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Court of Justice of the European Union holds resolution of divergence of wording in different-language versions of Article 22 (2)of EC Regulation 44/2001 requires strict interpretation to ensure scope of jurisdiction stays within resolution's main objectives.

On July 19, 2007, JP Morgan Chase Bank NA (JPM), an American investment bank with branches and subsidiaries in Germany and the United Kingdom, and Berliner Verkehrsbetriebe (BVG), a transportation provider headquartered in Berlin, Germany, concluded via a trade confirmation an "Independent Collateral Enhancement Transaction" involving a Swap Contract that contained a clause conferring jurisdiction on the English courts. Under the terms of the Swap Contract, BVG agreed to pay JPM up to $220 million in the event of default on payment by certain third-party companies.

After JPM brought an action before the English courts designed essentially to enforce the contract on the basis of a clause conferring jurisdiction, BVG brought a parallel action asking the German courts, inter alia, to declare the same contract void because its subject matter was ultra vires. Ultimately the Court of Appeal of England made a reference for a preliminary ruling by the Court of Justice of the European Union (Third Chamber).

The issue the Court of Justice addresses is whether the scope of Article 22(2) of EC Regulation 44/2001 extends to "proceedings in which a company or legal person objects, with regard to a claim made against it stemming from a legal transaction, that decisions of its organs which led to the conclusion of the legal transaction are ineffective as a result of infringement of its statutes." [613] The issue was complicated by a divergence in the wording of various language versions of Article 22(2). As the Court of Justice describes it,

"According to some of the language versions, the courts where a company or other legal person or an association of natural or legal persons has its seat have exclusive jurisdiction: 'in the matter of' the validity of its constitution, its nullity or its dissolution or of the validity of the decisions of its organs. By contrast, other language versions provide for such jurisdiction where proceedings have such a question as their 'object' or 'subject-matter'. The second of those forms of wording suggests, unlike the first, that only proceedings in which the validity of a company's constitution or of a decision of a company's organs is raised as the primary issue are covered by that provision of Regulation 44/2001." [614-615]

The Court notes that it had been well-established case law that the various-language versions of a text of EU law must be given a uniform interpretation, so that in the case of a divergence among language versions, the provision in question must be interpreted "by reference to the purpose and general scheme of the rules of which it forms a part." [615] In the case before it, the Court cautions,

"[I]t is to be recalled that the jurisdiction provided for in art.2 of Regulation 44/2001, namely that the courts of the Member State in which the defendant is domiciled are to have jurisdiction, constitutes the general rule. It is only by way of derogation from that general rule that the regulation provides for special rules of jurisdiction for cases ... in which the defendant may or must, depending on the case, be sued in the courts of another Member State." [615]

The Court holds that insofar as Article 22(2) constitutes an exception to the general rule, it must not be given an interpretation broader than is required by its objective, and that a strict interpretation of the article "is particularly necessary because the jurisdiction rule which it lays down is exclusive, so that its application would deny the parties to a contract all autonomy to choose another forum." [615] The Court continues:

"If all disputes relating to a decision by an organ of a company were to come within the scope of art. 22(2) ...that would in reality mean that legal actions brought against a company--whether in matters relating to a contract, or to tort or delict, or any other matter--could almost always come within the jurisdiction of the courts of the Member State in which the company has it seat. ... It would be sufficient for a company to plead as a preliminary issue that the decisions of its organs that led to the conclusion of a contract or to the performance of an allegedly harmful act are invalid in order for exclusive jurisdiction to be unilaterally conferred upon the courts where it has its seat." [616]

Further, because one of the aims of the regulation is to "seek to attain rules of jurisdiction that are highly predictable, and secondly, to the principle of legal certainty" [616], the application of a jurisdictional rule based on the nature of the dispute would shift depending on "whether a preliminary issue, capable of being raised at any time by one of the parties, exists, on the ground that this would alter the nature of the dispute." [616] Such a broad interpretation of Article 22(2), the Court reasons, "would extend the scope of that provision beyond what is required by the objectives pursued by it." [617]

The Court deems the divergent versions of Article 22(2) must be resolved by interpreting that provision as covering only proceedings whose principal subject matter comprises "the validity of the constitution, the nullity or the dissolution of the company, legal person or association or the validity of the decisions of its organs." [617] As such, Article 22(2) must be interpreted as not applying to the current proceedings.

CITATION: Berliner Verkehrsbetriebe (BVG) v JPMorgan Chase Bank NA, [2011] I.L.Pr. 29 (Court of Justice of the European Union [Third Chamber] 2011).
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Publication:International Law Update
Geographic Code:4E
Date:Apr 1, 2011
Words:921
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