1. Ruling of European Court of Justice on jurisdiction in product liability case

Another interesting judgment of the ECJ on jurisdiction in cross-border disputes was handed down on 22 February 2024 in a product liability case.

In this case, a person living in Austria had purchased a motor caravan from a dealership in Germany. The vehicle was manufactured by two Italian manufacturers and delivered to the purchaser at a warehouse in Austria.

The purchaser then brought an action against the two Italian manufacturers for tortious liability in Austria, claiming that the vehicle had been fitted with an illegal defeat device which reduced the effectiveness of emission control.

Under Article 7 (2) of the Brussels Ia Regulation, the courts for the place where the harmful event occurred have jurisdiction in matters relating to tort. According to longstanding case law of the ECJ, this place is both the place where the damage occurred and the place where the event giving rise to the damage occurred, with the plaintiff being able to choose between the two.

The manufacturers argued that the courts of the member state where the vehicle was purchased, in this case Germany, should therefore have jurisdiction over the case.

The ECJ ruled that in the present case, the place where the damage occurred within the meaning of the Brussels Ia Regulation was the place where the defect in the vehicle manifested itself and produced “its harmful effects” – and according to the ECJ, that was not the place of purchase but rather the place of delivery, Austria.

Relevant for: Manufacturers.

Further details: https://curia.europa.eu/juris/document/document.jsf?text=&docid=283054&pageIndex=0&doclang=EN&mode=req&dir=&occ=first&part=1

2.German Federal Court of Justice rules on withdrawal right information in loan agreement to finance vehicle purchase

Germany’s highest civil court, the Federal Court of Justice (Bundesgerichtshof, “BGH”), has ruled on the validity of withdrawal right information provided by a lender to a consumer under a loan agreement linked to a vehicle purchase agreement as the loan financed the purchase of the vehicle.

Pursuant to sec. 358 (2) of the German Civil Code (Bürgerliches Gesetzbuch), a consumer’s withdrawal from a loan agreement that is linked to a purchase agreement also has the same effect on the purchase agreement so that the consumer is no longer bound by either agreement. This is the case even if the consumer had no right of withdrawal under the purchase agreement. A contract is considered to be “linked” to another contract if, for example, a loan finances the other agreement in whole or in part.

In this case, the plaintiff had declared their withdrawal from the loan agreement on the grounds that they had not been properly informed of their withdrawal rights and that the 14-day withdrawal period had not yet commenced.

The plaintiff argued, among other things, that the withdrawal information did not include the required information on the amount of daily interest payments to be made in case of a withdrawal for the time period between payout of the loan and repayment. The withdrawal information merely stated that no interest would be payable for that period. The plaintiff also pointed out that the information did not state the interest rate on arrears (Verzungszinssatz) applicable at the time of contract execution or how and when such interest rate would be changed.

In its decision, the BGH found the information on the interest rate payable after a withdrawal to be correct. The court argued that by including that no interest was payable in the event of a withdrawal, the lender had waived its corresponding claims and placed the consumer into a more favorable position. Therefore, the information was not a breach of the lender’s obligations.

Although the lender did not adequately inform the plaintiff about the applicable interest rate on arrears at the time of contract execution or its adjustment mechanism, but only provided the information that interest in the amount of “five percentage points above the base interest rate” was due, the BGH held that this did not prevent the commencement of the withdrawal period. According to a December ruling by the ECJ, inaccurate or incomplete information about the right of withdrawal prevents the withdrawal period from commencing only if the incompleteness or incorrectness of the information affects the consumer’s ability to assess the scope of his rights and obligations arising from the loan agreement or his decision to conclude the contract and, if applicable, deprives him of the opportunity to exercise his rights under essentially the same conditions as those that would have existed if the information had been provided completely and accurately. The BGH found that a consumer who is reasonably well-informed, reasonably attentive and overall reasonable would have also concluded the loan agreement if the information on the interest rate on arrears had been correct. Therefore, although the information provided was incomplete, the withdrawal period began to run after the loan agreement was entered into and had already expired when the plaintiff declared their withdrawal.

The case illustrates that while incorrect information about the right of withdrawal can generally have a significant impact by failing to start the withdrawal period, not every inaccuracy necessarily results in an extension of the consumer’s right of withdrawal.

Relevant for: Car manufacturers, dealerships, finance providers.

Further details (available only in German): https://www.bundesgerichtshof.de/SharedDocs/

3. Amendment to Passenger Vehicle Energy Consumption Labelling Ordinance becomes effective

On 23 February 2024, the amendments to the Passenger Vehicle Energy Consumption Labelling Ordinance (Pkw-Energieverbrauchskennzeichnungs-Verordnung), which implement mandatory EU law, came into force.

Under the updated regulations, the fuel consumption and carbon dioxide emissions of new vehicles must now be determined using the “Worldwide Harmonized Light Vehicles Test Procedure” (WLTP) which is stricter than the “New European Driving Cycle” procedure previously used and is designed to provide more realistic figures.

In addition, vehicle emissions will be classified in various classes and color-coded, ranging from Class A in green for zero-emission vehicles to Class G in red for high-emission vehicles. Unlike the previous emission categories, the new categories will no longer take into account the weight of the vehicle. That had previously allowed large and heavy vehicles to receive a better emissions rating than lighter vehicles with the same amount of emissions. The new emission labels will also distinguish between different types of drives, such as electric vehicles, hybrid vehicles, vehicles with diesel or gasoline engines and vehicles powered by natural gas or fuel cells.

Relevant for: Vehicle manufacturers.

Further details (available only in German): https://www.bmwk.de/Redaktion/DE/Downloads/P-R/240223-pkw-envkv-pressepapier.pdf?__blob=publicationFile&v=6

4. Agreement on new German law on liability insurance

On 21 February 2024, the German parliament and state governments reached an agreement on the revised version of the German law on liability insurance.

The original draft law would have made liability insurance mandatory for forklifts and other self-driven machinery, including lawn tractors. That requirement was now deleted from the draft so that operators of such machinery will not be required to obtain liability insurance. Instead, damages will be compensated by a compensation fund.

The amendments to German national law implement EU directive 2021/2118.

Relevant for: Companies operating self-driven machinery, insurance providers.

Further details (available only in German): https://dserver.bundestag.de/btd/20/104/2010420.pdf

5. European Court of Justice rules on validity jurisdiction clause

In a judgment dated 8 February 2024, the European Court of Justice (“ECJ”) ruled on the validity of jurisdiction clauses, which are often found in commercial agreements, especially in B2B contracts.

In this case, two Slovakian entities had entered into loan agreements containing a jurisdiction clause that designated a court in the Czech Republic as the competent court for disputes arising under or in connection with the contracts. The lender subsequently assigned the claims to another Slovak entity.

The Czech court asked the ECJ whether the jurisdiction clause had been validly agreed under EU Regulation 1215/2012 (“Brussels Ia Regulation”), since the transactions contemplated had no connection with the Czech Republic other than the jurisdiction clause. The Brussels Ia Regulation supersedes national rules on jurisdiction within its scope of application.

The ECJ held that although in the present case, the only connection to the Czech Republic was indeed the jurisdiction clause, the mere wording of the applicable Article 25 of the Brussels Ia Regulation did not require any other connection to the chosen jurisdiction.

However, according to settled case law cited by the ECJ, there must also be an “international element”. The ECJ reasoned that this was the case because two jurisdictions, Slovakia and the Czech Republic, were involved as a result of the jurisdiction clause agreed between the parties. According to the ECJ, no further connection is required.

As a consequence, jurisdiction clauses that fall within the scope of the Brussels Ia Regulation are valid in cases where they would not have been valid under national law.

Relevant for: All companies.

Further details: https://curia.europa.eu/juris/document/document.jsf?text=&docid=282586&pageIndex=0&doclang=EN&mode=lst&dir=&occ=first&part=1&cid=166422

Leaseholds play an important role in the real estate industry. It is therefore becoming increasingly important for real estate investors, project developers and the public sector to take a closer look at the content, structure and legal consequences of leaseholds. In addition, politicians are increasingly viewing leaseholds as an “instrument of strategic land policy in Germany”, with the result that local authorities in particular are increasingly only issuing larger project developments on the basis of leaseholds.

Our newsletter series “Erbbaurecht kompakt” (in German) presents the key topics and regulations as well as current case law relating to leaseholds. In our first article, we present the most important basics of leasehold law in the form of an FAQ.