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O P I N I O N O F ADVOCATE GENERAL GEELHOED delivered on 31 January 2002 1

I — Introduction may be sued in a court of another Con- tracting State. Article 5(1) states that the courts for the place of performance of the obligation in question have jurisdiction in matters relating to a contract. The parties 1. In this case the Corte Suprema di to the contract may themselves agree that a Cassazione (Supreme Court of Cassation) particular court is to have jurisdiction to (Italy) has referred a question concerning settle a dispute. Under Article 5(3), in the interpretation of Article 2, the first matters relating to tort, delict or quasi- subparagraph of Article 5(1), and delict, the courts for the place where the Article 5(3) of the Convention of 27 Sep- harmful event occurred have jurisdiction to tember 1968 on jurisdiction and the hear and determine the dispute. enforcement of judgments in civil and commercial matters 2 (hereinafter: 'the Convention'). In order to be able to deter- mine which court has jurisdiction to settle a dispute, the national court seeks to ascer- tain how an action for pre-contractual liability must be classified. Does such an action fall within the scope of matters relating to delict or quasi-delict under 3. The Court has already, on several occa- Article 5(3) of the Convention or must sions, dealt with the interpretation of the such an action be regarded as falling with Convention, and Article 5 thereof in par- the scope of matters relating to a contract ticular. However, this is the first time that it under Article 5(1) thereof? That national has been requested, in relation to this court also considers the possibility that Convention, to answer a question concern- Article 5 of the Convention is not appli- ing the liability which can arise in con- cable in its entirety. nection with the conduct of the parties in negotiations over a contract.

3. in matters relating to tort, delict or quasi-delict, in the courts for the place where the harmful event occurred;

5. Under Article 1 thereof, the Convention ...'. is to apply in civil and commercial matters whatever the nature of the court or tribu- nal. As regards legal jurisdiction, the gen- eral principle contained in Article 2 applies, that is to say that persons domiciled in a Contracting State must, whatever their 7. Article 17 of the Convention provides nationality, be sued in the courts of that inter alia: State. Under Article 3, persons domiciled in a Contracting State may be sued in the courts of another Contracting State only by virtue of the rules set out in Sections 2 to 6 of this title concerning 'jurisdiction'. Of these provisions, Articles 5 and 17 are of 'If the parties, one or more of whom is relevance to this case. domiciled in a Contracting State, have

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agreed that a court or the courts of a 8. As of 1 March 2002 the Convention was Contracting State are to have jurisdiction to superseded by Council Regulation (EC) settle any disputes which have arisen or No 44/2001 of 22 December 2000 on which may arise in connection with a jurisdiction and the recognition and particular legal relationship, that court or enforcement of judgments in civil and those courts shall have exclusive jurisdic- commercial matters. 3The 11th and 12th tion. Such an agreement conferring juris- recitals in the preamble to this regulation diction shall be either: state as follows:

(a) in writing or evidenced in writing; '(11) The rules of jurisdiction must be highly predictable and founded on the principle that jurisdiction is gen- erally based on the defendant's domi- cile and jurisdiction must always be available on this ground save in a few or well-defined situations in which the subject-matter of the litigation or the autonomy of the parties warrants a different linking factor. The domicile of a legal person must be defined autonomously so as to make the (b) in a form which accords with practices common rules more transparent and which the parties have established avoid conflicts of jurisdiction. between themselves;

12. The parties disagree as to whether or 9. Article 1337 of the Codice Civile pro- not a contract was entered into between vides that parties must act in good faith BN and HWS. Tacconi takes the view that during negotiations over entering into a it was not because HWS refused to sell the contract. moulding plant to BN. Tacconi also claims that during the negotiations HWS rejected each of the offers made. Then, following protracted negotiations, it had suddenly broken off negotiations. HWS, on the other hand, takes the view that a contract was indeed entered into. I I I— Factual and procedural background

The factual background Proceedings

10. The facts in the main proceedings are as follows. 13. On 23 January 1996 Tacconi sum- moned HWS, which is established in Ger- many, to appear before the Tribunale di Perugia in Italy. Tacconi asked the court to 11. Fonderie Officine Meccaniche Tacconi declare that the contract between BN and (hereinafter: 'Tacconi') and HWS Heinrich HWS for the purchase of the plant had not Wagner Sinto Maschinenfabrik GmbH been concluded. It based its claim on what (hereinafter: 'HWS') negotiated a contract it considered to be HWS's unjustified for the sale to Tacconi of an automatic refusal to sell the plant to BN. Tacconi moulding plant. HWS is the manufacturer submitted that during the negotiations of the moulding plant. The contract was to HWS had failed to fulfil its obligations be concluded by B.N. Commercio e and act in good faith by rejecting each of

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15. It should be noted that HWS does not The question referred for a preliminary dispute Tacconi's claim that it broke off ruling negotiations suddenly. Nor does it do so in the proceedings before this Court.

4 — In this connection Tacconi claims that there is culpa in 18. By order of 9 June 2000, lodged at the contrahendo on the part of HWS. Court Registry on 11 September 2000, the

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Corte Suprema di Cassazione (Italy) Proceedings before the Court referred the following question for a pre- liminary ruling:

20. The parties to the main proceedings and the Commission have submitted written observations to the Court. No hearing has been held.

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well-defined cases, which must be regarded These conditions are governed by the sub- as derogations from the principal rule, a stantive law determined by the national claimant may also bring an action before conflict of law rules of the court seised, another court. Article 5(1) and Article 5(3) provided that the effectiveness of the Con- constitute such derogations. vention is not thereby impaired. 7

23. According to the preamble, the Con- vention seeks to strengthen the legal pro- 25. The Court takes the view that in tection of persons established in the Euro- general the concepts used in the Conven- pean Union. 5To that end, the Convention tion are to be interpreted independently. specifies which court has jurisdiction to Regard must be had, in interpreting these hear and determine a particular civil case. concepts, primarily to the objectives and According to the Court, the legal protection general scheme of this Convention, in order is reinforced by allowing the claimant to ensure that it functions properly. These easily to identify the court before which concepts cannot therefore be taken to refer he may bring an action and the defendant to how the legal relationship in question reasonably to foresee the court before before the national court is classified by the which he may be sued. 6 The rules of relevant national law. 8 jurisdiction must be highly predictable, as the 11th recital in the preamble to Regu- lation No 44/2001 makes clear. This also reinforces legal certainty, which is also an objective of the Convention.

27. Furthermore, the Convention seeks to avoid, so far as possible, creating a situ- ation in which a number of courts have jurisdiction in respect of one and the same legal relationship. The simultaneous juris- 29. However, this power to bring an action diction of several courts would heighten the in its entirely before the same court is not risk of irreconcilable decisions. This unlimited. A court which has jurisdiction requirement, which the Court laid down under Article 5(3) over an action in so far in De Bloos, 1 2serves to protect legal as it is based on tort or delict does not have certainty. jurisdiction over that action in so far as it is not so based. 15

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duct of proceedings. 17 The proximity of Article 26 of the Convention which pro­ the court with jurisdiction is also referred vides that a judgment given in a Contract­ to in connection with Article 5 of the ing State is to be recognised in the other Convention. 18 The proximity of the Court Contracting States without any special to the place of execution of the obligation is procedure being required. intended to simplify the taking of evidence. In brief, there must be — as the 12th recital in the preamble to Regulation No 44/2001 makes clear — a close link between the court with jurisdiction and the action concerned.

Article 5 of the Convention and restrictive interpretation

Article 2

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for a person domiciled in a Contracting 35. On the other hand, the restrictive State to be sued in the courts of another nature of the interpretation cannot go so Contracting State. The requirement relating far as to deprive Article 5 of its practical to a restrictive interpretation means that effect. 25I interpret the case-law as meaning the jurisdictional rule in Article 5 cannot be that the requirement relating to restrictive applied by analogy so that it goes beyond interpretation has the effect of excluding the cases envisaged by the Convention. 22 In application by analogy in this case but that Dumez France and Tracoba the Court the wording of the derogating provision is points out that this applies in particular in otherwise decisive. so far as the Convention allows the defend- ant to be sued in the courts of the Contracting State in whose territory the claimant is domiciled. The court considers that, save for the cases expressly provided for, the Convention displays an obvious hostility towards the attribution of juris- diction to the courts of the claimant's domicile. 23 Article 5(1): matters relating to a contract

22 — See, for example, Case C-89/91 Shearson Lehman Hutton 37. The Court places stringent require- v TVB Treuhandgesellschaft für Vermögensverwaltung ments on the applicability of Article 5(1). und Beteiligungen [1993] ECR I-139, paragraph 16, and Handte, cited in footnote 10, paragraph 14. 23 — Cited in footnote 17, paragraphs 16 and 19. That judg- ment was concerned with the provisions regarding agree- ments concluded by consumers. See, to the same effect, 25 — See Case 38/81 Effer v Hans-Joachim Kantner [1982] ECR Case C-412/98 Group Josi Reinsurance Company v 825, paragraph 7, and the Opinion of Advocate General Universal General Insurance Company [2000) ECR Reisen] in that case. I-5925, paragraph 50. 26 — De Bloos, cited in footnote 12, paragraph 11, and 24 — Opinion in Case C-96/00 Gabriel v Schlank & Schick confirmed in Shenavai, cited in footnote 13, paragraph 20. [2002] ECR I-6367. 27 — Case 133/81 Ivenel v Schwab [1982] ECR 1891.

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38. The limited applicability of Article 5(1) also follows from De Bloos. 29 Not every obligation arising out of a contract falls within the scope of Article 5(1). It must be a contractual obligation which forms the actual basis of legal proceedings. The Court 40. Earlier, in Tessili, the Court held that in emphasises the reciprocity of the obli- accordance with Article 5(1) it is for the gation: the proceedings relate to the obli- court before which the matter is brought to gation which corresponds to the contrac- establish under the Convention whether the tual right on which the claimant's action is place of performance is situated within its based. territorial jurisdiction. For this purpose it must determine in accordance with its own rules of conflict of laws what is the law applicable to the legal relationship in ques- tion and define in accordance with that law the place of performance of the contractual obligation in question. 33 This rule, which refers to the applicable national law, con- 39. Under Article 5(1), the defendant can be summoned to appear before the court 30 — Advocate General Lenz shares this view. See Opinion in for the place of performance of the Case C-288/92 Custom Made Commercial v Stawa Metallbau [1994] ECR I-2913. 31 — Peters, cited in footnote 9. 32 — See Custom Made Commercial, cited in footnote 30, 28 — See Effer, cited in footnote 25, paragraph 7. paragraph 15. 29 — Cited in footnote 12. See paragraphs 10 and 11 of the 33 — See Case 12/76 Industrie Tessili Italiana Como v Dunlop judgment. [1976] ECR 1473, paragraph 13.

44. It is possible that the place where the 42. The material scope of Article 5(3) of damage occurred as a consequence of a the Convention is defined by the concepts tort, delict or quasi-delict is not the same as 'matters relating to tort, delict or quasi- the place of the event giving rise to the delict' and 'place where the harmful event damage. In Bier the Court ruled that both occurred'. These concepts are also inter- places can constitute an obvious connecting preted independently by the Court. In factor from the point of view of jurisdic- Marinari it points out that the Convention tion. Each of these connecting factors can, does not intend to link the rules on terri- depending on the circumstances, be helpful torial jurisdiction laid down in Article 5(3) from the point of view of the taking of with national provisions concerning the evidence and of the conduct of the proceed- conditions under which non-contractual ings. The Court added that to decide in civil liability is incurred. That is because favour only of the place of the event giving an interpretation whereby account had to 35 — Case C-364/93 Marinari v Lloyds Bank and Zubaidi Trading Company [1995] ECR I-2719, paragraph 18. 34 — See Kalfelis, cited in footnote 11, paragraph 18. 36 — See Bier, cited in footnote 17, paragraph 11.

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37 — Cited in footnote 17, paragraph 20. 38 — See Bier, cited in footnote 17, paragraph 15 et seq. 40 — It refers to Handte, cited in footnote 10, paragraph 15. 39 — Cited in footnote 35, paragraph 21. 41 — Cited in footnote 11, paragraph 17.

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of a contract and the action brought by Court. It points to the restrictive interpre- Tacconi relates precisely to the fact that no tation of Article 5 of the Convention, the contract was entered into. independent meaning of the concepts of 'matters relating to a contract' and 'matters relating to tort, delict or quasi-delict' and the requirement that a normally well- informed defendant be able reasonably to predict before which courts, other than 49. Furthermore, HWS contends that the those of the State in which he is domiciled, difference between pre-contractual liability he may be sued. In the view of the and liability arising from a delict and Commission, it is also evident from Handte quasi-delict within the meaning of that the concept 'matters relating to a Article 5(3) is that the latter applies to contract' does not cover a situation in any person who infringes the general rule which there is no obligation freely assumed of neminem laedere (inflict no damage on by one party towards another. 43 If this another), and thus any person who com- concept did cover such a situation, it would mits an offence or infringes an absolute be contrary to the principle of legal cer- right. Pre-contractual liability, on the other tainty. In the view of the Commission, the hand, can only be invoked against a person Court considers that therefore the element who has a particular relationship with the of freedom forms the basic condition injured party, that is to say a person governing entering into a contract. involved in negotiations over a contract. HWS considers that a person entering into negotiations with another accepts the risk that the other party might infringe the rules relating to good faith and thereby cause it damage.

53. The Commission considers that it is principles provide that 'a party who... advisable to draw a distinction between breaks off negotiations in bad faith is liable actions aimed at enforcing contractual for losses caused to the other party'. obligations and actions aimed at establish- According to the explanatory note to this ing the liability of the defendant. With article, negotiations can reach a point after regard to the first category of actions, the which they may no longer be broken off particular nature of the contractual obli- abruptly and without justification. When gation justifies the choice of bringing pro- such a point is reached depends firstly on ceedings before the courts for the place of the extent to which the other party, as a performance of the obligation in question. result of the conduct of the first party, had As regards the second category of actions, reason to rely on the positive outcome. the courts for the place where the harmful Secondly, it depends on the number of event occurred are, in general, best placed issues on which the parties had already to entertain such proceedings. reached agreement. However, where a party breaks off negotiations abruptly and without justification, it must compensate for the loss incurred by the other party.

54. In the light of the foregoing, the Com- mission concludes that an action for pre- contractual liability falls within the scope of matters relating to delict or quasi-delict within the meaning of Article 5(3).

56. Thus, pre-contractual liability arises where negotiations on a contract are broken off without justification.

59. In Italian law Article 1337 of the Codice Civile contains a specific provision governing pre-contractual liability. Parties must act in good faith during negotiations over and the formation of a contract. A party who breaks off negotiations without just cause, having created an expectation that a contract will be entered into, is liable for the negative contractual interest. Such negative interest specifically includes lost opportunities in addition to expenses. 4 5 The positive interest is not compensated for, that is to say the other party need not be placed in the situation in which it would have been had the contract actually been concluded. The legal requirement which is not observed when negotiations are broken off abruptly is intended to prevent the other 58. In most legal systems a party which party suffering harm as a result of the fact breaks off negotiations without just cause, that it is involved in negotiations and not having created an expectation on the part because the negotiations did not ultimately of the other party that a contract will be result in a contract. Fault is not required. entered into, is liable for the negative contractual interest. In general, such inter- est includes not only the expenses but also the lost opportunities to conclude another contract with a third party. Negotiations which are broken off dash an expectation that they will lead to a result. In this respect I will briefly examine some of these legal systems below. This brief account of the 60. In German law a party who culpably law relating to pre-contractual liability is breaks off negotiations without just cause certainly not intended to provide an exhaustive picture of the law in the 45 — According to the UNIDROIT Principles, losses are to be understood as meaning expenses incurred by the other party and the lost opportunity to conclude another 44 — The Evrigenis Report, OJ 1986 C 298, paragraph 49. contract with a third person.

62. Netherlands law is different. Liability is possible before the other party can legit- imately expect that the contract will be entered into. Under Netherlands law, a 61. French law does not lay down provi- stage can be reached in negotiations at sions on pre-contractual negotiations and which they may no longer be broken off. entering into contracts. Pre-contractual However, where this occurs, liability for liability is based on the doctrine of abuse positive contractual interest is possible. 4 7 of rights in conjunction with reasonable- Three stages in the negotiations are ident- ness and equity. It arises wherever a party ified. In the first stage negotiations may be suddenly breaks off negotiations without broken off without liability being incurred. just cause at a time when the other party This is followed by a stage during which could legitimately expect that a contract negotiations may be broken off, but the would be entered into. As long as no costs incurred by the other party must be contract has been entered into, the harm compensated for. Finally, there is the con- which results from the pre-contractual cluding stage at which negotiations may no stage is regarded as covered by the law longer be broken off. This is reached when governing tort, delict or quasi-delict. The the other party can legitimately expect that loss suffered by the other party must be a contract will be entered into or there are compensated for. It is uncertain whether no other circumstances which justify the this also covers lost opportunities ('perte negotiations being broken off. If a party d'une chance') because it is not established breaks off negotiations at this stage, it can

63. Liability arising from negotiations which have been broken off has not been recognised in United Kingdom law since 64. I now turn to the relevance of the time immemorial. The risk that a party will abovementioned legal principles to the break off negotiations before a contract has answer to the question which has been been entered into is regarded as a 'business referred in the light of the Convention. loss'. The continental notion of pre-con- tractual good faith per se is unknown in the United Kingdom. There is no obligation to negotiate in conformity with the require- ments of reasonableness and equity. How- ever, neither of these facts mean that there are no rules governing conduct during the pre-contractual stage. For example, liabil- 65. To that end, I will divide the negoti- ity can be based of the doctrine of 'mis- ation process into two stages. During the representation'. 4 9 However, I consider that first stage freedom of contract is para- the legal concept of 'estoppel by represen- mount. The parties may break off negoti- tation' 50 is more important. In accordance ations. However, during the second stage with this legal concept, a party may not the parties may no longer break off negoti- withdraw a previous statement if the other ations. The expectation which been created party has suffered harm as a result of that on the part of the other party and the harm statement. Thus, this legal concept is — which it suffers because negotiations are albeit not identical — comparable with broken off can give rise to liability. In any notions in continental law such as the event, that liability includes the negative protection of good faith and legitimate contractual interest, that is to say the expenses incurred and the opportunities lost. In general this liability does not go so 48 — See the note by Schultz on the Peters judgment (cited in footnote 9), Nederlandse Jurisprudentie 1983, p. 644, and far as to enable the other party to demand J.E.J.Th. Deelen, IPR en de afgebroken onderhandelingen, that the contract nevertheless be con- Studiekring 'Prof. Mr. J. Offerhaus', Reeks Handelsrecht No 18, 1984, p. 126. cluded. 51 49 — Compare this with the continental doctrine of error. 50 — In addition, United Kingdom law also provides for 'promissory estoppel'. In accordance with this legal con- cept, a party can be held to a promise which it made to 51 — This also applies — and to an even greater extent — to another party. 'Promissory estoppel' is usually invoked in the system in the United Kingdom which applies different existing contractual relations. Normally it cannot be used legal principles from the continental legal systems in respect of pre-contractual liability. described above.

— In general the concepts in the Con- — Jurisdiction referred to in Article 5 vention are to be interpreted indepen- must be based on the existence of a dently; their relevance is not subject to particularly close connecting factor the interpretation which is placed between the dispute and courts other thereon in the national law of the than those of the State of the defen- Member States. dant's domicile.

— In interpreting the concepts, regard is to be had to the Convention's objective — Article 5 itself forms a closed scheme. of strengthening legal protection. The In disputes concerning liability under

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civil law either Article 5(1) or must not be required to bring proceedings Article 5(3) applies. in a court of the place of the defendant's domicile in all cases. Although the Con- vention does not go so far as to enable the claimant to choose the court of his own place of domicile, 52 it does provide him with alternatives which are intended to bring out a procedural balance between the — The decisive factor as regards the parties. applicability of Article 5(1) is whether or not obligations have been freely assumed.

68. These factors form the background The relationship between Article 5(1) and against which the question must be Article 5(3) answered. I would also single out two further points in addition to the above.

73. In brief, according to the case-law of the Court, the scope of Article 5(1) is precisely defined. Where a matter does not fall within the scope of Article 5(1), Article 5(3) applies. In this sense Article 5(3) is a residual category. Thus, it The importance of pre-contractual is necessary to establish in which cases a relations matter falls within the scope of Article 5(1). In that respect the aspect of freedom is central. According to Handte, 53 the phrase 'matters relating to a contract' is not 'to be understood as covering a situation in which 75. As the national court emphasises, the there is no obligation freely assumed by one pre-contractual liability derives from the party towards another'. Whether an obli- failure to observe a legal requirement and gation is freely assumed is determined not from the failure to fulfil a contractual primarily by the principle of legal certainty obligation. That is because there. is no as applied inter alia in Handte. Must a contract. In the present case the · legal normally well-informed individual foresee requirement derives from Article 1337 of that he has assumed an obligation? the Italian Codice Civile under· Which parties must act in good faith during negotiations over a contract.

76. I consider that this requirement is a generally applicable rule of conduct 74. The precise definition of the scope of enshrined in law which does not differ Article 5(1) is important for another rea- from other rules of conduct derived from son. Article 5(1) includes the possibility of law. Under certain circumstances failure to choice of forum. Under Article 17 of the comply with such rules of conduct can constitute a delict or quasi-delict. Con- sequently, Article 5(3) of the Convention 53 — Cited in footnote 10, paragraph 15. should apply.

— the practices which the parties have established between themselves, or,

78. The obligation referred to in the above paragraph need not relate to the actual contract on which negotiations are being held. It can also relate to a preformation — in international trade or commerce, the contract under which one of the parties usage of which the parties are or ought makes a start on performance. By way of to have been aware and which in such illustration, I refer to the case in the main trade or commerce is widely known to, proceedings. Even before there is a com- and regularly observed by, parties to plete contract for delivery of the moulding contracts of the type involved in the plant by HWS, which also lays down all the particular trade or commerce con- financing terms and conditions, for cerned. I - 7380

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80. I will clarify my view by reference to Article 5(1) of the Convention can apply. the various stages in the negotiating process Such circumstances might lie in the fact which I identified in Section VI of this that agreement has been reached on the Opinion. 54 main aspects of a contract — the draft of the contract and the price — but negoti- ations are still under way on the other terms and conditions. It is also possible that one of the party has already made a start on performing the contract since it was able to deduce from the conduct of the other party that it intended to conclude a contract. 81. During the first stage of the negotiating Finally, I refer to the circumstances set out process the parties may break off negoti- in Article 17 of the Convention. ations without incurring liability. At this stage Article 5 of the Convention is irrel- evant. There is no delict or quasi-delict, or an agreement.

An action for pre-contractual liability can be regarded as falling within the scope of matters relating to delict or quasi-delict within the meaning of Article 5(3) of the Convention of 27 September 1968 on jurisdiction and the enforcement of judgments in civil and commercial matters. Where such action relates to an obligation which the other party has assumed towards the claimant, it must also be regarded as falling within the scope of matters relating to a contract within the meaning of Article 5(1) of that Convention.

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