European Court of Justice awards credit institutions home-field advantage

Por

There was some uncertainty as to what court is competent to hear disputes relating to credit agreements. On 15 June 2017 the European Court of Justice resolved this uncertainty by setting useful and practically applicable criteria: the court located in the member state where the credit institution has its registered office is competent to hear all disputes relating to the credit agreement. An exception is made inter alia if the contract is subjected to a different jurisdiction by the contract parties (forum choice clause). The ruling applies both to disputes between creditor and debtor, and to disputes between jointly and severally liable debtors. The judgment is directly applicable in all member states of the European Union except Denmark.

The judgment is particularly relevant in cases where parties were originally located in the same jurisdiction, but later on moved to a different jurisdiction. If, for example, a bank registered in the Netherlands provides credit to debtors located in the Netherlands and the debtors subsequently move to Mexico and Germany, then the Dutch court would still be competent to hear disputes between the bank and the debtors. The Dutch court would also be competent to hear a claim for recourse of the Mexican debtor against the German debtor (and vice-versa) as such a claim is related to the credit agreement.

In making its judgment the court determined that a credit agreement constitutes a ‘contract for the provision of services’. In the absence of a choice for a specific jurisdiction,[1] the jurisdiction to which such a contract is subject must be ascertained by determining the 'place where the contract is to be performed'.[2] The place where a credit agreement is to be performed is the place where the credit institution has its registered office, as this would be most in accordance with the objectives of predictability, unification and the proper administration of justice. The court further held that a claim for recourse between debtors that are jointly and severally liable for the credit constitutes a ‘matter relating to a contract’[3] i.e. relating to the underlying credit agreement. Thus, the court competent to hear such a claim is the same court that is competent to hear a dispute relating to the credit agreement itself.

The court did not make a ruling as to which court would be competent in the situation that where there are several different creditors located in different member states.

Read the full judgment


[1] See article 25 of Regulation (EU) No 1215/2012 of the European Parliament and of the Council of 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters.
[2] See article 7 paragraph 1(a) of Regulation (EU) No 1215/2012 of the European Parliament and of the Council of 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters.
[3] See article 7 paragraph 1(a) of Regulation (EU) No 1215/2012 of the European Parliament and of the Council of 12 December 2012 on jurisdiction