Latvijas Republikas Augstākā tiesa; 2023-12-12; C32349714
Decision by national courts in the field of European Union law — ECLI:LV:AT:2023:1212.C32349714.20.S
Date: 2023-12-12
Subject matter: Judicial cooperation in civil matters
Origin: Latvia

82023LV1212(51)_ENG_SUMJURE
JURE summary
JURE summary
This case concerns the determination of the law applicable to a debt recovery decided by the Latvijas Republikas Augstākā tiesa (hereinafter ‘the Supreme Court’).
A company domiciled in Sweden (hereinafter ‘the plaintiff’) brought an action against several defendants to recover a freight debt owed by the defendants to a company domiciled in Taiwan. There were various claims against particular defendants, including demurrage, interest on late payment, a declaration that the contract between the defendants was null and void and the cancellation of the relevant entries in the land register. There was also a counterclaim by one of the defendants against the plaintiff for lien and set-off of claims. The plaintiff argued that it had issued a letter of guarantee to the Taiwanese company in Gothenburg, Sweden, in which it undertook to be liable as a third-party debtor for the obligations of one of the defendants. When the defendant failed to make the agreed payments, the Taiwanese company demanded payment from the plaintiff. The plaintiff paid the Taiwanese company the freight debt, which the plaintiff seeks to recover.
The judgment of the Rīgas pilsētas Vidzemes priekšpilsētas tiesa (hereinafter ‘the Court of First Instance’) partially upheld and partially dismissed the plaintiff's claims. The counterclaim was dismissed. Relying on Article 4(2) and (3) and Article 15 of the Rome I Regulation (1), the court found that the Lithuanian courts had jurisdiction to hear the case and that Latvian law applied to the dispute since the defendants were domiciled in Latvia.
The Rīgas apgabaltiesa (hereinafter ‘the Court of Appeal’) partially upheld the first instance decision and adjusted the amount of the debt to be recovered. The Court of Appeal confirmed that the applicable law in a dispute must be determined in accordance with the Rome I Regulation, which resulted in the application of the law of the Republic of Latvia.
Both parties appealed in cassation to the Supreme Court, arguing that the Court of Appeal had wrongly applied the Rome I Regulation to determine the law and that its provisions had been misinterpreted even if the Regulation was applicable. The Supreme Court concluded that the lower court had misapplied the Rome I Regulation when prioritising Latvian law instead of Swedish law. The Supreme Court held that Swedish law should apply to the guarantee provided by the plaintiff since a Swedish company issued the guarantee in Sweden without specifying the applicable law.
The Supreme Court recalled that, in a debt recovery case, the court is obliged to examine and establish the facts of the case (in the present case, whether the defendants had failed to fulfil their obligations, whether the debt had been paid, who had paid the debt to whom (in the case of third parties)), in accordance with Articles 97(1), 193(5) and 432(5) of the Civilprocesa likums (2).  According to the Supreme Court, the requirements of the procedural law were not met. The Court of Appeal determined a different amount of debt than the Court of First Instance without successfully stating the reasons for such conclusions to the Court of First Instance's decision. This is a misapplication of the substantive rules of law and a violation of the procedural rules, which must be understood as leading to an incorrect decision.
The Supreme Court annulled the decision of the Court of Appeal and referred the case back to the Court of Appeal for a new hearing.
(1) Regulation (EC) No 593/2008 of the European Parliament and of the Council of 17 June 2008 on the law applicable to contractual obligations (Rome I).
(2) Civilprocesa likums (Code of Civil Procedure).