Choice of jurisdiction in consumer contracts: Bitar v Banque Libano-Francaise and Dooley v Castle Trust

Bitar v Banque Libano-Francaise: background

The Claimant ("Bitar") was a British national domiciled in England. The Defendant was a Lebanese bank ("BLF") with headquarters in Beirut. By proceedings issued on 5 February 2021 (i.e. after the end of the Brexit transition period), Bitar sought payment of a sum of money said to be the balance standing to his credit under a joint account with BLF, together with damages for alleged failure to repay this sum on demand. He wished to bring the proceedings in England in order to avoid the money becoming trapped in the Lebanese banking system; BLF was seeking to pay Bitar using a special form of banker's cheque issued by the Lebanese Central Bank which could not be deposited into an account outside Lebanon. US dollar deposits stuck in the Lebanese banking system in this way are colloquially known as "lollars".

Bitar had applied for and obtained permission to serve the proceedings outside the jurisdiction. BLF applied to set aside the Order permitting such service. The application failed, but the Master extended time for an application challenging the jurisdiction of the English Court. This application came before Michael Kent QC, sitting as a Deputy High Court Judge, on 21 September 2021.

Consumers and jurisdiction in the post-Brexit era

Prior to the end of the Brexit transition period, Articles 17 to 19 of the recast Brussels Regulation provided that consumers domiciled in an EU Member State could only be sued in their Member State of domicile, and could choose to sue the counterparty either in their own, or the counterparty's, Member State of domicile. Furthermore, any jurisdiction clause that departed from these provisions was unenforceable, unless it had been entered into after the dispute in question had arisen.

Following Brexit, new provisions were inserted into the Civil Jurisdiction and Judgments Act 1982 (the "CJJA") in order to replicate this protection (and similar protection for employees).

Section 15E(1) of the CJJA defines a "consumer" as a person who concludes a "consumer contract" for a purpose which can be regarded as being outside the person's trade or profession. Further, a "consumer contract" is defined as:

(a) a contract for the sale of goods on instalment credit terms;

(b) a contract for a loan repayable by instalments, or for any other form of credit, made to finance the sale of goods; or

(c) a contract which has been concluded with a person who –

(i) pursues commercial or professional activities in the part of the United Kingdom in which the consumer is domiciled, or

(ii) by any means, directs such activities to that part or to other parts of the United Kingdom including that part

and which falls within the scope of such activities […]

This is, to all intents and purposes, the same definition as that contained at Article 17(1) of the Recast Brussels Regulation, save that references to a "Member State" have been replaced with reference to "part of the United Kingdom". Section 15B(2) of the CJJA replicates the protection  from Article 18(1) of the Recast Brussels Regulation, and provides that a consumer may bring proceedings against the counterparty in the part of the United Kingdom in which the consumer is domiciled. Finally, s.15B(6) and s.15D(1) provide together that any jurisdiction clause that is entered into prior to the dispute arising will have no legal force if it purports to require the consumer to bring proceedings or permits the consumer to be sued otherwise than in the part of the UK in which the consumer is domiciled. This mirrors Articles 19 and 25(4) of the Recast Brussels Regulation.

"Directing" of activities

The question to be decided was whether BLF had "directed" its commercial activities to England, and the relevant banking agreement fell within the scope of those activities, such that it was a "consumer contract" for the purposes of the second limb of part (c) of the definition at s.15E(1). BLF argued that it had not directed its commercial activities to England, but it did not otherwise dispute that Bitar entered into the contract as a "consumer".

Section 15E(2) of the CJJA provides that, when interpreting s.15A-E, the Court must have regard to (but is not bound by) the EU jurisprudence that was applicable prior to the end of the Brexit transition period. The parties agreed that the necessary guidance was provided by the CJEU in Pammer v Reederei Karl Schlüter GmbH & Co KG; Hotel Alpenhof GesmbH v Heller [2011] 2 All ER (Comm) 888³.

In Pammer, the CJEU held that it was necessary to determine "in the case of a contract between a trader and a given consumer, whether, before any contract with that consumer was concluded, there was evidence demonstrating that the trader was envisaging doing business with consumers domiciled in other member states, including the member state of that consumer's domicile, in the sense that it was minded to conclude a contract with those consumers". The mere fact that the business had a website which could be consulted worldwide was not by itself sufficient, but the CJEU gave a non-exhaustive list of features which alone or in combination might be capable of demonstrating that the business in question had "directed" its activities to the Member State of the consumer's domicile, including:

• the international nature of the activity at issue (e.g. certain tourist activities);
• mention of telephone numbers with the international dialling code;
• use of a domain name other than that of the Member State in which the business is established, or use of neutral top-level domains names such as '.com' or '.eu';
• mention of an international clientele composed of customers domiciled in various Member States; and
• whether the website permits customers to use a different language or a different currency.

The CJEU also held that there needed to be an intention on the part of the business to direct its activities to the Member State in question, but that "this could be reference as much to the trader's apparent intention as to its actual or subjective intention". The Court in Bitar held, by reference to the Court of Appeal decision of Merck KGaA v Merck Sharp & Dohme Corp & ors⁴, that the test was an objective one, and that evidence of "actual intention" was not a necessary ingredient (although it may assist in resolving the question).

A further relevant principle from EU caselaw⁵ to which the Court referred was that there does not need to be a causal connection between the consumer's entry into the relevant contract with the trader and the marketing materials which manifested the trader's (objective) intention to direct its commercial activities to the consumer's place of domicile.

Decision

The Court ultimately held that BLF had directed its commercial activities to England. The fact that its website mentioned international dialling codes and had a high-level website domain, and the establishment of correspondent banks in London were, the Court held, all irrelevant factors; this was merely evidence that BLF was targeting business outside Lebanon, which was not in dispute, but revealed nothing about where the customers it was targeting might be based. The use of correspondent banks in one of the world's major financial centres was hardly surprising, and did not necessarily indicate that BLF was directing its commercial activities to England. The Court also held that the use of English language in the marketing materials, the fact that the dropdown menu of options for contacting BLF included the UK, and evidence that BLF did have customers in the UK, whilst not irrelevant factors, were not by themselves sufficient to establish an intention to direct commercial activities to England. The most significant factors were the references in BLF's marketing materials to a strategy to target Europe, and an annual report referring to BLF's residential mortgage business with private banking clients in Paris and London.

It is worth noting that the Court held that, had subjective intention been the relevant test, it would have likely concluded that BLF did not intend to direct its commercial activities to England. However, it held that the marketing materials which were visible from the United Kingdom on BLF's website did give the impression to the fair-minded observer that the Bank was interested in obtaining custom from the expatriate Lebanese community, wherever in the world not insignificant numbers of members of that community could be found, which included England at the relevant time. It did not matter that Bitar was not himself a Lebanese national.

The Court also held that the requirement that the contract in question must fall within the scope of the activities directed to the consumer's place of domicile should be interpreted widely. The fact that the US dollar account that the Bitar family had opened did not precisely match the examples given in the marketing materials did not matter; it was sufficient that it was a banking arrangement entered into by a consumer.

Dooley & ors v Castle Trust: a contrasting case

By contrast, the recent case of Dooley & ors v Castle Trust involved an unsuccessful attempt to rely on the consumer protection provisions contained in the Brussels Convention 1968. The Brussels Convention was the predecessor to, and was largely superseded by, the Brussels Regulation but still applied where the Defendant was domiciled in certain dependent territories of Member States, including Aruba, certain French overseas territories, and Gibraltar. The Brussels Convention ceased to apply in the UK at the end of the transition period, although its provisions still apply to determine jurisdiction as between the UK and Gibraltar⁶.

The facts of Dooley are quite different from Bitar. 62 Claimants brought proceedings against the Defendant ("Castle Trust") as trustee and administrator of two Qualifying Recognised Overseas Pension Schemes ("QROPS") established in Gibraltar. Claims were brought against Castle Trust under the Financial Services & Markets Act 2000, in common law negligence, for breach of fiduciary duty and breach of contract. Essentially, the Claimants alleged that the QROPs were inappropriate for pension provision and of little, if any, value and that Castle Trust knew or should have known that it had acted negligently and/or in breach of contract by its involvement with a third party who had promoted the transfer of the claimants' pension funds into the QROPS.

Castle Trust challenged the jurisdiction of the English Court to hear the claims against it.

The Claimants relied on Articles 13.3 and 14 of the 1968 Convention. Article 14 is the equivalent of s.15B(2) of the CJJA and Article 18(1) of the Recast Brussels Regulation and provides that a consumer may bring proceedings against the other party to the contract in either the courts of the Contracting State in which the consumer is domiciled or the courts of the Contracting State in which the other party is domiciled. Article 13.3 of the Convention provides that a consumer contract for the purposes of the Convention includes any "contract for the supply of goods or a contract for the supply of services" which is "concluded by a person for a purpose which can be regarded as being outside his trade or profession, hereinafter called "the consumer" [...] and

(a) in the State of the Consumer's domicile the conclusion of the contract was preceded by a specific invitation addressed to him or by advertising; and

(b) the consumer took in that State the steps necessary for the conclusion of the contract."

The Claimants pleaded an extract from Castle Trust's website as constituting advertising in the UK. The website was not hosted in the UK but the Claimants argued that it was "directed to persons in the UK". 

Castle Trust's position was that it could only be sued in Gibraltar, where it was domiciled, either by reliance on Article 2 of the convention, the lex generalis, which provides that parties domiciled in a Contracting State "shall [ …] be sued in the courts of that State" or by reliance on Article 5.6, the lex specialis for trustee claims, which provides that claims against a trustee can be brought in the courts of the Contracting State in which the trust is domiciled. It was not in dispute that Castle Trust was domiciled in Gibraltar.

Castle Trust argued that the claims either did not concern a contract for services, or a contract at all, but that even to the extent they did Article 5.6 of the Convention applied, which precluded the application of Article 5.1 (which makes provision for matters relating to a contract), as the two were mutually exclusive. If Article 5.1 did not apply, i.e. these were not claims relating to a contract for the purposes of the Convention, then the Court never got to the stage of considering Article 13.3, which by definition required the claim to be one relating to a contract.

Castle Trust further contended that, even if the claim did concern a consumer contract for services, Article 13.3 did not apply because the Claimants had not shown that the conclusion of the contract was preceded in the consumers' domicile by a specific invitation addressed to them or by advertising. Castle Trust did not, however, otherwise dispute that the Claimants were "consumers" within the meaning of the Convention.

The Court held that:

• it was clear from the evidence before it that Castle Trust's obligations to the Claimants rested fundamentally on its trusteeship of the QROPs rather than on any separate contract for the provision of financial administration services;
• a claim arising out of the relationship of beneficiary and trustee, falling within Article 5.6, could not also be within Article 5.1;
• Article 13 was a further lex specialis which overrode the more general provision for matters relating to a contract in Article 5.1, and the matter could not fall within the scope of the former if it did not fall within the scope of the latter; and
• even if that conclusion was wrong, the Claimants had failed to establish that the contract was preceded by a specific invitation addressed to them or by advertising in the UK even if it could be shown that the Claimants had read the part of the website relied on prior to investing in the QROPs, as this was not advertising "in" the UK for the purposes of Article 13.3(a), even if it could be accessed from there.

Castle Trust's application therefore succeeded and the Court declared that it had no jurisdiction to hear the claims, which could only be heard in Gibraltar.

Although the application was ultimately successful on the basis that the claims did not concern a contract at all, the Court's comments on Article 13.3(a) are interesting. It is clear that this is a higher hurdle to overcome than the equivalent in the CJJA and the Recast Brussels Regulation (and its predecessor), which (as discussed above) refer to a business "directing" its commercial activities to the state in question. The Court in Dooley even refers to the fact that, in Pammer, the CJEU, in discussing the change in focus in the Brussels Regulation to commercial activities "directed to" Member States, had expressly recognised that "this territorial limitation under the 1968 Convention as to the place of advertising or invitation perhaps failed to anticipate the modern world of the internet".     

Practical implications

The decision in Bitar highlights the jurisdictional risks that may arise from the marketing materials that any business which contracts with consumers chooses to place on its website. While parties may, in theory, agree to submit disputes to the courts of a particular jurisdiction, the CJJA consumer protection provisions override any contractual choice of jurisdiction. The factors that will be deemed sufficient to establish that business was "directed" to the UK in the context of a consumer contract will vary from case to case, but the bar is not set particularly high, and neither the subjective intention of the business, nor the sophistication of the individual consumer, are relevant. While context remains important, where business is conducted with consumers on a website that can be accessed from other jurisdictions, there is a real risk that a contractual choice of jurisdiction clause may be overridden.

The court's consideration of CJEU case law is also of interest. While it is no longer binding, it is clear that in both Bitar and Dooley, the English court has sought significant assistance from its interpretation of the prior EU legislation on which the new UK legislation is based.