Jurisdiction over ‘matters relating to a contract’ under the Brussels I (Recast) Regulation: No direct contractual relationship required: Joined Cases C-274/16,C-448/16 and C-447/16 flightright GmbH v. Air Nostrum,Líneas Aéreas del Mediterráneo SA,Roland Becker v. Hainan Airlines Co. Ltd and Mohamed Barkan and Others v. Air Nostrum,Líneas Aéreas del Mediterráneo SA,EU: C:2018:160

A. Flightright ³ and Barkan ⁴

Two (unnamed) passengers and the Barkan family separately booked a flight with Air Berlin and Iberia, respectively (the contracting airlines, hereafter ‘CA’). The two passengers flew from Ibiza, Spain to Düsseldorf, Germany, with a connection in Palma de Majorca, Spain. The Barkans went from Melilla, Spain, to Frankfurt am Main, Germany, via Madrid, Spain. Although the CA operated the second leg of the flight to the respective final destinations, both connecting flights were operated by another airline, Air Nostrum (the operating airline, hereafter ‘OA’). Due to delays of the OA’s flight, the two passengers and the Barkans missed their second flight. Consequently, they claimed compensation from the OA pursuant to Article 7 of the so-called Flight Compensation Regulation. ⁵ Whereas the Barkans personally brought the action, the two unnamed passengers decided to assign theirs to ‘flightright’, an organization that enforces passengers’ rights. Flightright and the Barkans commenced proceedings in the court of what they allege is the contract of carriage’s place of provision of the service within the meaning of Article 7(1)(b), second indent of the Brussels I Recast Regulation, being, respectively, the District Court (Amtsgericht) of Düsseldorf and Frankfurt am Main. Although flightright’s case is still pending in the Düsseldorf District Court, the Frankfurt District Court already asserted jurisdiction and granted compensation to the Barkans. In a subsequent appeal lodged by the OA, the Regional Court (Landsgericht) of Frankfurt am Main quashed the District Court’s judgment and dismissed the Barkans’ action due to lack of jurisdiction. The Barkans appealed that judgment before the Federal Court of Justice (Bundesgerichtshof), before which the case is currently pending. ⁶

In both flightright and Barkan the OA alleged in its defence that the courts of final destination of the second leg operated by the CA lack jurisdiction over the passengers’ claims. The OA argued that it can only be sued in the courts of the destination of its connecting flight in Ibiza or Madrid, because this is the place of provision of its services towards the passengers pursuant to Article 7(1)(b), second indent of the Brussels I Recast Regulation. In flightright, the OA additionally alleged that it was not a party to the contract that the passengers concluded with the CA, implying that it cannot be sued based on Article 7(1)(b), second indent because that jurisdictional ground only allows it to sue parties who assumed contractual obligations within the meaning of Article 7(1)(a) of the Brussels I Recast Regulation. Note, however, that the CJEU observes that the analysis of this argument is relevant for Barkan as well. ⁷

Hence, the national German courts are confronted with two interrelated questions that require the CJEU’s clarification.

Should the passengers’ action (cq. flightright’s action, the assignee of the passengers’ rights) against the OA be qualified as ‘matter relating to a contract’ within the meaning of Article 7(1)(a), despite the fact that the passengers only entered into a contract with the CA?

B. Becker ⁸

Mr. Becker booked a flight from Berlin to Beijing with Hainan Airlines (the ‘CA’), an airline incorporated in China. The flight comprised a connecting flight from Berlin to Brussels that was operated by Brussels Airlines (the ‘OA’). After arriving in Brussels, the CA denied Becker’s boarding on the flight to Beijing. Consequently, Becker was forced to book a flight back to Berlin in order to take another flight from Berlin to Beijing.

Discontented with the denied boarding, Becker brought an action against the CA in the District Court (Amtsgericht) of Berlin-Wedding in Germany. He based that court’s jurisdiction on Article 7(1)(a) of the Brussels I Recast Regulation, alleging that Berlin is the place of provision of the CA’s service, because it is the place of departure of his journey. The District Court, however, dismissed Becker’s action, holding that the Belgian courts have jurisdiction because the place of provision of the CA’s service is located in Brussels, the place of departure of the leg of the flight operated by the CA.

Becker disagreed and appealed before the Federal Court of Justice (Bundersgerichtshof). The Federal Court doubted whether Berlin could be considered the place of provision of the CA’s service towards Becker, given the fact that Becker booked the flight with the CA and could not foresee that the latter would contract the OA to perform a connecting flight from Berlin to Brussels. In want for clarification of this issue, the Federal Court of Justice submits a reference for a preliminary ruling to the CJEU. As is discussed in section 3 below, the CJEU does not clarify the issue that is referred by the Federal Court of Justice since the Brussels I Recast Regulation does not apply to Becker’s action.

A. Contract, an expanding concept

Having clarified the preliminary reference in Becker, the CJEU analyses the first issue of flightright and Barkan. The key question is whether the actions brought by the passengers against the OA can be qualified as ‘matters relating to a contract’. The existence of a contractual matter is relevant because it is the criterion on which the applicability of the special jurisdictional ground of Article 7(1) of the Brussels I Recast Regulation depends. The CJEU commences its analysis by reiterating that the concept of contract cannot be defined by referring to national contract law, because subjecting the applicability of EU PIL to diverging national definitions would undermine the uniform application of the harmonized EU PIL rules. ¹⁵ For the sake of uniform application, the concept of contract requires its own European definition, or – as the CJEU traditionally puts it – an autonomous interpretation. ¹⁶

Next, the CJEU articulates a wide interpretation of the concept of contract. When a claimant bases its action on the non-performance of a contract, all obligations arising under that contract must be considered to be contractual in nature. ¹⁷ Adding to that, the CJEU repeats its Handte criterion; ¹⁸ for an obligation to be qualified as contractual in nature, the defendant must have assumed a freely consented obligation towards the claimant. ¹⁹

The CJEU then explicitly clarifies that the identity of the parties is not essential in qualifying an action as a matter relating to a contract. When a third party who performs a contractual obligation on behalf of a party to the contract is held accountable, the obligation remains contractual in nature in respect to that third party too, because the cause of action is the contractual obligation. ²⁰

Applying these principles to the actions brought in flightright and Barkan, the CJEU points out that pursuant to Article 3(5) of the Flight Compensation Regulation, an OA that performs obligations arising under that Regulation without having a contract with a passenger is to be regarded as doing so ‘on behalf of the person having a contract with that passenger’. ²¹ This implies that the OA is considered to perform the CA’s contractual obligations. Consequently, the CJEU holds that passengers’ actions against the OA is based on a contract and hence constitute ‘matters relating to a contract’ within the meaning of Article 7(1)(a) of the Brussels I Recast Regulation, despite the OA’s not being a party to the contract the CA concluded with the passengers. ²²

The qualification of an action against a third party to a contract, as being contractual in nature, constitutes a departure from case law. Traditionally, the qualification hinges on the existence of an obligation freely consented to by one person towards another. ²³ In the light of that requirement, an action against the person who performs such an obligation (in casu the OA) on behalf of the party who consented to it (in casu the CA) was regarded to be non-contractual, because the parties to the action – claimant and defendant – should be identical to the parties to the contractual obligation. A direct contractual relationship was hence required. ²⁴

By establishing that the contractual nature of an action is independent from the identity of the parties to the court proceedings, the CJEU clearly shifts towards a wider approach in qualifying actions. The fact that the OA is a third party to the contract is of no importance. It becomes apparent that the criterion of the freely consented obligation is demoted in favour of a broader concept; whenever the cause of action can be traced back to a contractual obligation, that action is contractual in nature.

The CJEU's approach seems to be inspired by what Van Calster has dubbed the ‘ancestry test’, ²⁵ which first occurred in Advocate General Sharpston’s Opinion in ERGO Insurance. ²⁶ Before flightright, however, the ancestry test has only been reflected in the CJEU’s reasoning in Kareda. The setting of that case differed considerably from flightright, since it concerned a recourse action between severally liable debtors. The debtor who brought the action paid the entirety of a loan he took out together with another debtor. It was held that the debtor’s recourse action against the other debtor is contractual in nature, since such an action would not exist in absence of the contract of loan the debtors concluded with the bank. ²⁷ Future CJEU case law will show whether or not in the wake of flightright the contractual qualification of actions is further subjected to the ancestry test.

B. Place of provision of the service

Having established that Article 7(1)(a) of the Brussels I Recast Regulation applies in the context of flightright and Barkan, the CJEU goes on clarifying where the place of provision of the service within the meaning of point (b), second indent of the same Article should be located. Much like the notion of contract itself, the notion of the place of provision of the service is subject to autonomous interpretation in order to ensure uniformity of EU PIL, so that no recourse can be had to the national law of the member states. ²⁸

The CJEU’s analysis starts by reiterating Rehder, Domberger, and Wood Floor. According to this line of case law the localization of the place of provision of the service should warrant a close link between the contract and the court that has jurisdiction. ²⁹ Reference is then made to Rehder, a case that specifically relates to the place of provision of the service under a contract for air carriage. In that ruling, the place of provision of the service was located in both the place of departure and the place of arrival. ³⁰

Rehder concerned a situation in which the entire flight was operated by the same airline. The factual background of flightright, however, is different, since one leg of a flight is operated by an OA on behalf of a CA. Following its Advocate General, ³¹ the CJEU observes that notwithstanding the different factual background, the Rehder case law applies by analogy. Although the OA only operates part of the complete journey, namely the first flight to the airport from which the second leg to the final destination is operated, its obligations under the single booking comprise transporting the passengers to their final destination. Consequently, the OA can also be sued in the place of the final destination. ³²

The CJEU justifies its wide interpretation of the place of performance of the service by referring to the fact that localising the place of provision in the final destination ensures proximity of the dispute with the competent court. Adding to that, the CJEU observes that pursuant to Article 3(5) of the Flight Compensation Regulation, the OA is regarded to operate the flight on behalf of the CA. The OA can be reasonably expected to be informed about this provision. It can hence foresee the risk of being sued in the forum of the place of the final destination. ³³

The flightright judgment does not clarify whether the OA can also be sued in the place of departure of the first flight (in addition to the place of the final destination). Yet the CJEU clearly intends to transpose Rehder without reservation, considering that it stresses the fact that ‘one of the principal places of provision’ of the OA’s service is at the final destination, implying that the other is at the place of departure in accordance with Rehder. ³⁴ Advocate General Bobek moreover explicitly suggests that the OA can also be sued in the place of departure of the first leg of the flight. ³⁵ Consequently, passengers can also opt to sue the OA in the place of departure of the first flight.