IP, Technology & Data

In a recent case the European Court of Justice (ECJ) has ruled that consumers can sue in the member state in which they are domiciled, where the party that they are suing is domiciled in another member state, and the contract was not “concluded at a distance.”

This latter phrase was given a surprisingly wide interpretation by the court, and has consequences for any business that promotes its services online, even if it concluded contracts offline.

The facts
In this case, the individual raising the action, Ms Muhlleitner (who resided in Austria) had bought a car from a company based in Germany. She had come across the German company on the internet, but did not buy the car online, instead she travelled to Germany to conclude the contract and collect the car.

When Muhlleitner arrived back in Austria, she discovered that there was a problem with the car, but the company that she bought it from refused to repair it. She then raised an action in the Austrian courts to seek to annul the contract of sale. The Austrian courts then had to consider whether or not they actually had the jurisdiction to hear a dispute against a German trade, in relation to a contract that hadn’t been ‘concluded at a distance’ (by internet or by phone).

The law
The ECJ considered the issue, and decided that, under the Brussels Regulation, the contract did not have to be concluded at a distance for the consumer to be given the additional protection of being able to sue in their home state.

Instead they found that, in order for a consumer to raise an action in their own member state (rather than the state of the business they are suing):

  • the business must pursue commercial or professional activities in the member state in which the consumer was domiciled, or in anyway direct such activities to that member state; and
  • the contract  in question must relate to those activities.

What this means
This decision will be welcomed by consumers, making it much easier (and cheaper) to raise legal proceedings against a supplier in another member state. As can easily be imagined, the concept of ‘directing’ or ‘pursuing’ commercial interests in a particular EU state is not that limiting when you consider that online marketing and the use of websites will bring into scope many businesses. The decision is consistent with the EU’s aims of protecting consumers and encouraging cross-border trade.

However, the decision may not be welcomed by businesses, who now need to be aware that rules governing jurisdiction of disputes now have a wider application than previously thought, bringing offline transactions into scope. Businesses that promote their services outside their member state should therefore be aware that exclusive jurisdiction clauses in their standard terms and conditions may not be effective.

Follow me

Martin Sloan

Partner at Brodies LLP
Martin is a partner in Brodies Technology, Information and Outsourcing group and has wide experience of advising clients on technology procurement and IT and business process outsourcing projects. Martin also advises on data protection (including the GDPR), and general technology and intellectual property law, and has a particular interest in the laws applying to social media and new technology such as mobile apps, contactless/mobile payments, and smart metering.
Follow me