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Exclusive jurisdiction clauses

The First Hall of the Civil Court, presided over by Mr Justice Anthony Ellul, on April 12, 2013, in the case ‘PWA Co. Ltd vs Luisa Spagnoli SpA’ held, among other things, that terms such as “any controversy or …” in any way connected to this agreement (clause 11.6) were very wide and included any dispute between the parties. The court declared that it lacked jurisdiction on the basis of a foreign exclusive jurisdiction clause in the contract.

The facts in this case were as follows:

The jurisdiction of the court for the place of performance and that of the selected court are two distinct concepts

By virtue of an agreement dated May 14, 2010, the company PWA Co. Ltd was granted exclusive rights to sell Luisa Spagnoli garments for the period from June 1, 2010, to May 31, 2018. It was agreed in terms of clause 11.6 of the agreement that:

“This agreement shall be governed by Italian law, with the express exclusion of the application of the United Nations Convention for international contracts for the sale and purchase of goods. Any controversy arising from, or in any way connected to, this agreement, shall be of the exclusive jurisdiction of the court of Milan, without prejudice to the right of Luisa Spagnoli to turn to the courts having jurisdiction in the place in which the sales outlet is located, or the authorised retailer has its residence or registered office, in order to initiate a lawsuit and/or request precautionary or executive measures. The Italian version of this agreement and any other accessory document shall be valid and binding for the parties.”

By these proceedings, PWA Co. Ltd requested the Maltese court to declare that Luisa Spagnoli SpA was obliged to pay an agreed sum for the refurbishment and embellishment of its boutique Luisa Spagnoli at Puer, Tigné Street, Sliema, as well as the sum liquidated as damages and caused by Luisa Spagnoli SpA, including the value of the stock of clothes, which were deposited in court.

It further asked the court to liquidate the sum due from Luisa Spagnoli SpA and condemn it to pay the sum it liquidated.

In reply, the defendant company pleaded that the Maltese court lacked jurisdiction in face of clause 11.6 of the agreement, and in this respect it should be freed from the proceedings. Luisa Spagnoli SpA submitted that by application of article 23 of Regulation 44/2001, the Maltese courts had no jurisdiction as the contract vested jurisdiction with the courts of Milan.

The court considered that PWA Co. Ltd was claiming damages as a result of defendant company’s acts and decisions which, it said, went beyond the exclusive distributorship agreement. It said that the dispute had been referred to the courts not under the exclusive distributorship agreement, nor was it connected with it. The only connection was that the parties were the same, and that it concerned the same business.

PWA Co. Ltd maintained that this dispute was not regulated by the exclusive distributorship agreement.

Luisa Spagnoli SpA, on the other hand, rebutted PWA’s claims. It disputed breaching its contractual and legal obligations and denied causing any damage to PWA Co. Ltd. It made reference to clause 11.5 of the contract where it was stated that this was the only agreement between the parties.

The court noted that PWA Co. Ltd had decided to move its business to another shop which was more centrally located. Luisa Spagnoli SpA, however, objected that this shop be used to sell Luisa Spagnoli products. Instead, PWA Co. Ltd had to acquire two shops, one of which must be dedicated exclusively to the sale of Luisa Spagnoli products, with additional costs.

The contract stipulated that Luisa Spagnoli clothes could be sold only from premises approved by Luisa Spagnoli SpA.

The court said it had to consider the dispute in the light of the agreement, and it was evident that the premises where Luisa Spagnoli products could be sold was connected with the contract.

The contract provided: “The authorised retailer shall not market in the sales outlet products other than Luisa Spagnoli products.”

“It remains understood that Luisa Spagnoli shall not bear any expenses for renovations, furnishings or the upkeep of the sales outlet.”

The agreement prohibited PWA Co. Ltd from selling other brands from the Luisa Spagnoli shop. Clause 11.5 provided that the agreement overrode any previous agreements between the parties.

The court felt that this dispute fell within the parameters of the agreement, which regulated the legal relations between the parties. The dispute could not be considered in vacuo, without considering what was stated in the contract.

The court noted that the relations between the parties were regulated by the agreement: re. clause 7.3: “The authorised retailer shall promptly inform Luisa Spagnoli of any episode of counterfeiting or violation of the intellectual property rights of Luisa Spagnoli of which it becomes aware.”

In the court’s opinion this dispute came within the ambit of the exclusive distributorship agreement. It had to be seen that within the context of this agreement, clause 11.3 provided that: “This agreement and the single rights and obligations deriving from same may not be transferred to third parties save with the prior written consent of the other party.”

The contract had the force of law between the parties: re article 992 of the Civil Code. The intentions of the parties as expressed in the contract had to prevail. Under article 23 of Regulation 44/2001: “If the parties, one or more of whom is domiciled in a member state, have agreed that a court or the courts of a member state are to have jurisdiction to settle any dispute which has arisen or which may arise in connection with a particular legal relationship, that court or those courts shall have jurisdiction. Such jurisdiction shall be exclusive unless the parties have agreed otherwise.”

The requisites of this provision were that one party had to be domiciled in the EU, and that the agreement had to be in writing.

PWA Co. Ltd contended that the damages which it claimed to have suffered could only be verified and liquidated in Malta, and that in this respect, the Maltese courts had to decide its claim for damages.

The court did not agree. The regulations of the EU were mandatory. In any case there should be no problem for the damages to be liquidated by a foreign court.

Reference was made to the European Court decisions in C269/95 of July 3, 1997, and C387/98 of November 9, 2000. The court said that the words “any controversy or …” in any way connected to this agreement (clause 11.6) were very wide, and included disputes between the parties at the stage of the negotiation of the contract. The court made reference to article 1002 of the Civil Code, which was clear and left no room for interpretation.

The court said that this dispute was connected with the exclusive distributorship agreement which was signed by the parties. It could not be considered without considering the contents of the contract and the reciprocal obligations of the parties:

“Whether other than contractual claims – for instance, connected tort claims – fall within the scope of a jurisdiction agreement depends again in the first instance on the wording of the agreement and on its interpretation. In case of doubt and absence of any contrary indication, tort claims for damages and other extra-contractual claims which are connected with the contractual relation are deemed to be included as well.”

In case 56/79 ‘S. Zelger vs Salinitri’ dated January 17, 1980, the court held that: “By contrast, article 17 (5), which occurs in Section 6 of the Convention titled Prorogation of Jurisdiction and which provides for the exclusive jurisdiction of the court designated by the parties in accordance with the prescribed form, puts aside both the rule of general jurisdiction – provided for in article 2 – and the rules of special jurisdiction – provided for in article 5 – and dispenses with any objective connection between the legal relationship in dispute and the court designated. It thus appears that the jurisdiction of the court for the place of performance (provided for in article 5 (1)) and that of the selected court (provided for in article 17) are two distinct concepts and only agreements selecting a court are subject to the requirements of form prescribed by article 17 of the Convention.”

For these reasons the First Hall of the Civil Court gave judgment by declaring that it lacked jurisdiction under clause 11.6 of the agreement as well as under article 23 of Regulation 44/2001. Luisa Spagnoli SpA was freed from the proceedings.

Dr Grech Orr is a partner at Ganado Advocates.

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