(preliminary ruling requested by the French Cour de Cassation)

Transcription

1 terms JUDGMENT OF THE COURT OF 21 JUNE Société Bertrand v Paul Ott KG (preliminary ruling requested by the French Cour de Cassation) "Sale of goods on instalment credit Case 150/77 Convention of 27 September 1968 on Jurisdiction and the Enforcement of Judgments in Civil and Commmercial Matters Jurisdiction in the case of sales and loans on instalments Concept of "sale of goods on instalment credit terms" Independent classification within the context ofthe Convention Description (Convention of 27 September 1968, Arts. 13 and 14) Since the concept of a contract of sale on instalment credit terms varies from one Member State to another, in accordance with the objectives pursued by their respective laws, it is necessary, in the context of the Convention, to consider that concept as being independent and therefore to give it a uniform substantive content allied to the Community order. According to the principles common to the laws of the Member States, the sale of goods on instalment credit terms is to be understood as a transaction in which the price is discharged by way of several payments or which is linked to a financing contract. However, a restrictive interpretation of the second paragraph of Article 14 of the Convention, in conformity with the objectives pursued by Section 4, entails the restriction of the jurisdictional advantage for which provision is by made that article to buyers who are in need of protection, their economic position being one of weakness in comparison with sellers by reason of the fact that they are private final consumers and are not engaged, when buying the product acquired on instalment credit terms, in trade or professional activities. In Case 150/77 REFERENCE to the Court pursuant to Articles 1 to 3 of the Protocol of 3 June 1971 on the Interpretation by the Court of Justice of the Convention of 27 September 1968 on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters by the French Cour de Cassation (First Civil 1 Language of the Case French 1431

2 terms" Facts JUDGMENT OF CASE 140 /77 Chamber) for a preliminary ruling in the action pending between before that court Société BERTRAND, having its registered office at Arnage (France) and Paul Ott KG, having Republic of Germany) its registered office at Neustadt/Stuttgart (Federal on the interpretation of the concept "sale of goods on instalment credit within the meaning of Article 13 of the said Convention of 27 September 1968, THE COURT composed of: H. Kutscher, President, M. Sørensen and G. Bosco (Presidents of Chambers), J. Mertens de Wilmars, P. Pescatore, Lord Mackenzie Stuart and A. Touffait, Judges Advocate General: F. Capotorti Registrar: A. Van Houtte gives the following JUDGMENT Facts and Issues The facts, the procedure and the written observations submitted pursuant to Article 20 of the Protocol on the Statute of the Court of Justice of the EEC may be summarized as follows: Bertrand, which has its registered office in France, a machine tool the price of which was fixed at DM in an invoice of 26 May A separate invoice relating to transport and installation was later drawn up in the sum of DM DM of the first I and written procedure amount was not paid, while no payment at all was made on the second invoice. On 12 February 1972 Paul Ott KG, which has its registered office in the Federal Republic of Germany, sold to The letter by which the order was placed had stipulated delivery in June 1972 and payment by two equal bills of 1432

3 Summary BERTRAND v OTT exchange payable at 60 and 90 days (10 August and 10 September 1972). On 10 May 1974 the Landgericht (Regional Court) Stuttgart ordered Bertrand in its absence to pay to Ott, apart from the summ owing of DM 7 139, 10% interest on DM as from 11 October 1972 and on DM as from 21 August The judgment was notified on 14 June 1974 and thereafter became final, no appeal having been lodged. That judgment was declared to be enforceable in France, first by order of 30 June 1975 of the Tribunal de Grande Instance, Le Mans, and subsequently by a confirmatory judgment of the Cour d'appel, Angers, of 20 May 1976 which stated, in particular: "It is a matter of principle that a sale against deferred payment amounts to a cash sale". Bertrand appealed on a point of law against that judgment upon the ground that "a sale in which the price must be paid in particular by two bills of "Whether the sale of a one company company machine which agrees to make to another on the basis of a price to be paid by way of two equal bills of exchange payable at 60 and 90 days can be held to be a sale of goods on instalment credit terms within the meaning Convention." of Article 13 of the Brussels In accordance with Article 5 (1) of the Protocol of 3 June 1971 and Article 20 of the Protocol on the Statute of the Court, written observations were submitted by the parties to the main action, the Commission of the European Communities and the Governments of the Federal Republic of Germany, the United Kingdom of Great Britain and Northern Ireland and the Italian Republic. Upon hearing the report of the Judge- Rapporteur and the views of the Advocate General, the Court decided to open the oral procedure without any preparatory inquiry. exchange constitutes a credit sale; that it is mandatory for actions against credit buyers to be brought before the courts of the State in which the buyer is domiciled; and that a decision of a foreign court which has not complied with this binding rule on jurisdiction cannot be made enforceable in France." The Cour de Cassation (First Civil Chamber), finding that the solution to the problem thus posed depended on the classification of the contract, felt itself bound, pursuant to Article 3 (1) of the Protocol of 3 June 1971 on the Interpretation by the Court of Justice of the Convention of 27 September 1968, to ask that Court to give an interpretative ruling concerning Articles 13, 14 and 28 of the Convention. By judgment of 8 November 1977, which was received at the Registry of the Court of Justice on 15 December 1977, the Cour de Cassation stayed the proceedings and referred the following question to the Court for a preliminary ruling: II of the written observations submitted to the Court The appellant in the main action (Bertrand) sets out the facts and, before commencing its examination of the question raised directly in the judgment making the reference, emphasizes that the Landgericht Stuttgart necessarily classified the contract drawn up between the panics and indeed classified it otherwise than as a "sale of goods on instalment credit terms", since had it not done so it would have declined jurisdiction pursuant to the combined effect of Articles 13 and 14 of Section 4 of Title II of the Convention, which provide that in such a case proceedings may be brought by a seller against a buyer only in the courts of the State in which the defendant is domiciled. The French court did not feel itself bound by the unspecified class 1433

4 in in JUDGMENT OF CASE 140/77 ification adopted by the German court and reviewed that court's finding on this point; evidence of this is the question put by the Cour de Cassation, and even the previous classification of the said contract by the Cour d'appel, Angers, as a "cash sale". That review was required by the nature of the case, being necessary in order to ensure compliance with the Convention and to make good any errors committed by the court before which the dispute was first brought; otherwise, there would be a danger that the provisions of the second paragraph of Article 14 would remain inoperative whenever the court of first instance, in confirmation of its jurisdiction, refused to classify a contract as a sale on instalment credit terms. By way of analogy, mention may be made at this point of the judgment given by the Court the context, it is true, of a quite different classification Case 29/76 LTU v Eurocontrol, where it was accepted that the court applied to may review the classification of the subject-matter dealt with by the court of first instance. In the present case, "in view of the fact that the court applied to is empowered to classify a contract as a sale of goods on instalment credit terms with the same authority as the court in which the judgment was given, the question arises according to what law that classification must be undertaken by those courts". The French Cour de Cassation has merely raised the question of the content of the concept "sale of goods on instalment credit terms". It is necessary to know, before answering that question, from which legal system that concept is to be taken. For practical reasons, the international principle of the lex fori, which is accepted by the six Member States which are parties to the Convention, is not applicable by the two or more courts concerned at the same time in the event of a difference of classification in the Member States concerned. That principle is contrary to the objective of a uniform application of the Convention and to the recognition of the existence of a Community legal order. Classifications such as that of the sale on instalment credit terms, within the meaning of Section 4 of Tide II of the Convention, must therefore be held to be independent, to be defined according to Community law and incorporated into the law of each of the States. It is clear from a study of comparative law that the rules of the Member States concerning sales on instalment credit terms vary from one State to another, but that the objective thereof is the same: to protect, in certain cases, the buyer on instalment credit terms against a contract the apparent advantages of which are apt to hide the dangers. For that reason the Convention reinforced the jurisdiction of the court where the buyer is domiciled to take cognizance of any action brought by the seller, and thereby rules dictated by expense permitted the application of of any a social interest at the derogative stipulations. The rule contained in the second paragraph of Article 14 is exclusively a rule of jurisdiction, and not a rule of conflict of laws: it guarantees the jurisdiction of the courts of the State in which the buyer is the law even foreign domiciled whatever to be applied to the dispute. As regards the sale on instalment credit terms itself, there is no extrinsic element which enables disputes engendered by it to be linked to the domicile of the buyer; in this connexion there is no difference between a sale on instalment credit terms and a cash sale; thus the rule contained in the second paragraph of Article 14 appears at first sight to reinforce, in this particular field, the principle actor sequitur forum rei contained in Article 2, whereas in reality it is to be explained by the fact that the courts of the buyer's domicile are deemed to be better qualified than any others to take cognizance of actions concerning sales on instalment credit 1434

5 BERTRAND v OTT terms. This avoids the theoretical and practical difficulties caused by the thereby application by foreign courts of special rules having direct application. Moreover, the Convention draws its inspiration from the fact that the courts of the buyer's domicile are the latter's natural courts. The objective of the Convention as thus defined in terms of the protection of the buyer on instalment credit terms would be jeopardized if classification were undertaken on the basis of the lex fori, In conclusion, Bertrand claims that the Court of Justice should rule that: "A sale of machines which one company company agrees to make to another on the basis of a price to be paid by way of two equal bills of exchange payable at 60 and 90 days constitutes a sale of goods on instalment credit terms within the meaning of Article 13 of the Brussels Convention." since not only protective rules but also The respondent in the main action the very concept of the sale on instalment credit terms one country may vary from to another. Accordingly, the requirement of a uniform application of the law in all the States necessitates the use of a single Community classification, to be superimposed upon the various national rules without reference to any particular protective legislation. Thus a sale on instalment credit terms within the meaning of the second paragraph of Article 14 of the Convention can only be a credit sale in which the price is paid by successive amounts. The fact that the buyer has accepted bills of exchange to guarantee payment is irrelevant in this connexion since, in the contrary case, it would be too easy to abuse the Convention's protective intention. The material subject-matter of the transaction is likewise of no importance. One further consideration should be added to the remarks set out above. Rules regarding sales on instalment credit terms, in countries which have adopted such rules, are merely one element of general economic policy and in particular of policy with regard to credit, from which cannot they be separated. It would be inadvisable to interfere with those rules, even in a field as particular as that covered by the Convention. An ill-considered intervention would risk throwing the national economic laws into disarray an retraces the stages of the proceedings and states that, having regard to the provisions at present in force, the question which arises is as follows: "Is the court first seised of a dispute bound to attach an independent and purely Community definition to the concept of a sale on instalment credit terms, or may it derive that definition from its own national system, and if so, is the classification arrived at by that court binding upon the court to which application is made to recognize or enforce the judgment?" A large number of learned writers achieve a disjointed construction. (Goldman, Bellet, Droz, Gotho and Molleaux) incline in favour classification which are common to of the Contracting States or Community classifications. Moreover, the Court itself shares this inclination (judgment of 6 October 1976 in Case 12/76 Tessili [1976] ECR 1473). The criterion of the "objectives" of the Convention has been restated in other decisions (judgments of 6 October 1976 in Case 14/76 De Bloos [1976] ECR 1497; 30 November 1976 in Case 21/76 Bier [1976] ECR 1735). The problem, therefore, is to ascertain whether the concept of a sale on instalment credit terms "may be interpreted in a uniform manner within the Member States and constitute an independent, Community concept". Viewed in this way, since the objective of the Convention is to ensure the "free 1435

6 movement" JUDGMENT OF CASE 140/77 of European decisions, the rules of interpretation must, in order to encourage the achievement of that objective, make it possible to restrict to the highest degree the causes of a refusal to recognize and to classify in a uniform manner those concepts in particular such as that of the sale on instalment credit terms which circumscribe the sphere of application of a rule of jurisdiction which derogates from the ordinary law of the Convention. In the present case, it is clear that if a common concept of the sale of goods on instalment credit terms were not adopted, the free movement of judgments relating to that subject might well be impeded, since the court in which the judgment was given and the court applied to do not necessarily have the same conception of a sale on instalment credit terms. Not only the free movement of judgments but also equality of treatment of nationals of the Member States would be impeded. The second criterion for interpretation given by the above case-law, that is to say the "system" also gives a of the Convention, conventional and common meaning to the concept of a "sale on instalment credit terms". Since that system is deemed to be coherent, the various rules of jurisdiction should not encroach one upon the other and should be distinguished according to whether they arise from the principle or from the exception (opinion of Mr Reischl in Case 19/76). If the rules of jurisdiction contained in Section 4 of the Convention are analysed, it will be found that those rules are imperative in character or appertain to public policy, on the basis either of the interests of an efficient administration of justice, which requires a reduction in cases concerning jurisdiction and the concentration of certain disputes in a single forum, or on the basis of considerations of a social nature, deriving from the desire to protect certain categories of persons, in this case buyers or borrowers on instalments. The intention of those who drafted the Convention was to avoid the inevitable risk that conceptual differences should lead again to a review by the court applied to of the jurisdiction of the court in which judgment was given. In the present instance, since the Convention does not refer to national law in matters of sale on instalment credit terms, that concept must be uniform, as is shown by the impossibility of undertaking any modification of the corresponding national laws. If, therefore, full effect is to be given to the second paragraph of Article 14, that is to say, if it is to be accorded a coherent meaning in relation to the body of rules concerning jurisdiction contained in the Convention, it must be held that the rule contained therein constitutes an exception to the rule laid down in matters relating to a by Article 5 (1) of the Convention. contract In view of the content of Article 5 (1), the second paragraph of Article 14 provides that proceedings may be brought by a seller against a buyer only in the courts of the State in which the defendant is domiciled. Accordingly, to allow the concept of a sale on instalment credit terms to be determined by reference to the national laws would amount to depriving the rule contained in the second paragraph of Article 14 of all practical effect. In a contractual matter as important as the sale of goods disparities of interpretation would develop, constituting the absolute negation of a single and uniform rule of jurisdiction, which is the clear objective of the second paragraph of Article 14. Indeed, although, according to the case-law of the Court of Justice (judgment in case 14/76), the term "obligation" contained in Article 5 (1) of the Convention cannot be interpreted as referring to any obligation 1436

7 obligation." concerned" BERTRAND v OTT whatsoever arising under the contract in This accounts for the importance, in question but must refer to the contractual obligation forming the basis of the legal proceedings and corresponding to the contractual right on which the plaintiffs action is based, the Court of Justice has elsewhere decided that the place of performance of the obligation, within the meaning of Article 5 (1) of the Convention, is to be determined in accordance with the law which governs the obligation in question according to the rules of conflict of laws of the court before which the matter is brought. The application of that case-law to the contractual matter of sale on instalment credit terms therefore allows the court before which proceedings by the buyer are brought to determine, in accordance with the law governing the obligation in question, which is not necessarily its own law but the law applicable under its own rule of conflict of laws to the contractual obligation in question, the place of performance of that obligation, and it is a necessary conclusion that the court having jurisdiction under international law is not always the court of the place where the buyer, the defendant, is domiciled. Moreover, it should not be forgotten that in matters of contract the place of performance of the obligation is, first and foremost, fixed by the parties themselves and this, in most systems of conflict of laws, entails the application of the law of autonomy, as is shown by the national case-law. "In short, it is certain that if it were left to the national legislatures to determine the concept of sale on instalment credit terms sellers in certain countries would be enabled systematically to bring before the courts of the place where they are domiciled their buyers on instalment credit terms domiciled in another Contracting State, by providing in their contracts that the latter are subject to their national law which authorizes the determination of the courts having jurisdiction on the basis of the place of performance of the connexion with such concepts, of independent and Community particularism which is another aspect conceptions, which exclude that of partitioning. This is particularly true of the rule of jurisdiction contained in the second paragraph of Article 14. In connexion with the Treaty of Rome and in view of the objectives of Article 220, the conclusion must be drawn that the Convention, the aim of which is to achieve the objectives of the Treaty within the field of legal jurisdiction, can take full effect only if it is interpreted as a separate entity, without taking account of particular aspects of internal law, that is without allowing those aspects to develop in contradiction to a Community principle which it has laid down, as is the case with expressly the second paragraph of Article 14. In this respect a reference to national law can only maintain particularisms and internal legal frontiers and encourage divergent interpretations. Finally, the Community concept of sale on instalment credit terms is easily definable "by way of a systematization of solutions which, as to their principle, have already been established in most of the States (judgment Case 21/76, paragraph 23). In fact, when the Brussels Convention of 1968 was signed, only Belgium possessed special legislation on sales on instalment credit terms containing a rule of territorial jurisdiction derogating from the normal law (Law of 9 July 1957, Articles 1 in and 2, together with Article of the Code Judiciaire of 10 October 1967). Such a system was introduced, subsequent to the Convention, in the Federal Republic of Germany by a legislative amendment of 1 September 1969, and subsequently in France by the Law No of 10 January Those laws were enacted for the protection of consumers alone and embody two concepts of the credit 1437

8 terms" JUDGMENT OF CASE 140/77 sale or sale on instalment credit terms: a restrictive concept concerning consumers and a wider concept concerning professional or trade activities; this, in particular, is reinforced by the means of application of the French law. It is therefore evident that legislatures which enact special laws in the field of sales on instalment credit terms and provide in particular for rules of jurisdiction which depart from the normal law in favour of buyers, are exclusively concerned with non-professional buyers. It may well be thought that the draftsmen of the Brussels Convention were possessed of the same concern when they of Section 4 and that they laid down the rules were not governed by monetary considerations. Accordingly, the rule must not exceed its aim, since the Community concept of sale on instalment credit terms may not be applied without distinction to nonprofessional and professional buyers. indeed, the situation is In most cases, far from comparable and the contract is not subject to the same rules. The international sale of goods is not an ordinary sale and is rarely undertaken outside commercial dealings between traders. It is very rare for payment to be made on a cash basis in international sales, and because of the problems inherent in international payments and the transfer of funds abroad in consequence of legislative disparities in relation to foreign exchange, the concept of a cash sale has a different meaning in international law from that of domestic law. Payment by the issue of bills of exchange is very common; it is even at the basis of international transactions which cannot be speedily concluded by reason of the distance separating the parties. Also, the financing of such transactions is effected om accordance with special procedures and subject to the intervention of specialized bodies. In short, the expression "sale on instalment credit used in Section 4 of the Brussels Convention cannot cover all international sales in which payment is not made on a cash basis, otherwise all international sales would, by implication, be governed by that exceptional rule of jurisdiction. The exception, that is to say exclusive jurisdiction, would become the rule in a matter which is particularly important for the Brussels Convention, in view of the frequency of disputes connected with payment or performance in relation to transactions in international trade. The second paragraph of Article 14 would supersede Article 5 (1) for all proceedings by the seller against the buyer. In fact, where an international sale is undertaken according to the normal procedures in that field and in accordance with common usage the trade buyer has no need to claim the protection which is specially provided by the Convention. The general rules must apply. The advantage granted by the convention to the buyer or borrower on instalments should not be extended systematically to every buyer, at the risk of erecting a further barrier to the development of international trade. Quite clearly, these questions were not unknown to the signatories of the Brussels Convention, who were rightly concerned to allow the speedy setdement of disputes between nationals of the Member countries of the Community by facilitating the free movement of judgments. That effort should not be paralysed by an extensive interpretation of the provisions providing for exceptions to the special rules of jurisdiction which, in particular in the case of contract law, leave to the creditor the choice of bringing proceedings against the debtor either in the courts where the latter is domiciled or in the courts for the place of performance of the obligation. The Community concept of sale on instalment credit terms must therefore be a concept which is restricted to the case where the protection provided for by the Brussels Convention is fully 1438

9 " Declare Declare Reply With systems" terms" BERTRAND v OTT justified, that is to say the case of nonprofessional buyers. the weaker party but that, since this is a The defendant in the main action therefore suggests that the Court should : that the concept of sale on instalment credit terms within the meaning of Article 13 of the Brussels Convention must be interpreted in a uniform manner in the Member States; rule having special scope, the interpretation must remain within the limits of its objective. The classification of "a sale on instalment credit independent and be must be established on the basis of the "general principles which stem from the corpus of the national legal (Case 29/76 Eurocontrol, judgment of 14 October 1976 [1976] ECR 1541; see also the Jenard Report on the Convention). The Convention that in the case of the sale of goods on instalment credit terms or of loans expressly made to finance the sale of goods and repayable by instalments, entered into for the requirements of a professional or trade activity, jurisdiction is to be determined in accordance with the rules contained in Section 4 of the Brussels Convention, with the exception of that laid down in the second paragraph of Article 14, that provision being restricted to the case of the non-professional buyer or borrower; does not itself define the concept of sale on instalment credit terms; the Jenard Report merely states that Section 4 relates to the sale of goods for which the price is discharged by way of several payments or to the sale of such goods linked to a financing agreement (hire purchase sales). Credit sales, in which a product is to be delivered immediately, payment of the price being deferred, are a very common trade practice, in particular in international commercial relations, which the legislatures of the Member States have not seen fit to regulate. On the other hand, by reason of the to the question put by the French Cour de Cassation to the effect that the sale of a machine which one company to another company agrees to make on the basis of a price to be paid by way of two equal bills of exchange payable at 60 and 90 days cannot be held to be a sale of goods on instalment credit terms within the meaning of Article 13 of the Brussels Convention." social problems which it raises, consumer credit is the subject-matter of national rules, and the sale on instalment credit terms, its most frequent manifestation, is regulated by a series of national provisions enumerated by the Commission. Having regard to the objectives of Article 13 and the particular features national of legislation, the Commission considers be what criteria should used to determine whether what is at issue is a sale on instalment credit terms or a The Commission of the European Communities recalls the Community ambit of the Convention, which has already been demonstrated by the case-law of the court (judgments of 14 July 1977 in Case 12/76, cited above, and Joined Cases and 10/77 [1977] 9 ECR 1517). It emphasizes that in Sections 3 and 4, the choice of special jurisdiction is linked to the protection of mere credit sale: regard to the status of the contracting parties, it is perhaps tempting to think that the mere fact that the buyer is a trader is sufficient to exclude the application of Article 13; this, however, disregards the fact that small traders have to have recourse to sales on instalment credit terms; 1439

10 With With First The The periodically" by CASE for JUDGMENT OF /77 regard to the nature and subject-matter of the contract, it should be noted that national laws refer to products to be consumed over a greater or lesser period of time; their value is often limited to a maximum figure; regard to the means of payment, in comparison with the credit sale merely by deferred payment, the sale on instalment credit terms is characterized the price being payable "by fractions due more or less elaborate techniques for repayment: (1) payment of a deposit; (2) payment or interest, the rate of (3) which is often regulated; the existence of bills of exchange is irrelevant; In conclusion, the Commission submits that the question raised should be answered as follows: "A contract for the sale of a machine which one company agrees to make to another company on the basis of a price to be paid by way of two equal bills of exchange payable at 60 and 90 days does not correspond to the criteria normally used to classify a sale as a sale of goods on instalment credit terms as referred to in Article 13 of the Brussels Convention of 27 September 1968." The Government of the United Kingdom believes that the answer to the question referred to the Court requires an examination of the function which Article 13 performs in the context of the Convention as a whole and its objectives. (4) time-limits, the maximum often being fixed by law; (5) a minimum number of payments. The Commission then sets out the criteria which should prevent a refusal of the order for enforcement on the grounds that there is a sale on instalment credit terms: of all, it is clear from the national laws on sales on instalment credit terms that those laws do not cover credit sales relating to capital goods used by industrial undertakings; if the consumer is a trader, he must be a person operating a small business, and in any event not an industrial company. price fixed by be fairly small. the contract must contract must contain sufficiently elaborate technical details relating to the deposit, the periodicity and number of payments, the rate of charge, the time-limit for payment in relation to the amount The Convention lays down as the fundamental principle that persons domiciled in a Contracting State should be sued in the courts of that State (Article 2). In the view of the United Kingdom, any departure from that principle must be interpreted strictly in the light of the underlying purposes which call for a departure. The justification for the departure provided for in Section 4 derives from a desire to protect the buyer similar to that which exists in the legislation of several States. However, buyers on credit terms are not as such afforded special protection in the law of any Member State for to give them such protection would have serious consequences for trade in the Community. Such protection is reserved exclusively buyers who may be classified as "consumers". broadly This concept applies to buyers who are not engaged in commercial activities, to be understood, in the various systems of protective law, and that criterion is and the nature of the subject-matter as meaning either that the buyer is not or service. engaged in commercial activities or that 1440

11 terms" terms' BERTRAND v OTT the goods are bought for private consumption and not for the purposes of the exercise of a business or profession. In the United Kingdom protection for buyers on credit terms is at present confined to transactions involving purchases worth less than and this criterion of transactions of a relatively small character is to be found in other legal systems. Unless the application of Article 13 is limited in some such way its result would be arbitrary and illogical and might hinder inter-state trade and the free movement of goods. The number of instalments is not characteristic of an economically weak buyer. The true test of a sale on instalment credit terms lies in the relationship between the parties and the nature of the transaction at issue, and the latter should fall into the category of consumer transactions, this being a question which must be determined by the court before which the sale is litigated. The German Government, calling in evidence the established case-law of the Court, states that the concept of "sale on instalment credit may be interpreted on the basis of the text having by regard to the objectives pursued the Convention. In the Federal Republic of Germany the law concerning sales on instalment credit terms is intended to protect the buyer on instalments whereas, in other States, it also pursues objectives appertaining to credit policy by way of provisions relating to minimum deposits or to the maximum duration of credit. The German law on sales on instalment credit terms is not applicable to a sale to a trader whose name appears on the commercial register. In the present case, involving the acquisition by a commercial undertaking of a highly-priced machine intended for commercial use, it might be argued that the provisions of Tide II, Section 4, of the Convention, are not applicable since the national rules payment on concerning instalments are in agreement on essentials in restricting their scope to transactions of a private nature, to the exclusion of transactions undertaken by a professional buyer for the purposes of his profession or for industrial or commercial objectives, to buyers who are not connected with trade. However, it appears difficult in the absence of any indication of this nature in the text of the Convention to draw a distinction between persons or operations which are in need of protection and those which are not. The Government of the Federal Republic of Germany view with satisfaction an or would therefore interpretation derived from the provisions of the Convention and would not consider a restriction in matters of commercial operations as being in accordance with the aims of the latter. The Government of the Federal Republic would be inclined to answer as follows the questions raised in the order of the Cour de Cassation: "1. The interpretation of the expression 'sale of goods on instalment credit within the of meaning Article 13 et seq. and the first paragraph of Article 28 of the Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters must be drawn directly from the Convention on the basis of certain findings of comparative law. 2. The sale of a machine which one commercial company agrees to make to another on the basis of a price to be paid by way of at least two bills of exchange falling due following delivery of the goods is to be classified as a sale of goods on instalment credit terms within the 1441

12 terms" " The terms' terms" A The Oral terms' JUDGMENT OF CASE 140/77 meaning of Article 13 of the Convention." The Italian Government makes the preliminary remark that the rules of the Brussels Convention are in the form of rules inherent in or at least derived from the Community legal order, since they were laid down so as to serve the objectives of the latter. It follows that the interpretation of the expression "sale on instalment credit must be sought, as a general rule, at the level of the Community order and must be determined in an "independent" manner and not by III 'sale on instalment credit within the of meaning the said Article 13 is constituted by the sale of a commodity in respect of which it is established in advance that all or part of the price is to be discharged after delivery of the object in question in one or more payments which may be unequal; issue of one or more bills of exchange constituting credit for the payments is irrelevant, unless there debt." is substitution of the procedure reference to the legal order of any particular State. The combined provisions of Article 13, the second paragraph of Article 14 and Article 15 of the Convention render proceedings brought by the seller against the buyer "on instalments" subject to the jurisdiction of the national courts of the defendant. That rule is prompted by the tendency to protect the said buyer because he is generally the weaker contracting party. A "sale on instalment credit be considered to be a may sale in respect of which it is stipulated that the price is to be paid subsequent to the delivery of the commodity by fractions of the whole and with prior specification either of the amount of the payments (which are not necessarily equal) or of the rate of those payments (which are not necessarily equidistant in time). In conclusion, the Italian Government proposes the following reply: At the hearing on 27 April 1978 the representative of the Jean- Commission, Claude Seche, recalled that in his opinion the exception contained in Section 4 to Article 13 of the Convention of 1968 must be interpreted strictly, in view of the need to protect the persons concerned. On the basis of that criterion and of a study of comparative law, the Commission has arrived at the conclusion that, although traders should not be excluded systematically from the protection provided by the Convention, at least contracts concerning industrial machines or contracts concluded by industrial companies should be excluded. The Commission brought to the attention of the Court a projected amendment to Article 13 the drawn up by national delegations in the context of the adjustment of the Convention, limiting the field of application of that article to contracts entered into by a person for a purpose which may be expression 'sale on instalment credit referred to in Article 13 of the Convention of 27 September 1968 is independent and common to all the Member States; professional or trade activity, that considered extraneous to his persons being designated the "consumer". The Advocate General delivered his opinion at the hearing on 31 May

13 BERTRAND v OTT Decision 1 By judgment of 8 November 1977, which was received at the Court Registry on 15 December 1977, the French Cour de Cassation referred to the Court of Justice a question, pursuant to Articles 1 to 3 of the Protocol of 3 June 1971 (Journal Officiel L 204, p. 28) on the Interpretation by the Court of Justice of the Convention of 27 September 1968 on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters (Journal Officiel L 299 of 31 December 1972, p. 32), hereinafter referred to as "the Convention", for a preliminary ruling concerning the interpretation of Articles 13, 14 and 28 of the said Convention. 2 That question has been raised in the context of a dispute between two commercial undertakings, one having its registered office in Germany, the other in France, concerning a contract, dated 12 February 1972, for the sale of a machine tool, the price of which, fixed at DM , was to be paid by the French company by way and 90 days, which were only partially discharged. of two equal bills of exchange payable at 60 3 By judgment of 10 May 1974 the Landgericht Stuttgart ordered the French company, in its absence, to pay the sum of DM 7 139, plus interest. 4 That decision was declared to be enforceable in France, first by order of the Tribunal de Grande Instance, Le Mans, of 30 June 1975, and then by conformatory judgment of the Cour d'appel, Angers, of 20 May An appeal was made against that judgment on a point of law. 6 The Cour de Cassation held that the judgment of the Cour d'appel, Angers, "would be valid under the third paragraph of Article 28 of the Brussels Convention, by virtue of which the jurisdiction of the courts of the State in which the judgment was given may not be reviewed by the court before which enforcement is sought unless the sale can be held to be a sale of goods on instalment credit terms within the meaning of Article 13 of the Convention, in which case, under the second paragraph of Article 14 and the first paragraph of Article 28, proceedings may be brought only in the courts of the State in which the respondent company is domiciled, namely, 1443

14 .. only JUDGMENT OF CASE 140 /77 the courts of France, and execution must be withheld from the decision of a German court". 7 The Cour de Cassation deduced from this that the solution to the problem depended upon the status to be accorded to the contract and it therefore referred the case to the Court of Justice in order to ascertain by way of a preliminary ruling "whether the sale of a machine which one company agrees to make to another company on the basis of a price to be paid by way of two equal bills of exchange payable at 60 and 90 days can be held to be a sale of goods on instalment credit terms within the meaning of Article 13 of the Brussels Convention". 8 In relation to the sale of goods on instalment credit terms, the second paragraph of Article 14 of the Convention provides that "proceedings may be brought by a seller against a buyer in the courts of the State in. which the defendant is domiciled". 9 In consequence of that imperative rule of juridiction the Landgericht Stuttgart, the court in which the original judgment was given, the Tribunal de Grande Instance, Le Mans, and the Cour d'appel, Angers, the courts in which enforcement was sought, refused, whether by implication or the contract of sale in expressly, in defining their jurisdiction, to classify question as a contract for the sale of goods on instalment credit terms. 10 The reservations of the Cour de Cassation regarding the precise status of the said contract persuaded it to refer the above-mentioned question to the Court of Justice. 11 By that question the Court is asked whether a contract of sale such as that described is entitled to the privileged position with regard to jurisdiction created by the second paragraph of Article 14 of the Convention. 12 The concept of a contract of sale on instalment credit terms varies from one Member State to another, in accordance with the objectives pursued by their respective laws. 13 Although all of those laws incorporate the idea of protection for the buyer "on instalments" because, in general, he is the weaker party in economic 1444

15 BERTRAND v OTT terms in comparison with the seller, certain of them are also based on considerations of economic, monetary and savings policy, which are intended to control the practice of sales on instalment credit terms, in particular in relation to consumer durable goods (cars, household electrical and audio-visual equipment, etc.), most often by the indirect expedient of provisions relating to minimum deposits or to the maximum duration of credit or by laying down minimum or maximum values for the total sale price. 14 Since these various objectives have led to the creation of different rules in the various Member States it is necessary, for the purpose of eliminating obstacles to legal relations and to the settlement of disputes in the context of intra-community relations in matters of the sale of goods on instalment credit terms, to consider that concept as being independent and therefore common to all the Member States. 15 In fact, it would not be possible to guarantee the harmonious operation of Article 13 et seq. of the Convention if the expression in question were given different meanings in the various Member States according to the court first seised of a dispute concerning a contract for the sale of goods on instalment credit terms or the court having jurisdiction to order enforcement. 16 It is therefore indispensable, for the coherence of the provisions of Section 4 of the Convention, to give that expression a uniform substantive content allied to the Community order. 17 To this finding must be added the fact that the compulsory jurisdiction provided for in the second paragraph of Article 14 of the Convention must, because it derogates from the general principles of the system laid down by the Convention in matters of contract, such as may be derived in particular from Articles 2 and 5 (1), be strictly limited to the objectives proper to Section 4 of the said Convention. 18 Those objectives, as enshrined in Articles 13 and 14 of the Convention, were inspired solely by a desire to protect certain categories of buyers who, having been parties to contracts for the "sale of goods on instalment credit terms", may be sued by the seller only in the courts of the State on the territory of which the said buyers are domiciled, whereas sellers domiciled be sued either in the courts of on the territory of a Contracting State may that State or in the courts of the Contracting State in which the buyer is domiciled. 1445

16 JUDGMENT OF CASE 140/77 19 In order to reply to the question referred to the Court an attempt must be made to elaborate an independent concept of the contract of sale on instalment credit terms in view of the general principles which are apparent in this field from the body of laws of the Member States and bearing in mind the objective of the protection of a certain category of buyers. 20 It is clear from the rules common to the laws of the Member States that the sale of goods on instalment credit terms is to be understood as a transaction in which the price is discharged by way of several payments or which is linked to a financing contract. 21 A restrictive interpretation of the second paragraph of Article 14, in conformity with the objectives pursued by Section 4, entails the restriction of the jurisdictional advantage described above to buyers who are in need of protection, their economic position being one of weakness in comparison with sellers by reason of the fact that they are private final consumers and are not engaged, when buying the product acquired on instalment credit terms, in trade or professional activities. 22 The answer to be given to the national court should therefore be that the concept of the sale of goods on instalment credit terms within the meaning of Article 13 of the Brussels Convention of 27 September 1968 is not to be understood to extend to the sale of a machine which one company agrees to make to another company on the basis of a price to be paid by way of bills of exchange spread over a period. Costs 23 The costs incurred by the Commission of the European Communities and the Governments of the Federal Republic of Germany, the Italian by Republic and the United Kingdom of Great Britain and Northern Ireland, which have submitted observations to the Court, are not recoverable. 24 Since these proceedings are, in so far as the parties to the main action are concerned, in the nature of a step in the action pending before the national court, the decision on costs is a matter for that court. 1446

17 BERTRAND v OTT On those grounds, THE COURT in answer to the question referred to it by the French Cour de Cassation by judgment of 8 November 1977, hereby rules: The concept of the sale of goods on instalment credit terms within the meaning of Article 13 of the Brussels Convention of 27 September 1968 is not to be understood to extend to the sale of a machine which one company agrees to make to another company on the basis of a price to be paid by way of bills of exchange spread over a period. Kutscher Sørensen Bosco Mertens de Wilmars Pescatore Mackenzie Stuart Touffait Delivered in open court in Luxembourg on 21 June A. Van Houtte H. Kutscher Registrar President OPINION OF MR ADVOCATE GENERAL CAPOTORTI DELIVERED ON 31 MAY Mr President, Members of the Court, 1. In the case which concerns us today the Court is required to interpret the provisions of the Brussels Convention of 27 September 1968 on jurisdiction and the enforcement of Judgments in Civil and Commercial Matters. The question put by the French Cour de Cassation, Civil Chamber, is as follows: "whether the sale of a machine which one company company agrees to make to another on the basis of a price to be paid by way of two equal bills of exchange payable at 60 and 90 days can be held to be a sale of goods on instalment credit terms within the meaning of Article 13 of the Brussels Convention". I would emphasize the precise and circumscribed nature of that request: the answer thereto must 1 Translated from the Italian. 1447