Issues of jurisdiction (II)

Question: what in case of B2B SLA?

B2B scenarios are regulated in a different way as regards jurisdiction, provided the freedom of the parties to regulate their relationship as they want. In a B2B contract both the parties are companies or other legal persons, so, according to Article 60, they are domiciled where they have alternatively their statutory seat, their central administration, or their principal place of business. It must be pointed out that it is rather difficult to determine the principal place of business of a party that (like typically the technology provider and the supplier of Grid-based services) carries on its business exclusively on the Internet and therefore it may be cumbersome if not impossible to locate the business in any specific geographical point. Neither it is important to consider the location of the technology supporting the website, since article 19 of the Electronic Commerce Directive provides that it is irrelevant in determining the place of establishment of “a company providing services via an Internet website”.

For these purposes, also the reference to the top level domain is unhelpful: the fact that the domain name of a company ends, very often, with “.com” or “.net” is not a clear indication of the location of the place of establishment of the company itself. We can conclude that if the defendant is the Grid service provider, it is not generally possible to determine the domicile having regard to the principal place of business and so Regulation 44/2001 will apply only if the supplier has its statutory seat or central administration within the EU; when, on the contrary, the other party of the SLA is sued all the criteria set out in article 60 to determine the domicile will be applicable, unless such a party carries on its business on the Internet too. When the Regulation applies, the general rule set out in Article 2 provides for the jurisdiction of the court of the State where the defendant is domiciled. In contractual disputes however Article 5(1) of Regulation 44/2001 confers jurisdiction also to the courts of a Member State different from that of the domicile of the defendant. Article 5 provides that “[A] person domiciled in a Member State may, in another Member State, be sued:

    “(a) in matters relating to a contract, in the courts for the place of performance of the obligation in question;
     (b) for the purpose of this provision and unless otherwise agreed, the place of performance of the obligation in question shall be:
              - in the case of the sale of goods, the place in a Member State where,                   under the contract, the goods were delivered or should have been                     delivered,
              - in the case of the provision of services, the place in a Member State                   where, under the contract, the services were provided or should                         have been provided,
     (c) if subparagraph (b) does not apply then subparagraph (a) applies”.

It is then necessary to consider whether a SLA can be considered a “contract of provision of services” within the meaning of article 5(1)(b). If the answer is positive, the competent court to adjudicate all the disputes concerning the SLA will be that of the country where the service is provided or shall be provided; otherwise the competent court will be determined taking into consideration (i) the specific obligation upon which the claimant founds his action and (ii) the place of performance of such an obligation, according to the rules about conflict of laws of the seized court. We can fortunately answer the question with the authoritative uidance of the European Court of Justice (ECJ). In the recent judgement Falco Privatstiftung it was held that a licence agreement could not be included in the notion of “contract for the provision of services” employed by article 5(1)(b), since “the concept of service implies, at the least, that the party who provides the service carries out a particular activity in return for remuneration”.  Then an agreement can be defined as a contract for the provision of services only if it creates on the supplier an obligation to perform an activity or active conduct.

The solution provided by the ECJ may be read together with one of the opinions expressed in the literature. It was argued that the notions set out in article 5(1)(b) have to be interpreted in the light of the principle of proximity: so a contract can be regarded as one for the provision of services only if a significant aspect of it takes place where the conduct of one of the parties is expected to occur and thus only if, at least, such a conduct is an active one, possible to be localized in a specific geographical point [Franzina]. Moreover this interpretation is consistent with the objective of the reform of article 5, n. 1, that is to provide a “pragmatic determination of the place of performance”: when the service supplier’s obligation does not imply any positive conduct, there is no place where the performance can be “pragmatically” located and then article 5(1)(b) must be held inapplicable [De Cristofaro]. It is then possible to argue that SLAs are not contracts for the provision of services for the purposes of the Regulation, since no active conduct is required to the technology provider or to the Grid-based service supplier, under the contract. Consequently Article 5(1)(a), instead of Article 5(1)(b) will apply. This is surely the case in point for the provision of Grid capacity (e.g. in the field of storage, where no specific activity is required by the provider) and the same conclusion can be reached as regards the supply of Grid-based services. To make an example, the provision of SaaS to a plurality of customers does not basically require any specific activity directed to any particular client, in other words the SaaS supplier does only upload the software in his servers and does not physically deliver it to every customer. As confirmed by the ECJ22, the obligation in question is that upon which the claimant founds his action. When, e. g., the supplier sues the other party for payment of the sum due under the contract, the relevant obligation is that of payment; when, on the contrary, the supplier is sued for damages for alleged breach of a contractual obligation related, for instance, to the quality of the service, we must have regard to such an obligation. After having identified the relevant obligation, we have to consider where it has to be performed. In the light of Tessili case, the question should be answered having regard to the law governing the contract under the private international law rules of the court seized. The reference to the law governing the contract allows determining the place of performance also of obligations not implying an active conduct, since such a law will generally provide “default rules” establishing the place of performance even if it is not possible to identify it on a factual basis.In other words, thanks to Tessili approach, it is possible to determine where the performance of obligations is legally due, like those of the technology provider or of the Grid-based service supplier, which are expected to be performed only in the virtual space of the Internet.

In conclusion, as far as SLA disputes are concerned, Regulation 44/2001 confers special jurisdiction to the court of the place, where the obligation upon which the claimant founds his action has to be performed, under the law governing the contract. Therefore the criteria described and analysed supra about the law governing the agreement do apply.