Relevant rules
Art. 25 of Regulation (EU) No 1215/2012 (Brussels I bis) on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters governs agreements by which the parties to a dispute, present or future, confer jurisdiction upon the courts of a Member State to decide that dispute. Such an agreement, when it complies with the requirements provided for under Art. 25, has the effect of conferring jurisdiction upon the court designated therein (the so-called prorogation effect), and – unless the parties agree otherwise – the effect of depriving any other court of the jurisdiction which would otherwise be conferred on it (the so-called derogation effect). Indeed, if a dispute arises, which falls within the scope of the agreement, and one of the parties to the agreement aims to sue the other, its claim may, as a rule, be brought only before the designated court.
This rule, however, does not expressly state anything about the subjective limits of choice-of-court agreements, nor does it say under what law or under what material conditions a choice-of-court agreement concluded between two or more parties may bind persons who are not parties to the original agreement, in particular persons who become parties – by virtue of an assignment of the claim, or an assignment of the contract – to the substantive legal relationship to which the prorogation agreement relates to.
The above issues are not met by the other rules the effectiveness of a choice-of-court agreement relates to in Italy, including Art. 4 of Law No 218 of 31 May 1995 reforming the Italian system of private international law. Hence the issue whether, and if so under what conditions, an agreement concerning disputes that could arise in respect of a relationship based on obligations may also be relied upon by (and against) the person who – extraneous to the agreement, when it was concluded – became party to the relationship concerned before the litigation relating thereto arose.
The position of the Italian Court of Cassation
The Court of Cassation, Civil Joined Divisions, dealt with the above issue in judgment No 7736 of 7 April 2020, which has already been reported in the blog of this portal.
The Court of Cassation was seised to rule upon the enforceability against the assignee of the choice-of-court agreement contained in the contract from which the assigned claims arose, the non-performance of which was alleged before court.
The Court ruled in the affirmative, arguing that the principle of protection of the assigned debtor, whose position shall remain unchanged following the assignment of the claim, implies that the debtor shall be able to claim the same position vis-à-vis the assignee as it had vis-à-vis the assignor, and this also with reference to the prorogation of jurisdiction clause.
The Court also clarified that the enforceability of the agreement on prorogation of jurisdiction against the assignee does not in any way affect the continuation of the prorogation in the relationship between assignor and assignee even after the assignment of the claim. Indeed, for the purposes of the enforceability of the agreement on prorogation of jurisdiction it is irrelevant that there has been a change in the holder of the right to claim under the contract.
Briefly, according to this judgment, the assignment of the claim results in an extension of the subjective scope of the choice-of-court agreement clause contained in the contract from which the assigned claims arise. Instead of circulating with the assigned claim and being transferred from the assignor to the assignee, the choice-of-court agreement remains binding upon the assignor creditor and the assigned debtor and also becomes enforceable against the assignee creditor.
The Ryanair judgment by the Court of Justice of the European Union
On 18 November 2020, the Court of Justice of the European Union ruled on a similar issue in the Ryanair case.
The issue referred to before the Court was whether an extension clause included in a contract of carriage between a passenger and an airline could be relied upon by the latter against a debt collection company to which the passenger had assigned his/her claim.
The Court of Justice ruled in the negative. Its reasoning is based on the premise that a prorogation clause is in principle only effective vis-à-vis the parties to the contract the prorogation is contained on or vis-à-vis the parties who have specifically agreed to be bound by the prorogation clause.
The only exception to this rule is where “in accordance with national substantive law, could that third party nevertheless be bound by a jurisdiction clause to which it had not agreed” (§ 47).
The meaning of this passage is unclear. It is not clear what is to be meant by the substance – whether the contract of carriage or the choice-of-court agreement – and whether the rights and obligations to which the assignment is concerned are those arising under the contract of carriage or the agreement on jurisdiction.
Clarification of both aspects can be inferred from para. 63 below and from the operative part, in which the Court of Justice clarifies the scope of the exception mentioned in paragraph 47 and states that “a jurisdiction clause incorporated in a contract of carriage concluded between a passenger and that airline cannot be enforced by the airline against a collection agency to which the passenger has assigned the claim, unless, under the legislation of the Member State whose courts are designated in that clause, that collection agency is the successor to all the initial contracting party’s rights and obligations, which it is for the referring court to determine.”
The reference in the choice-of-court clause to the law of the State where the court designated is situated makes it clear, first of all, that the “substance” referred to by the Court of Justice in para. 47 cannot be meant as the contract of carriage. Indeed, the law applicable to the contract of carriage, under which it is to be determined whether there has been a takeover of the contract of carriage by the third party, is determined by the court seised under Regulation (EC) No 593/2008 on the law applicable to contractual obligations (Rome I) and not under the law of the State of the court seised. Therefore, the Court, by the expression ‘merits’, can only have referred to the agreement on prorogation of jurisdiction.
Similarly, the rights and obligations whose assignment is at stake can only be those arising out of the prorogation of jurisdiction. If it were an issue of the assignment of rights and obligations arising under the contract of carriage, regard would be had not to the lex fori prorogati but to the law applicable to the contract of carriage.
In conclusion, the fact that reference is made to the law of the State of the prorogated court makes it possible to understand the position taken, albeit implicitly, by the Court of Justice on the subjective limits of prorogation of jurisdiction: in the case of the assignment of a claim arising from a contract containing a prorogation of jurisdiction clause, the agreement on jurisdiction circulates with the assigned claim only in cases where the assignee of the claim has succeeded to the rights and obligations arising from the prorogation of jurisdiction under the rules applicable to it, i.e. in those cases where the third party, in addition to being the (alleged) assignee of the claim, is also the assignee of the prorogation of jurisdiction.
Independence of the prorogation of jurisdiction clause
The Ryanair judgment is destined to call into question the solution followed by the Court of Cassation in the aforementioned judgment, which had already been set out by the same Civil Joint Divisions in previous rulings (order of 5 May 2006 No 10312; order of 18 May 2011 No 10862).
As a matter of fact, in relation to choice-of-court agreements under Art. 25 of the Brussels I bis Regulation, the solution adopted by the Italian case law concerning the enforceability against third parties of arbitration clauses will be adopted. As regards the latter, indeed, the majority position of the case law on merits and on legitimacy is that the arbitration clause contained in the contract from which the assigned claim derives from cannot be opposed to the assignee of the claim, under penalty of violation of the principle of autonomy of the arbitration clause (Italian Court of Cassation, Civil Joint Divisions, judgment of 17 December 1998 No 12616, confirmed by the subsequent Italian Court of Cassation judgment of 22 December 2005 No 28497).
It is only by adopting the solution provided for by the Court of Justice that the principle of independence of the prorogation of jurisdiction clause is fully respected.
According to the first paragraph of Art. 25(5) of the Brussels I bis Regulation, “an agreement conferring jurisdiction which forms part of a contract shall be treated as an agreement independent of the other terms of the contracts”, so that the prorogation of jurisdiction, like arbitration clauses, is not affected by the invalidity of the main contract within the meaning of the express rules of the first subparagraph of Art. 25(5), and may be governed by a different law from that governing the contract it is included in.
It would be detrimental to the independence of the prorogation of jurisdiction clause if it were held to be enforceable against the assignee of the claim on the sole ground that, under the law applicable to the contract from which the claim arose, the assignee had taken over one of the rights under the contract (right of claim). Indeed, the fact that the assignee has become the holder of the right of claim against the obligor is irrelevant for the purposes of the ownership of the different obligations which the assignor and the assignee have assumed by signing the prorogation of jurisdiction.
Therefore, if the issue of the subjective limits of the prorogation of jurisdiction clause is to be resolved in a manner which effectively respects its independence, it will be necessary to examine the vicissitudes of the prorogation of jurisdiction separately from the vicissitudes affecting the contract the prorogation is contained in, and it will be necessary to investigate whether there has been a takeover by the third party, the assignee of the claim, of the rights and obligations assumed by the original party to the prorogation of jurisdiction under the law applicable to the prorogation.
The law applicable to choice-of-court agreements
The question now remains on how to determine the law applicable to a choice-of-court agreement.
The courts of the Member States may not rely upon the conflict-of-law rules of Regulation (EC) No 593/2008 on the law applicable to contractual obligations (Rome I) for this purpose, as jurisdiction agreements are expressly excluded by Art. 1(2)(e) from the scope of application of this Regulation.
Indications as to how to determine the law applicable to prorogation of jurisdiction may, after all, be derived from the new international-law rule on the substantive validity of prorogation of jurisdiction in Art. 25(1) of the Brussels I bis Regulation, to be analysed in connection with Recital 20 of that regulation. According to this rule, the substantive validity of the choice-of-court agreement is to be assessed in accordance with the law of the Member State of the prorogued court, including its conflict-of-law rules (lex fori prorogati).
The rule does not clarify what is to be understood by the “substantive validity” of the prorogation agreement.
While legal scholars are unanimous in considering that this concept covers the substantive validity of the prorogation agreement in the face of defects of the will (e.g. error, violence and fraud) capable of causing its annulment (see, inter alia, U. Magnus, Art. 25, in U. Magnus, P. Mankowski (eds. Mankowski (eds), Brussels Ibis Regulation – Commentary, Köln, 2016, p. 631), there is no uniformity as to the applicability of this rule to other aspects of choice-of-court agreements that do not currently have a uniform (material or private-international law) discipline. Among these, precisely, the subjective scope of effectiveness of the agreement, considered by some authors to fall within the focus of the new rule (C. Heinze, Choice of Court Agreements, Coordination of Proceedings and Provisional Measures in the Reform of the Brussels I Regulation, in RabelsZ, 2011, p. 585).
Such an extensive reading of the scope of application of the rule of renvoi to the prorogated legal order is supported by the Ryanair judgment.
As mentioned above, in this judgment the Court of Justice clarified that the verification of whether the third party has succeeded to all the rights and obligations originally accruing to the assignor must be carried out under the lex fori prorogati. This implies that the court seised shall determine the law applicable to the choice-of-court agreement in order to determine whether there has been an assignment by the assignee of the rights and obligations assumed by the assignor in connection with the prorogation of jurisdiction, within the meaning of the private international law of the jurisdiction of the prorogued court.
The rule under Art. 25 Brussels I bis in the case of prorogation in favour of the Italian courts
Where an agreement to prorogate Italian jurisdiction, contained in a contract giving rise to a claim which is the subject-matter of an assignment, is relied upon by the assignee of the claim in order to establish his/her own proceedings before the court designated in the choice-of-court agreement, the private international law rule laid down in Art. 25 of the Brussels I bis Regulation requires to be applied as follows.
The Italian court, whose jurisdiction has been previously argued by the other parties to the proceedings, shall verify whether the plaintiff (the alleged assignee of the claim) is entitled to rely upon the choice-of-court agreement designating it as the court having jurisdiction. To this end, the court shall assess whether the assignee of the claim has replaced the assignor in the rights and obligations under the prorogation clause.
In order to carry out this assessment, the court shall first determine which law applies to the choice-of-court agreement on the basis of the conflict-of-law rules under Law 218/1995, since the court cannot rely upon the conflict-of-law rules provided for under the Rome I Regulation for the exclusion mentioned above.
According to Art. 57 of Law 218/1995, contractual obligations are “in any event” governed by the Rome Convention of 1980. Assuming that the reference to the Rome Convention can be read as referring to the Rome I Regulation (in these terms, F. Marongiu Buonaiuti, Note Introduttive, in F. Salerno, P. Franzina (eds.), Regulation (EC) No. 593/2008 of the European Parliament and of the Council of 17 June 2008 on the law applicable to contractual obligations (“Rome I”). Commentario, in NLCC, 2009, p. 535 ff.), the Italian court shall identify the law applicable to the choice-of-court agreement pursuant to Art. 4(4) of the Rome I Regulation, which residually provides that “the contract shall be governed by the law of the country with which it is most closely connected”.
Once the country with which the choice-of-court agreement is most closely connected with has been identified, the Italian court shall apply the law of that country in order to assess whether the assignee has succeeded to the rights and obligations assumed by the assignor under the choice-of-court agreement. If such assignment has occurred, the assignee will be considered as capable of relying upon the choice-of-court agreement and the Italian court shall have jurisdiction to hear the case. If, on the other hand, the assignee has not succeeded to the rights and obligations which the assignor had under the choice-of-court agreement, then, and if the issue of lack of jurisdiction is raised, the court seised shall have no jurisdiction.
Caterina Benini
Note – This document is subject to the warning set out here.