In January of this year, the Court of Appeal of Arnhem-Leeuwarden rendered an interesting judgment regarding the interpretation to be given to article 5(1)(a) and second indent of Article 5(1)(b) of Regulation (EC) No 44/2001 and the definition of a distribution agreement.
Article 5(1)(a) stipulates that a person domiciled in a Member State may, in another Member State, be sued in matters relating to a contract, in the courts for the place of performance of the obligation in question. In the second indent of Article 5(1)(b) it is laid down that the place for the performance of the obligation in question shall be:
– in the case of the sale of goods, the place in a Member State where, under the contract,
the goods were delivered or should have been delivered,
– in the case of the provision of services, the place in a Member State where, under the
contract, the services were provided or should have been provided.
The judgement was in relation to a question of jurisdiction in a dispute concerning the termination of a long standing business relationship of supply and purchase of ceramic products between a Dutch company (“ICA”) and a Spanish supplier of ceramic products (“Duna Ceramica”). The business relationship had never been formalized in a written contract nor had parties otherwise agreed on a choice of forum. After termination of the business relationship by Duna Ceramica, ICA had brought proceedings before the Dutch Courts claiming damages on account of the fact that the distribution agreement had not been terminated with a reasonable period of notice. ICA stated that the Dutch Courts had jurisdiction on the basis of article 5(1)(a) and second indent of Article 5(1)(b) of Regulation (EC) No 44/2001. With regard thereto ICA argued that the business relationship between parties qualified as an exclusive distribution agreement under which ICA had provided services for Dune Ceramica in The Netherlands. Duna Ceramica challenged the jurisdiction of the Dutch Courts stating that the business relationship had merely been a simple supply-purchase relationship and therefore that only the Spanish Courts had jurisdiction on the basis of article 5(1)(a) and first indent of article 5(1)(b).
Both the District Court in the proceedings in the first instance as well as the Court of Appeal in the second instance declared that the Dutch Courts lacked jurisdiction stating that the relation between parties did not qualify as a distribution agreement and that the business relationship had (solely) consisted of successive agreements for the sale of goods. Since the ceramic products were delivered in Spain according to the applicable general Conditions of Duna Ceramica, the Spanish Courts were considered to have jurisdiction rather than the Dutch Courts.
In the judgement of the Court of Appeal , reference was made to the relevant case law of the European Court of Justice (ECJ) (Case C-533/07 Falco Privatstiftung Rabitsch v Weller-Lindhorst ; Case 9/12 Corman-Collins v La Maison du Whisky ).
In Falco Privatstiftung and Rabitsch the ECJ ruled that the concept of ‘services’ within the meaning of article 5(1)(b) of Regulation (EC) No 44/2001 requires at least that the party who provides the service carries out a particular activity in return for remuneration. In Corman-Collins the ECJ ruled that the criterion of the performance of a particular activity, in the case of an exclusive distribution agreement, corresponds to the characteristic service provided by the distributor which, by distributing the suppliers’ products, is involved in increasing their distribution. As to the criterion of a remuneration paid as consideration for such activity, the ECJ ruled that this is not to be understood strictly as the payment of a sum of money. All sorts of advantages connected to being selected as a distributor may be regarded as constituting remuneration (e.g. having the sole right to distribute the suppliers’ products in a particular territory, or at the very least that a limited number of distributors enjoy that right; provision of assistance to the distributor regarding access to advertising, communicating know-how by means of training and yet even payment facilities).
Taking the above into consideration, the ECJ held in Corman-Collins that distribution agreements are to be treated as agreements for the provision of services under the second indent of article 5(1)(b) of the Regulation. In Corman-Collins the ECJ furthermore confirmed its earlier decision (Case C-381/08 Car Trim), that the existence of a distribution agreement encompasses more than a contract which has as its characteristic obligation the supply of a good and that the latter type of business relation is to be classified as a ‘sale of goods’ within the meaning of the first indent of article 5(1)(b).
In the case between Dune Ceramica and ICA, the latter had not sufficiently stated (and substantiated) that the business relationhip between parties consisted of more than successive agreements for the sale of goods. The Court of Appeal therefore ruled that the business relationship could not be considered an agreement for the provision of services under the second indent of article 5(1)(b) of the Regulation. As a result the Court of Appeal confirmed the earlier decision in the first instance that the Dutch Courts did not have jurisdiction in this matter.
Jaap van Till, IDI agency & distribution country expert for Netherlands