Stephen Cowan: Jurisdiction – a timely reminder for Heriot Watt University
Stephen Cowan takes a look at a recent case in which a Scottish university’s claim against a student was dismissed due to lack of jurisdiction.
The basic rule of jurisdiction is that an individual should be sued in the court where they reside, as opposed to the court where a pursuing creditor carries on business. The rationale for this is to protect “consumers” who are seen to be the commercially weaker party in the relationship. Currently Scottish jurisdiction is governed at a European level by the Civil Jurisdiction and Judgments Act 1982. This incorporated the 1968 Brussels Convention on Jurisdiction and Enforcement of Judgments in Civil and Commercial Matters. This became known as “Brussels 1” because it was later amended by EU Regulations in 2012 – known as Brussels 1 Recast - which recast the 1968 predecessor Convention. From a Scottish perspective the 2012 recast regulations amended the 1982 Act, by virtue of the Civil Jurisdiction and Judgments (Amendment) Regulations 2104, and the Civil Jurisdiction and Judgment (Amendment) (Scotland) Regulations 2015.
How do the regulations determine domicile?
In terms of Brussels 1 Recast the main ground of jurisdiction is the defender’s domicile. The preamble states: “(18) In relation to insurance, consumer and employment contracts, the weaker party should be protected by the rules of jurisdiction more favorable to his interests than the general rules”.
Section 4 relates to consumer contracts with Article 17 providing that “In matters relating to contracts by a person, the consumer, for a purpose which can be regarded as outside his trade or profession, jurisdiction shall be determined by this section…”
Article 17(c) regulates contracts where a creditor business provides goods or services to a consumer. This states that where a party which pursues commercial or commercial activities in the Member State of the consumer’s domicile, (or by any means directs such activities to that member state) then the consumer has a choice. In terms of Article 18 the consumer can bring an action against the commercial party either in the commercial party’s court or in the consumer’s court. Naturally it will be more likely that the consumer will prefer to institute proceedings in his “home” court rather than going to the inconvenience of raising proceedings in commercial party’s court. However the choice which the consumer has is unavailable to the commercial party who must initiate proceedings in the court of the consumer’s domicile.
If the defender is not a “consumer” then a different rule applies with Article 8 providing that the consumer may be sued
“In matters relating to a contract, the courts for the place of performance of the obligation in question.” So if, for example, the creditor was a business trading from Edinburgh and that business provided business services to a German individual in Germany, within the German’s trade or profession, then court action could be raised in Edinburgh Sheriff court. This is because performance of the contact (in this example payment of the price) should have been “performed” in Edinburgh by means of the German tendering payment to the supplier in Edinburgh.
Herriot Watt University’s tale
Herriot Watt University took an action against Christian Schlamp in Edinburgh Sheriff Court for non-payment of his tuition fees for his distance learning business course. The university argued that Edinburgh sheriff court had jurisdiction because they had entered into a “contract for the provision of educational services”. However the court upheld the defender’s argument that because he was a “consumer”, in terms of the EU Regulation, then the action had to be raised in Germany. The university’s argument was that when Schlamp enrolled on the course he was not a “consumer”, in terms of Article 7, because the course related closely to his self-employment as a finance and business consultant. As a consequence the contract’s performance (payment of the fees) should have been made in Edinburgh, thus conferring jurisdiction on the Scottish court. Schlamp’s counter argument was that the contact was clearly a “consumer” contract in which event the university did not have jurisdiction. Any court action arising would have to be raised in a German court which would be the court of his domicile.
What was the court’s decision?
The court held that there was no onus on Schlemp to prove that he was a consumer. And because he had contracted in a personal capacity for the provision of services it was clear he was in a “weaker bargaining position”. As such he was entitled to the protection which Brussels 1 Recast bestowed. With the sheriff holding that “The weaker position relates to both the level of knowledge of the consumer and to his bargaining power under terms drawn up in advance by the supplier, the content of which the consumer is unable to influence” it was clear that the sheriff was not going to find in the university’s favour.
The sheriff also said that “the individual circumstances of each contract are of central importance. A student undertaking an educational course may or may not be a consumer, depending on the purpose and content of the contract for the supply of educational services. For a contact to be a consumer contract” Referring to Brussels 1 Recast ( article 17(1)) “for a contract to be a consumer contract it has to be one which can be regarded as being outside his trade or profession”.
Whilst the decision may only be one from the sheriff court, and non-binding, the sheriff’s reasoning cannot be faulted. His statement and interpretation of the law are entirely correct and serve as a timely reminder that the Brussels jurisdiction regime seeks to protect consumers in the manner illustrated in the decision. Of course that’s not all which Brussels 1 Recast achieves. Whilst necessarily a complex instrument, in addition it provides a well regulated regime for the allocation of jurisdiction amongst the member states of the EU. With the EFTA states having a similar regime with the Lugano Convention a uniform set of jurisdictional rules pervades throughout the entire European Economic Area. It is hoped that when the UK negotiates the withdrawal agreement from the EU that some method will be fashioned to ensure that we retain the benefits of this welcome code thus bringing certainty and clarity in our contractual relationships with European business, consumers and other entities.
Stephen Cowan is managing director of Yuill + Kyle, and author of Scottish Debt Recovery: A Practical Guide