Silvia Bortolotti
Buffa, Bortolotti & Mathis, Italy; Newsletter Editor, IBA International Franchising Committee
s.bortolotti@bbmpartners.com

Facts

On 28 June 2018, EXTÉRIA sro, a company established in Ostrava (Czech Republic), which provides consultancy services in the field of occupational safety and health concluded with Spravime sro, a company established in Slovakia, a contract to enter into a future contract relating to the future conclusion of a franchise agreement (‘the contract to enter into a future contract’) which would enable Spravime to operate and manage franchised branches of EXTÉRIA in Slovakia.

That contract to enter into a future contract contained, in addition to the obligation to conclude that contract in the future, certain contractual terms and conditions and an undertaking on the part of Spravime to pay an advance of €20.400,00 exclusive of value added tax and, in the event of failure to comply with that obligation, a contractual penalty equal to the amount of that advance (‘the contractual penalty’). That advance, the purpose of which was not only to guarantee that obligation but also to preserve the confidentiality of all the information contained in that contract to enter into a future contract relating to the franchise concept of EXTÉRIA, had to be paid within ten days of the signing of that contract to enter into a future contract. In addition, the contract provided for EXTÉRIA’s right to withdraw if Spravime did not pay it the agreed fee within the prescribed period.

The contract to enter into a future contract provided for the application of Czech law, without any agreement on jurisdiction having been concluded.

Alleging that Spravime had failed to fulfil its obligation to pay the advance in question, EXTÉRIA withdrew from the contract to enter into a future contract and claimed payment of the contractual penalty, before the competent court of its jurisdiction (District Court, Ostrava, Czech Republic).

In this framework, a dispute arose between the parties, concerning the competent jurisdiction and the application of Article 7(1) of Regulation Brussels I bis to the contract at issue.

The question referred to the European Court of Justice

The question brought before the European Court of Justice (ECJ) is the following:

‘Must Article 7(1)(b) of [the Brussels I bis] Regulation be interpreted as meaning that the concept “contract for the provision of services” also includes a contract to enter into a future contract (pactum de contrahendo), in which the parties undertook to enter into a future contract that would be a contract for the provision of services, within the meaning of that provision?’

The answer of the ECJ

First, the ECJ noted that the Regulation Brussels I bis is based on the general rule, set out in Article 4(1) thereof, that persons domiciled in a Member State are to be sued in the courts of that Member State, irrespective of the nationality of the parties. Therefore, the special rules of jurisdiction laid down by the Regulation Brussels I bis are to be interpreted strictly.

The ECJ then confirmed that the obligations binding the parties and arising from the terms of a contract to enter into a future contract, such as that at issue in the main proceedings, fall within the concept of ‘matters relating to a contract’ within the meaning of Article 7(1)(a) of Regulation Brussels I bis.

With respect to the classification of a contract for the ‘provision of services’, the ECJ pointed out that it is clear from the case law that the concept of ‘services’, within the meaning of the second indent of Article 7(1)(b), implies, at the very least, that the party providing them carries out a specific activity in return for remuneration.

Then, referring to the case at issue, the ECJ stated that – while the subject matter of the franchise agreement which should have been concluded following the contract to enter into a future contract perfectly satisfies the two criteria mentioned above (ie, performance of an activity in return for remuneration) – that is not the case with that contract to enter into a future contract, the objective of which was to conclude a future franchise agreement and preserve the confidentiality of the information contained in that contract to enter into a future contract. Moreover, in the absence of any actual activity carried out by the co-contractor, the payment of the contractual penalty cannot be characterised as remuneration.

Pursuant to the ECJ, in so far as the contract to enter into a future contract does not require the performance of any positive act or the payment of any remuneration, the obligations arising from that contract to enter into a future contract – in particular the obligation to pay the contractual penalty – cannot fall within the concept of ‘provision of services’ within the meaning of the second indent of Article 7(1)(b) of Regulation Brussels I bis.

The ECJ then noted that Article 7(1)(c) of Regulation Brussels I bis provides that ‘point (a) applies if point (b) does not apply’.

The ECJ concluded by answering as follows:

‘In the light of the foregoing considerations, the answer to the question referred is that Article 7(1)(b) of the Brussels I bis Regulation must be interpreted as meaning that a contract to enter into a future contract relating to the future conclusion of a franchise agreement which provides for an obligation to pay a contractual penalty based on non-performance of that contract to enter into a future contract, the breach of which serves as a basis for a claim, does not fall within the concept of a contract for the ‘provision of services’ within the meaning of that provision. In such a case, jurisdiction over a claim on which that obligation serves as a basis is determined, in accordance with Article 7(1)(a) of that regulation, by reference to the place of performance of that obligation.’