The Parties' Free Choice Of EU Jurisdiction

• Published date: 05 March 2024
• Subject Matter: Corporate/Commercial Law, Litigation, Mediation & Arbitration, Contracts and Commercial Law, Trials & Appeals & Compensation
• Law Firm: Ganado Advocates
• Author: Mr Nigel Micallef

On 8 February 2024, the Court of Justice of the European Union ("CJEU"), in delivering a preliminary ruling in the name of Inkreal s.r.o. v. Dúha reality s.r.o. (C-566/22) reached a controversial conclusion that parties established in the same Member State may agree on the jurisdiction of the courts of another Member State to settle their contractual disputes even if the contract does not have any other international element or connection with the chosen Member State. The CJEU concluded that such a contractual agreement would be covered by Article 25(1) of Regulation (EU) No. 1215/2012 on jurisdiction and the recognition and enforcement of judgements in civil and commercial matters (the "Brussels Recast Regulation" or the "Regulation").

Facts of the Case

FD as creditor resident in Slovakia and Dúha reality, a company governed by Slovak law and domiciled in Slovakia, as debtor, concluded two pecuniary loan contracts on 29 June 2016 and 11 March 2017. Each of these two contracts includes an agreement conferring jurisdiction with identical content under which, in the event of a dispute that cannot be resolved by negotiation, that dispute "shall be settle by a court of the Czech Republic having substantive and territorial jurisdiction." On 8 December 2021, FD assigned the receivables arising from the two pecuniary loan contacts, amount to a total of EUR 153,740 to Inkreal, a company governed by Slovak law and domiciled in Slovakia.

Dúha reality failed to repay the pecuniary loans and on 30 December 2021, Inkreal brought an action before the Supreme Court of the Czech Republic (the "Referring Court") seeking payment of debts owed and a determination of a Czech Court having territorial jurisdiction to rule on the merits of the case on the basis of the agreement conferring jurisdiction contained in the two pecuniary loan contracts.

Inkreal claimed that the agreement conferring jurisdiction was valid and that it complied with the requirements under Article 25(1) of the Brussels Recast Regulation and that there was no other special or exclusive jurisdiction of a court under that Regulation. The Referring Court held that the applicability of the Brussels Recast Regulation is subject to the existence of an international element and that it was uncertain whether the Regulation applied to the situation at issue where the international element was limited to an agreement conferring jurisdiction on the courts of a Member State other than that in which the contracting...