On your bike – jurisdiction in European product liability cases

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Jurisdiction of civil claims in the EU

The Brussels Regulation [1] sets out a system which allocates jurisdiction to the courts of EU member states.

Article 2 of the Brussels Regulation contains the fundamental principle that the defendant should be sued in the courts of the place where he is domiciled (regardless of his nationality). Article 2 provides that the jurisdiction is always given to the court in the defendant’s domicile, but the Regulation includes alternative grounds for special jurisdiction in certain circumstances, which allows for there being two possible forums; the jurisdiction of the defendant’s domicile and that which the special rules dictate.

Article 5(3) is one of those rules. For matters of tort, a claimant may sue the defendant in the courts of the place where the harmful event occurred or may occur, which in effect means where the event giving rise to the damage occurred.

Product liability

In the recent case of Kainz [2], an Austrian claimant brought proceedings for a declaration of liability due to defects in a bicycle and for damages suffered and arising in the future from a bike accident that occurred in Germany. The defendant was a German manufacturer; the claimant had sustained injury from a bike ride in Germany, but he had bought the bike from a distributer in Austria.

Applying Article 2, the German court had jurisdiction because the defendant manufacturer’s registered office and principal place of business was in Germany. The claimant, however, commenced proceedings in Austria arguing that, “the place where the harmful event occurred or may occur” was in fact Austria because that was where the product was first put into circulation by the distributor.

The defendant challenged the jurisdiction of the Austrian court arguing that the event giving rise to the damage occurred in Germany – where the bike had been manufactured. The bike was first put into circulation when it left the defendant’s site.

The Austrian court sought clarification from the European Court of Justice (ECJ) on the meaning of the words contained in Article 5(3) as applied to product liability claims. The ECJ decided:

Article 5(3)…must be interpreted as meaning that, in the case where a manufacturer faces a claim for product liability for a defective product, the place of the event giving rise to the damage is the place where the product in question was manufactured.”

The Austrian court did not therefore have jurisdiction. The German court was the correct forum when applying both Article 2 and Article 5(3).

In making its decision, the ECJ observed that the special jurisdiction rules should be interpreted restrictively because they derogate from the fundamental principle in Article 2. Such derogation is only intended to allow for the court which is best placed to determine liability to assume jurisdiction. In product liability cases the court where the product was manufactured is best placed to hear the case. The words “where the damage occurred” mean where the product was manufactured (defectively) and not where the damage was later suffered, felt or related.

WM Comment

Where the Brussels Regulation applies, priority is given to the court which is “first seised” of the proceedings. It is a matter for that court to decide whether it has jurisdiction. In this case the Austrian court referred the question to the ECJ. A claimant who seeks the jurisdiction of a particular court should issue proceedings as soon as possible. Should the defendant wish to challenge jurisdiction, he must do so immediately after the proceedings are served and before any substantive steps are taken. It may even be worth pre-empting the claimant and issue proceedings for a negative declaration of liability in the court which the defendant would prefer.

Jurisdiction is an important consideration in cross-border disputes. There may be particular advantages or disadvantages for one or either party in different jurisdictions. For example, in Germany there are very few disclosure requirements and no pre-action requirements. Costs; the location of witnesses and experts; translation requirements; pre-trial disclosure; the availability of interim measures such as freezing orders; mediation requirements; litigation funding; court delays, and cost rules should all factor in a party’s decision when issuing proceedings in a particular jurisdiction. Particular consideration must be placed on whether a judgment from that court will be readily enforceable in the member state in which the defendant’s assets are located, should that be different to the state which is seised with the proceedings.

For further advice on product liability and jurisdictional issues, contact Gwendoline Davies.

[1] The Regulation on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (44/2001/EC)
[2] Kainz (Judgment of the Court) (case C-45/13) [2014] EUECJ