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Case Study - Multi-Jurisdictional Venue and Litigation

An interesting case study on the importance of venue and choice of law analysis comes from our Italian LAWorld member, Studio Corno Avvocati in Lissone-Milan. The firm recently assisted an Italian company specializing in the manufacture and supply of luxury furniture in a commercial dispute against a German company.

The parties had not formalized an integrated written contract but they had established a commercial relationship by exchanging several commercial documents such as orders, order confirmations, invoices and delivery notes. Because of the lack of an integrated contract, the parties had not defined either the jurisdiction or the applicable law in case of disputes arising in connection with the supply contract. 

The German company placed an order to the Italian company for a huge furniture inventory in order to set up a new shop in Austria. On request of the German company, the agreed price was guaranteed by a first-demand bank guarantee issued by an Italian bank for a maximum of fifty percent (50%) of the total sum owed. The Italian bank guarantee could be triggered by written request made by the German company to be sent by registered letter or by international courier, stating that the Italian company was in breach of its delivery obligation under the supply contract.

The Italian company supplied the furniture order to Austria and the German client fully paid the agreed price. However, the German company later contested the quality of the furniture and claimed a right to enforce the bank guarantee.

The Italian supplier challenged the existence of defects of the goods and, in order to avoid the enforcement of the bank guarantee by the German client, requested the assistance of Studio Corno Avvocati. But where to sue? It was necessary to identify the best combination of venue and applicable law. The decision involved examination of the following jurisdictions for both venue and substantive law: Italy, Germany and Austria.

The state having the most likely jurisdiction as to substance may be Germany because that is where the legal seat of the German client is located. Alternatively, it might be Austria because that is the place where the goods were delivered or should have been delivered according to the contract.

However, jurisdiction may also be found in Italy because, even if it has no jurisdiction as to the underlying substance of the matter, the bank guarantee agreement contained a clause of jurisdiction in favour of Italian Courts. Furthermore, for provisional, including protective, measures, article 35 of Regulation EU No. 1215/2012 (New Brussel I) provides that "Application may be made to the courts of a Member State for such provisional, including protective, measures as may be available under the law of that Member State, even if the courts of another Member State have jurisdiction as to the substance of the matter".

On the basis of article 35, it appeared that both the Italian and German courts were proper for provisional relief. The German court would have jurisdiction because of its substantive contacts and the Italian court because it is otherwise significantly involved in the dispute (so called: double-track system).

Studio Corno Avvocati decided to initiate an interim proceeding in the Court of Milan, where the Italian company was located. Thus, even though Italy has no jurisdiction under the Regulation over the substance of matter, Studio Corno Avvocati brought the case before the Milan Court to obtain provisional measure against the bank in order to prevent the payment of the guaranteed sum in consideration of the jurisdiction clause in favour of the Milan Court contained in the bank guarantee agreement or, subordinately, in consideration of the above mentioned article 35 of Regulation EU No. 1215/2012. The Italian company requested a provisional order seeking to avoid collection under the guaranty.

As regards the substance of applicable law, Studio Corno Avvocati supported the Italian law as applicable law in this matter in application of article 4 of Regulation (EC) No. 593/2008 (Rome I) which provides that, in case of absence of choice of applicable law by the parties, "the contract for the sale of goods shall be governed by the law of the country where the seller has his habitual residence" (par. 1 lett. a).

The judge has confirmed the Italian jurisdiction for application of interim measures. The trial is now being transferred to Germany for the substance of the matter to be resolved there. 

If you have any question, please do not hesitate to contact our LAWorld member firm, Studio Corno Avvocati in Milan and their experts in international commercial litigation: Mrs. Veronica Giussani, Junior Associate (veronica.giussani@studiocorno.it)   Mr. Mario Palma Busnelli, Senior Associate (mariopalma.busnelli@studiocorno.it)

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