Some about jurisdiction: how to avoid litigating abroad

It is likely that we, as company, have dealt with a commercial operation with foreign companies that led to a situation of non-payment or to a commercial dispute that has not been solved extrajudicially.

In view of the failure of any management to collect what is owed to us, the possibility of going to the Courts and Tribunals is always open, but knowing that there is an international element, that is, that the parties are not located therein State, we are withdrawn to this since litigation in another State means an uncertainty and a cost increase that many SMEs export cannot afford.

However, when talking about certain contracts and obligations you can avoid going to a foreign court with a prior organization and structuring of the contracts and its clauses.

Before going into the matter, we are going to explain how judicial competence is determined – the Judge or Court that has to know a matter – in our Law.

For all the Member States of the European Union, the rule determining jurisdiction in civil and commercial matters is the Brussels I bis Regulation No1215 / 2012, which replaces the previous Brussels I Regulation. It does not therefore apply to tax matters, nor administrative or criminal. The Regulations of the Union have for some years been the source to which we have to analyze so much to know the Court who has to judge a matter as to decide the law of which State is going to be applied by that Judge.

Thus, it may be the case that the German Judge has to settle under Spanish law, and vice versa.

1.General rule of attribution of competence.

According to Article 5, individual sor companies domiciled in a Member State must be sued in the courts of that Member State, although there are many exceptions. Even given the abundance of exceptions to this rule it could be said that even the most common is that any of the other rules apply.

2. Express and / or tacit submission:

The main rule that allows us to move away from suing a commercial opponent in his Member State is the possibility of agreeing expressly clauses or, in the case of tacit submission.

A pact of express submission is a clause that can be inserted into contracts of any kind, sale of goods, supply, or even autonomously in mails or other documents that usually establish commercial relations between the parties. In said clause it is said that the disputes arising from the relations must be substantiated in certain Courts and Tribunals.

The Brussels  Regulation has introduced two fundamental innovations in the express submission clauses not contained in the previous Brussels I Regulation, such as:

(i) Submission rules can now be applied even if the defendant is not domiciled in a Member State, and

(ii) Submission rules may be considered in accordance with the law of the Member State elected.

That is to say, if a rule of submission establishes a French court as competent, but that rule of attribution is made in a matter for which French jurisdiction declares another jurisdiction, that last criterion will prevail.

There is a tacit submission at the time when a person is sued in an organ, he appears before the same without challenging that attribution of competence, that is, accepting tacitly the competence of the organ. One of the main problems that a company can face is that the commercial partner, for example, that foreign company with which we operate that may be even larger than ours, refuses to accept covenants of submission to our Courts. However, in lack of will, there are also other jurisdictions that could be applied depending on the type of relationship that we have.

3. Jurisdictions provided in relation to the legal relationship when there is no election When the parties have not chosen Courts and Tribunals and we are not in the case of an imperative jurisdiction – conflicts with real estate, patents, etc. – the Regulation establishes rules depending on the legal relationship: for example if it is a service provision the organ in which they were to be lent, or in the case of purchase and sale of goods where they must have surrendered, shall be competent. But these cases are foreseen as a last resort, in the first place, our pact of submission will be applicable and you can leave aside these agreements of attribution.

4. Imperative grounds: There are 5 jurisdictions that are applied in an imperative way, in which there is no covenant or transaction to the contrary, nor possible submission of any kind and are as follows:

  • In the case of real property rights and leases of immovable property, the courts of the Member State in which the property is situated.·
  • As regards validity, nullity or dissolution of companies and legal persons, and in the matter of the validity of the decisions of their bodies, the courts of the Member State in which the company or legal person is domiciled;·
  • As regards the validity of registrations in public registers, the courts of the Member State in which the register is located;·
  • In the case of registration or validity of patents, trademarks, designs or other similar rights subject to deposit or registration, the courts of the State in which the deposit or registration has been requested, made or held.·
  • In the enforcement of judgments, the courts of the Member State of the place of enforcement.

5. Protection rights

 Finally, there are also 3 very specific matters, such as insurance contracts, work contracts and consumer and user rules that try to protect the weaker party, since there is an obvious imbalance between the parties. That is why favorable conditions are established for the insured, workers, and consumers.

It is therefore a complex issue but in which there is a loophole to act, provided that the legal relationships are equal to equal. The conventants of submission expressed in these cases will prevail and could serve us to claim invoices, defects in goods, etc., without having to leave Spain. As is often the case in any field, forecasting and anticipating problems save costs significantly. Having prior contractual advice allows for a greater margin of performance from a commercial point of view.

In Navarro Llima Abogados SL we can advise you if your company usually deals with abroad companies.

Héctor González.


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