringed and by judgment of 10 June (1) of the Protocol con­ 1977 the Hoge Raad decided, in cerning the interpretation implementation of Article 2 (3) and of by the Court of Justice of Article 3 (2) of the Protocol of 3 June the Convention and Article

1971 concerning the interpretation by 20 of the Protocol on the

the Court of Justice of the Convention of Statute of the Court of 27 September 1968, to stay the Justice of the EEC proceedings and to submit the following questions to the Court: Sanders observes that as the provisions of 1. Must 'tenancies of immovable Article 16 (1) of the Convention are property' within the meaning of drafted in general terms the authors of

JUDGMENT OF 14. 12. 1977 - CASE 73/77

Van der Putte maintains that the agreement to 'rent' under a usufructuary lease a retail business Convention in question represents a clear carried on in immovable property break with the past and, notwithstanding a well-established tradition, contractual rented from a third party by the lessor; relationships are now also subject to the 2. If the Court replies to the first jurisdiction of the court of the place question in the affirmative, the where the immovable property is exclusive jurisdiction of the courts of situated. Such a development in the the State where the immovable international rules governing jurisdiction must, however, lead to a restrictive property is situated does not apply also to a claim based on such an interpretation of the new provisions, agreement for which must result in application being (a) payment of the 'rent of the retail made to the court of the place where the premises under the usufructuary immovable property is situated only lease'; or where it is necessary as a result of the public policy nature of those provisions. (b) payment by the 'tenant under the That is in accordance with the usufructuary lease' of the head­ ent owed by the lessor to the aforementioned Commentary by P. owner of the immovable property; Jenard, according to which preference or must be given to the application by the (c) payment of consideration for the local court of 'specific legal provisions'. As regards an action for the payment of goodwill of the retail business; rents, the said Commentary states that 3. If the 'tenant under the usufructuary lease' contests the existence of the the rules in Article 16 do not apply since agreement, the court of the State in 'those actions are regarded as separate which the defendant is domiciled from the immovable property rented'. shall have jurisdiction. The provisions of the Convention The Government of the United Kingdom envisage disputes between a tenant and considers that the court of the situs must the lessor, who is the landlord. The main have exclusive jurisdiction if, in an action

agreements such as that at issue in the main action do not concern a tenancy in The consequences of having one legal the strict sense of the term but rather the relationship classified in different ways transfer of an undertaking as such. To are particularly serious in the present case for the reason that the rule in bring such agreements within the ambit of Article 16 (1) of the Convention would Article 16 concerns exclusive jurisdiction. The case-law of the national courts of amount to taking no account of the ratio legis of that provision. Furthermore, the which the Commission is aware appears to be somewhat divided. Committee of Experts who carried out the preparatory work on the Convention The Commission therefore proposes that intended to limit the scope of that article the following replies be given to the by excluding 'actions which may be questions raised: regarded as separate from the immovable 1. Actions arising out of the property rented'. implementation of a tenancy It is only in the case in which the agreement drawn up as an agreement implementation of an agreement gives under which one party allows another rise to specific problems concerning party to run a business for an agreed relationships between tenants and lessors period against payment of consideration, as well as actions for that such problems are covered by the exclusive jurisdiction rule in Article 16. the payment of such consideration, However, in the main action, no specific are not covered by the rule in Article relationship existed. 16 (1) of the Convention of 27 September 1968 on Jurisdiction and The opinion of the Committee of the Enforcement of Judgments in Experts is disputed by G. Droz (in Civil and Commercial Matters, unless Competence Judiciaire et Effets des the said actions concern specifically a Jugements dans le Marché Commun, relationship between the lessor and

3 A dispute having arisen between the parties to the main action as regards the agreement which they had concluded and even as regards its existence the 'subtenant', Sanders, who had refused to start running the business, was ordered to do so by judgment delivered in summary proceedings by the President of the Arrondissementsrechtbank, Arnhem.

4 On appeal, the Gerechtshof, Arnhem, found that the agreement in dispute did exist and that Sanders owed to his lessor, Van der Putte, a sum

SANDERS v VAN DER PUTTE

representing the rent due under the head-lease of the shop and a further sum representing the usufructuary lease as such of the business, and also the 'goodwill' (the intangible elements of the business).

5 Sanders pleaded that the Gerechtshof had no jurisdiction on the basis, in particular, of Article 16 of the Convention of 27 September 1968, the first paragraph of which provides that the following courts shall have exclusive jurisdiction, regardless of domicile:

'(1) in matters relating to rights in rem in, or tenancies of, immovable property, the courts of the Contracting State in which the property is situated;'

(b) payment by the tenant under the usufructuary lease of the head-rent owed by the lessor to the owner of the immovable property; or

(c) payment of consideration for the goodwill of the retail business?

3. Is the answer to the questions set out above affected by the fact that in the proceedings the defendant (the tenant under the usufructuary lease (pachter)) has contested the existence of the agreement?

The first two questions

8 Under the terms of Article 2 of the Convention and subject to any other provisions thereof, persons domiciled in a Contracting State shall, whatever their nationality, be sued in the courts of that State.

9 The Convention admits of exceptions to the general rule by allowing the plaintiff in certain cases to sue the defendant before the court of the State in which the latter is domiciled or before the court of another Contracting State, according to the special provisions in Articles 5, 6, 8, 9, 10, 13 and 14 of the Convention.

14 Tenancies of immovable property are generally governed by special rules and it is preferable, in the light of their complexity, that they be applied only by the courts of the States in which they are in force.

15 The foregoing considerations explain the assignment of exclusive jurisdiction to the courts of the State in which the immovable property is situated in the case of disputes relating to tenancies of immovable property properly so-called, that is to say, in particular, disputes between lessors and tenants as to the existence or interpretation of leases or to compensation for damage caused by the tenant and to giving up possession of the premises.

16 The same considerations do not apply where the principal aim of the agreement is of a different nature, in particular, where it concerns the operation of a business.

17 Furthermore, the assignment, in the interests of the proper administration of justice, of exclusive jurisdiction to the courts of one Contracting State in accordance with Article 16 of the Convention results in depriving the parties of the choice of the forum which would otherwise be theirs and, in certain cases, results in their being brought before a court which is not that of the domicile of any of them.

18 Having regard to that consideration the provisions of Article 16 must not be given a wider interpretation than is required by their objective.

19 Therefore, the concept of 'matters relating to ... tenancies of immovable property' within the context of Article 16 of the Convention must not be interpreted as including an agreement to rent under a usufructuary lease a retail business (verpachting van een winkelbedrijf) carried on in immovable property rented from a third person by the lessor.

23 The costs incurred by the Government of the United Kingdom and the Commission of the European Communities, which have submitted observations to the Court, are not recoverable and as these proceedings are, in so far as the parties to the main action are concerned, in the nature of a step in the action pending before the national court, the decision on costs is a matter for that court.

On those grounds,

THE COURT

in answer to the questions referred to it by the Hoge Raad der Nederlanden by order of 10 June 1977, hereby rules:

1. The concept of 'matters relating to tenancies of immovable property' within the context of Article 16 of the Convention must not be interpreted as including an agreement to rent under a usufructuary lease a retail business (verpachting van een winkelbedrijf) carried on in immovable property rented from a third person by the lessor;

SANDERS v VAN DER PUTTE

OPINION OF MR ADVOCATE-GENERAL MAYRAS DELIVERED ON 23 NOVEMBER 1977 1

Mr President, residing at that time in the Federal Members of the Court, Republic of Germany, took over from the said Van der Putte in February 1973 with I — The main action which has given effect from 5 March 1973 a florist's rise to the present reference for a business situated at Wuppertal-Elberfeld. preliminary ruling arises out of The sum due under the usufructuary settlement of accounts between lease in respect of the occupation of the Netherlands subjects who are florists in business premises was fixed at DM 750 the Ruhr. per week. For 'reasons of simplicity' Sanders paid the rent due under the It emerges from the file that the action headlease, amounting to DM 1 900 per arose in the following way: month, directly to the actual owner of the immovable property, a German According to the statement made by Mr insurance company. In addition, Sanders Van der Putte, a Netherlands national, was to pay DM or Hfl 25 000 (that point residing at that time at remains obscure) in respect of the Wuppertal-Barmen and already the goodwill or key money. That agreement apparent owner of two flower shops, one was, furthermore, to be governed by the of which was situated at Solingen and the provisions of an agreement concerning other at Wuppertal-Barmen, Mr Sanders, the taking over of another shop of the another Netherlands national also same type situated at Wuppertal-Barmen,

1 — Translated from the French.