CELEX: 62002CJ0168
Brussels Convention
Article 5(3)
Jurisdiction in matters relating to tort, delict or quasi-delict
Place where the harmful event occurred
Financial loss arising from capital investments in another Contracting State

By order of 9 April 2002, received at the Court on 6 May 2002, the Oberster Gerichtshof (Supreme Court) referred to the Court
for a preliminary ruling under 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 a question on the interpretation
of Article 5(3) of that Convention (OJ 1978 L 304, p. 36), as amended by the Convention of Accession of 9 October 1978 of
the Kingdom of Denmark, of Ireland and of the United Kingdom of Great Britain and Northern Ireland (OJ 1978 L 304, p. 1, and
amended text p. 77), by the Convention of 25 October 1982 on the accession of the Hellenic Republic (OJ 1982 L 388, p. 1),
by the Convention of 26 May 1989 on the accession of the Kingdom of Spain and the Republic of Portugal (OJ 1989 L 285, p. 1),
and by the Convention of 29 November 1996 on the accession of the Republic of Austria, the Republic of Finland and the Kingdom
of Sweden (OJ 1997 C 15, p. 1) (hereinafter ‘the Convention’).
That question was raised in proceedings brought by Mr Kronhofer, domiciled in Austria, against Ms Maier, Mr Möller, Mr Hofius
and Mr Karan (hereinafter ‘the defendants in the main proceedings’), each domiciled in Germany, in which Mr Kronhofer seeks
to recover damages for financial loss which he claims to have suffered as a result of the wrongful conduct of the defendants
in the main proceedings as directors or investment consultants of the company Protectas Vermögensverwaltungs GmbH (hereinafter
‘Protectas’), which also has its registered office in Germany.
Legal framework
The first paragraph of Article 2 of the Convention states:
‘Subject to the provisions of this Convention, persons domiciled in a Contracting State shall, whatever their nationality,
be sued in the courts of that State.’
Under Article 5(3) of the Convention:
‘A person domiciled in a Contracting State may, in another Contracting State, be sued:
...
(3) in matters relating to tort, delict or quasi-delict, in the courts for the place where the harmful event occurred.’
The main proceedings and the question referred
Mr Kronhofer brought proceedings against the defendants in the main proceedings before the Landesgericht Feldkirch (Feldkirch
Regional Court) (Austria),, ,    seeking to recover damages for financial loss which he claims to have suffered as a result of their wrongful conduct.
The defendants in the main proceedings persuaded him, by telephone, to enter into a call option contract relating to shares.
However, they failed to warn him of the risks involved in the transaction. As a result, Mr Kronhofer transferred a total
amount of USD 82 500 in November and December 1997 to an investment account with Protectas in Germany which was then used
to subscribe for highly speculative call options on the London Stock Exchange. The transaction in question resulted in the
loss of part of the sum transferred and Mr Kronhofer was repaid only part of the capital invested by him.
The jurisdiction of the Landesgericht Feldkirch was founded on Article 5(3) of the Convention as the court for the place where
the harmful event occurred, in this case Mr Kronhofer’s domicile.
When that action was dismissed, Mr Kronhofer appealed to the Oberlandesgericht Innsbruck (Innsbruck Higher Regional Court)
(Austria), which declined jurisdiction on the ground that the court of domicile was not ‘the place where the harmful event
occurred’, as neither the place where the event which resulted in damage occurred nor the place where the resulting damage
was sustained was in Austria.
An application for review on a point of law was brought before the Oberster Gerichtshof, which took the view that the Court
of Justice had not yet ruled on the question whether the expression ‘the place where the harmful event occurred’ is to be
so widely interpreted that, in cases of purely financial damage affecting part of the victim’s assets invested in another
Member State, it also encompasses the place of the victim’s domicile and thus the place where his assets are concentrated.
As it considered that a decision on the interpretation of the Convention was necessary to enable it to give judgment, the
Oberster Gerichtshof decided to stay the proceedings and to refer the following question to the Court of Justice for a preliminary
ruling:
‘Is the expression “place where the harmful event occurred” contained in Article 5(3) of the Convention … to be construed
in such a way that, in the case of purely financial damage arising on the investment of part of the injured party’s assets,
it also encompasses in any event the place where the injured party is domiciled if the investment was made in another Member
State of the Community?’
The question referred
By its question, the national court is essentially asking whether Article 5(3) of the Convention should be interpreted as
meaning that the expression ‘place where the harmful event occurred’ may cover the place where the claimant is domiciled and
where ‘his assets are concentrated’ by reason only of the fact that the claimant has suffered financial damage there resulting
in the loss of part of his assets which arose and was incurred in another Contracting State.
It should be noted at the outset that the system of common rules of conferment of jurisdiction laid down in Title II of the
Convention is based on the general rule, set out in the first paragraph of Article 2, that persons domiciled in a Contracting
State are to be sued in the courts of that State, irrespective of the nationality of the parties.
It is only by way of derogation from that fundamental principle attributing jurisdiction to the courts of the defendant’s
domicile that Section 2 of Title II of the Convention makes provision for certain special jurisdictional rules, such as that
laid down in Article 5(3) of the Convention.
Those special jurisdictional rules must be restrictively interpreted and cannot give rise to an interpretation going beyond
the cases expressly envisaged by the Convention (see Case 189/87
Kalfelis
[1988] ECR 5565, paragraph 19, and Case C-433/01
Blijdenstein
[2004] ECR I‑0000, paragraph 25).
According to settled case-law, the rule laid down in Article 5(3) of the Convention is based on the existence of a particularly
close connecting factor between a dispute and courts other than those for the place where the defendant is domiciled, which
justifies the attribution of jurisdiction to those courts for reasons relating to the sound administration of justice and
the efficacious conduct of proceedings (see, inter alia, Case 21/76
Bier
(‘
Mines de Potasse d’Alsace
’) [1976] ECR 1735, paragraph 11, and Case C-167/00
Henkel
[2002] ECR I‑8111, paragraph 46).
The Court has also held that where the place in which the event which may give rise to liability in tort, delict or quasi-delict
occurs and the place where that event results in damage are not identical, the expression ‘place where the harmful event occurred’
in Article 5(3) of the Convention must be understood as being intended to cover both the place where the damage occurred and
the place of the event giving rise to it, so that the defendant may be sued, at the option of the claimant, in the courts
for either of those places (see, inter alia,
Mines de potasse d’Alsace
, paragraphs 24 and 25, and Case C-18/02
DFDS Torline
[2004] ECR I-0000, paragraph 40).
It is clear from the order for reference that the Oberster Gerichtshof takes the view that, in the case in the main proceedings,
the place where the damage occurred and the place of the event giving rise to it were both in Germany. The distinguishing
feature of this case lies in the fact that the financial damage allegedly suffered by the claimant in another Contracting
State is said to have affected the whole of his assets simultaneously.
As the Advocate General rightly noted at point 46 of his Opinion, there is nothing in such a situation to justify conferring
jurisdiction to the courts of a Contracting State other than that on whose territory the event which resulted in the damage
occurred and the damage was sustained, that is to say all of the elements which give rise to liability. To confer jurisdiction
in that way would not meet any objective need as regards evidence or the conduct of the proceedings.
As the Court has held, the term ‘place where the harmful event occurred’ cannot be construed so extensively as to encompass
any place where the adverse consequences can be felt of an event which has already caused damage actually arising elsewhere
(see Case C-364/93
Marinari
[1995] ECR I-2719, paragraph 14).
In a situation such as that in the main proceedings, such an interpretation would mean that the determination of the court
having jurisdiction would depend on matters that were uncertain, such as the place where the victim’s ‘assets are concentrated’
and would thus run counter to the strengthening of the legal protection of persons established in the Community which, by
enabling the claimant to identify easily the court in which he may sue and the defendant reasonably to foresee in which court
he may be sued, is one of the objectives of the Convention (see Case C-256/00
Besix
[2002] ECR I-1699, paragraphs 25 and 26, and
DFDS Torline,
paragraph 36). Furthermore, it would be liable in most cases to give jurisdiction to the courts of the place in which the
claimant was domiciled. As the Court found at paragraph 14 of this judgment, the Convention does not favour that solution
except in cases where it expressly so provides.
In view of the foregoing considerations, the answer to the question referred must be that Article 5(3) of the Convention must
be interpreted as meaning that the expression ‘place where the harmful event occurred’ does not refer to the place where the
claimant is domiciled or where ‘his assets are concentrated’ by reason only of the fact that he has suffered financial damage
there resulting from the loss of part of his assets which arose and was incurred in another Contracting State.
Costs
The costs incurred by the Austrian, German and United Kingdom Governments and by the Commission, which have submitted observations
to the Court, are not recoverable. Since these proceedings are, for the parties to the main proceedings, a step in the proceedings
pending before the national court, the decision on costs is a matter for that court.
On those grounds,
THE COURT (Second Chamber),
0in answer to the question referred to it by the Oberster Gerichtshof by order of 9 April 2002, hereby rules:
Article 5(3) of the Convention of 27 September 1968 on Jurisdiction and the Enforcement of Judgments in Civil and Commercial
Matters, as amended by the Convention of Accession of 9 October 1978 of the Kingdom of Denmark, of Ireland and of the United
Kingdom of Great Britain and Northern Ireland, by the Convention of 25 October 1982 on the accession of the Hellenic Republic,
by the Convention of 26 May 1989 on the accession of the Kingdom of Spain and the Republic of Portugal, and by the Convention
of 29 November 1996 on the accession of the Republic of Austria, the Republic of Finland and the Kingdom of Sweden must be
interpreted as meaning that the expression ‘place where the harmful event occurred’ does not refer to the place where the
claimant is domiciled or where ‘his assets are concentrated’ by reason only of the fact that he has suffered financial damage
there resulting from the loss of part of his assets which arose and was incurred in another Contracting State.
Timmermans
Puissochet
Cunha Rodrigues
Schintgen
Colneric
Delivered in open court in Luxembourg on  10 June 2004.
R. Grass
C.W.A. Timmermans
Registrar
President of the Second Chamber
–
Language of the case: German.