BRUSSELS I REGULATION (EC) 44/2001: APPLICATION TO FINANCIAL SERVICES UNDER ARTICLE 5(1)(B)

10 Colum. J. Eur. L. 527 (2004)

John J.A. Burke, Associate Professor, Riga Graduate School of Law, Latvia.

This article investigates a single multi-faceted question: is a “financial service,” such as a bank loan, extension of credit or sale of securities, a “service” within the meaning of the Brussels I Regulation (EC) No 44/2001 (“Regulation”), Article 5(l)(b) second indent, on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters? The answer to that single question matters for conflicts law and the international banking  system. The creation of the internal market is designed to augment cross-border financial services. Since “financial services” cover a broad range of products, it is likely, in the absence of a choice of forum clause, that Article 5(1)(b), if applicable to “financial services,” will determine which court has jurisdiction over a dispute arising under financial service contracts. Although the European Court of Justice (“ECJ”) will resolve existing ambiguities under the Regulation, financial service providers, nevertheless, need to predict their risks now and shape policies that conform to law and reduce transaction costs. Therefore, an explanation of the effects of Article 5(l)(b) on financial service providers and their customers is important. Consequently, this article examines how Article 5(l)(b) should be applied in the case of financial services.

Neither the Regulation nor the Commission Proposal for the Regulation defines the phrase “provision of services,” which casts uncertainty on whether “financial services” is included within the meaning of the former term. Rather, subparagraph (l)(b) provides an “autonomous” definition of the place of enforcement of “the obligation in question” in two specific situations: delivery of goods and provision of services. The Commission adds, “In the case of provision of services, it will be the place where, under the contract, the services were or should have been provided,” and continues, “[t]his pragmatic determination of the place of enforcement applies regardless of the obligation in question, even where this obligation is the payment of the financial consideration of the contract.” In the case of goods or services, a court need not undertake the tortuous determination under principles of private international law “of the place of performance of the obligation in question” as still required under subparagraph (1)(a) to determine the question of jurisdiction. The mandate of autonomy requires this result, liberating the concept of “place of performance of the obligation” from the parochial understanding of national courts. The Regulation therefore, under subparagraph (1)(b), provides clarity and simplicity in contracts involving the sale of goods or the provision of services, ostensibly categories encompassing a large percentage of commercial contracts. The question arises whether, if subparagraph (1)(b) covers financial services, the resulting clarity and simplicity are achieved and desirable in cross-border transactions.

In his meticulously analyzed article, Professor Koji Takahashi maintains that the phrase “provision of services” is broad, notes a similar expression used in the Unfair Terms in Consumer Contracts Directive 93/13/EEC and suggests that the phrase, together with the “sale of goods,” covers “a majority of contracts.” Although Professor Takahashi discusses “provision of services” in subparagraph (1)(b), his article delineates the possible impact of amended Article 5 generally and does not focus on “services,” particularly financial services. He thus raises, but does not answer, the question of whether financial services are encompassed within the Regulation. This Article expands upon and elaborates his seminal analysis.