Negative Declaratory Proceedings and Conflict of Laws: article 27 of the Brussels I Regulation (EC 44/2001) and 31(2) of the CMR
by Jasper Groen & Hilde Pors (Van Steenderen Mainportlawyers)
The Judgment of the Court Utrecht, The Netherlands, of 3 September 2008 outlines the answer to the question of which court is competent to hear the claim when courts in two countries have been addressed on the same matter, taking into consideration article 27 Brussels I Regulation on litispendence.
The parties in the subject proceedings, Microsource and Noreal, purchased pallets with computer monitors from Ingram. Microsource engaged Noreal to transport the goods from Tilburg, The Netherlands, to Soest in Germany, to which the CMR Convention on road haulage applies. Noreal on its turn engaged Massong, who engaged sub-carrier Beurskens to transport the goods. Beurskens collected the goods on a Friday, and stored them for the weekend in its’ guarded warehouse, in order to continue transport to Germany after the weekend. However, during the weekend the goods were stolen from the warehouse.
On 27 February 2006 Beurskens initiated negative declaratory proceedings (through which its non-liability was to be established) before the Dutch Court in the district of Utrecht against Ingram, Noreal, Massong and Microsource. Later that year, on 21 June 2006, in order to claim compensation, Noreal – as cargo interests – commenced proceedings against Massong in Germany (in which proceedings also Beurskens joined Massong as defendants). Massong – in order to safeguard its recourse – also commenced proceedings in Germany in order to claim for indemnification against Beurskens in case Massong was found to be liable towards Noreal. Both claims commenced in Germany were admitted by the judgments rendered by the German Court (Landsgericht Arnsberg) on 19 July 2007. An appeal was filed against both these judgments.
In its judgment of 3 September 2008 the Court of Utrecht stipulated that the competence of the Court of Utrecht is affected by the competence of the German Court to deal with the proceedings on the merits, as well as the claim for indemnification, the latter being the second court seized. Since the Dutch Court can not rule on the competence of a foreign court, the Dutch Court simply needs to consider both judgments of the German Court as a known fact, even though – in expectation of the outcome of the appeal in Germany – a final judgment on the liability of Beurskens is not even known yet. So the Court of Utrecht – although the first court seized – declared itself not to be competent to hear the claim of Beurskens.
Article 27 Brussels I Regulation (and article 31(2) of the CMR Convention) prevents the Courts to render contrary judgments, as it is undesirable that the same parties avail themselves with conflicting judgments from courts in different countries, as a consequence whereof a judgment from one country may not be enforced in another Member State for example. In this case, Massong’s claim (that Beurskens is liable for the damages) is based on the same grounds and relates to the same subject as the claim of Beurskens (to have a negative declaratory judgment that Beurskens is not liable for the damages). Reference is made to the decision of the European Court of Justice of 6 December 1994 (NJ 1995, 659), in the case of the "Tatry", setting the criterions on litispendence.
Since the German Court – although secondly seized – decided earlier in relation to the liability of Beurskens against Massong than the Court of Utrecht decided in the negative declaratory proceedings, the Dutch Court may only conform to the decision of the German Court, as soon as that decision is irrevocable. Therefore, Beurskens did not have any interest in a judgment from the Court of Utrecht at this stage, in the opinion of that Court at least.
Although the proceedings in the Netherlands were initiated earlier than the proceedings in Germany, the proceedings continued much faster in Germany, leading to a judgment in in Germany before the Court of Utrecht rendered its judgment. Article 27 Brussels I Regulation stipulates:
" 1. Where proceedings involving the same cause of action and between the same parties are brought in the courts of different Member States, any court other than the court first seized shall by its own motion stay its proceedings until such time as the jurisdiction of the court first seized is established.
2. Where the jurisdiction of the court first seized is established, any court other than the court first seized shall decline jurisdiction in favour of that court."
Pursuant to this article of the Brussels I Regulation, technically the German Court should have stayed the proceedings until the Court of Utrecht had rendered a Judgment (on its competence), since the Court of Utrecht was the Court first seized. It appears however, that this article is interpreted differently Germany than in the Netherlands, since the German Court did not stay the proceedings initiated in Germany, while – according to article 27 Brussels I Regulation – the German Court should have stayed the proceedings. In order to prevent contrary decisions, although notwithstanding the fact that in Germany an appeal was still pending and no judgment in such appeal proceedings was rendered yet, the Dutch Court decided nevertheless that it was not competent to decide over the case to avoid litispendence.
This was also the case in an earlier decision of the Court of Appeal in The Hague (22 May 2008), where that court (also) ruled that another German Court was allowed to decide over the claim for damages, even though negative declaratory proceedings (“negative Feststellungsklage”) in relation to those same damages were first initiated before the Dutch Courts. And as a consequence the Dutch courts should stay the (related) proceedings or cannot be considered competent any longer to hear the claim.
The question arises why and on what basis the German courts accept the fact that a negative Feststellungsklage is already commenced in a Member State, does not set aside the possibility to commence proceedings in relation to a claim for actual compensation (“Leistungsklage”) in Germany.
As a matter of fact this approach of the German courts is in line with earlier decisions of the German Appeal Courts, like the decision in Oberlandesgericht (“OLG”) Keulen rendered on 8 March 2002 (Transportrecht 6-2002, page 239 to 243). The OLG Keulen ruled that notwithstanding the fact that a Belgian court was seized first for a negative declatory judgment (“Negative Feststellungsklage”) the German courts were competent to decide over the actual claim for compensation of damages initiated by cargo interests in Germany (“Leistungsklage”). It based its decision on the ratio behind article 31(1) of the CMR Convention, which in fact provides the cargo interest to claim for compensation of damages occurred during transportation before the various courts indicated in such article. As the OLG Keulen considered that this article 31 of the CMR Convention was drawn up for the protection and in favour of cargo interests. Such option for cargo interests to address the court convenient can not be limited or set aside by a carrier quickly claiming its non-liability in negative declaratory proceedings in another court convenient for that purpose. In addition the OLG Keulen ruled that article 31(1) of the CMR Convention enjoys priority over the litispendence rules of article 27 Brussels I Regulation. In addition, it was considered that pursuant to article 67 of that same Regulation (although the decision was rendered under the preceding Convention), it provides priority to the lex specialis agreed upon by the parties, in this case the CMR Convention which applies to international road haulage. However, this is not dealt with in the same manner in Member States other than Germany and may give rise to difficulties in relation to the recognition and enforcement of judgments abroad.
Should a party wish to obtain a judgment in the Netherlands, it is of utmost importance to proceed fast, or otherwise a judgment might be rendered in another country as a consequence whereof the Dutch Court may have to refrain from rendering a decision and simply conforms to that other judgment.
December 8, 2008