CELEX: 62004CC0073
Language: en
Date: 2005-04-07
Title: Opinion of Mr Advocate General Geelhoed delivered on 7 April 2005. # Brigitte and Marcus Klein v Rhodos Management Ltd. # Reference for a preliminary ruling: Oberlandesgericht Hamm - Germany. # Brussels Convention - Jurisdiction in proceedings regarding tenancies of immoveable property - Time-share in immoveable property. # Case C-73/04.

OPINION OF ADVOCATE GENERAL
      GEELHOED
      delivered on 7 April 2005 (1)
      
      Case C-73/04
      Brigitte Klein
      Marcus Klein
      v
      Rhodos Management Ltd
      (Reference for a preliminary ruling from the 29th division of the Oberlandesgericht Hamm (Germany))
      (Interpretation of Article 16(1) of the Brussels Convention – Competence as regards property charges – Contract for the use of a time‑share holiday apartment which at the same time and necessarily requires membership in a club
         whose main function is to ensure members the exercise of that right of use – Application to reimburse a part of the amount paid)
      I –  Introduction 
      1.     The present case, a preliminary reference from the Oberlandesgericht (Higher Regional Court of Appeal) Hamm, concerns the
         interpretation of Article 16(1)(a) of the Brussels Convention on jurisdiction and the enforcement of judgments in civil and
         commercial matters (the ‘Convention’). (2) In particular, the case raises the question whether this provision applies to proceedings which concern so‑called ‘time‑share’
         arrangements. 
      
      II –  Legal framework 
      2.     The general rule of the Convention governing national courts’ jurisdiction in respect of cases falling within its scope is
         set out in Article 2, which provides that: ‘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 …’ As concerns defendants who are not domiciled
         in a contracting State, Article 4 of the Convention provides: ‘If the defendant is not domiciled in a Contracting State, the
         jurisdiction of the courts of each Contracting State shall, subject to the provisions of Article 16, be determined by the
         law of that State …’ 
      
      3.     Article 16 of the Convention constitutes an exception to these general rules. This article grants, for five types of proceedings,
         exclusive jurisdiction to the courts of the contracting State which has the closest connection to the proceeding. The rules
         set out in Article 16 take precedence over all the other jurisdictional provisions of the Convention. They cannot be departed
         from by agreement between the parties to the proceedings (as governed by Article 17 of the Convention), or waived by the entry
         of an appearance by a defendant (as governed by Article 18 of the Convention). 
      
      4.     Article 16(1) lays down that, 
      ‘The following courts shall have exclusive jurisdiction, regardless of domicile: 
      1.(a) in proceedings which have as their object rights in rem  in immovable property or tenancies of immovable property, the courts of the Contracting State in which the property is situated;
         
      
      (b) however, in proceedings which have as their object tenancies of immovable property concluded for temporary private use
         for a maximum period of six consecutive months, the courts of the Contracting State in which the defendant is domiciled shall
         also have jurisdiction, provided that the landlord and the tenant are natural persons and are domiciled in the same Contracting
         State.’
      
      5.     The justification for the rule of exclusive competence contained in Article 16(1)(a) is that the legal and geographical proximity
         of the jurisdiction in which the property is situated means that this jurisdiction is best placed to deal with the dispute.
         Thus the Court has formulated the aim of the provision as follows: 
      
      ‘The essential reason for conferring exclusive jurisdiction on the courts of the Contracting State in which property is situated
         is that the courts of the locus rei sitae are the best placed, for reasons of proximity, to ascertain the facts satisfactorily and to apply the rules and practices
         which are generally those of the State in which the property is situated.’ (3)
      
      6.     Similarly, the Jenard Report (4) gives the following justification for exclusive jurisdiction in cases covered by Article 16(1), 
      
      ‘… This type of dispute often entails checks, enquiries and expert examinations which have to be made on the spot. Moreover,
         the matter is often governed in part by customary practices which are not generally known except in the courts of the place,
         or possibly of the country, where the immovable property is situated. Finally, the system adopted also takes into account
         the need to make entries in land registers located where the property is situated … The adoption of this provision was dictated
         by the fact that tenancies of immovable property are usually governed by special legislation which, in view of its complexity,
         should preferably be applied only by the courts of the country in which it is in force. Moreover, several states provide for
         exclusive jurisdiction in such proceedings, which is usually conferred on special tribunals.’
      
      III –  Factual background 
      7.     In 1992, the Kleins, domiciled in Germany, concluded a contract with Rhodos Management, established in the Isle of Man, by
         which they agreed to pay a sum of DEM 13 300 (approximately EUR 6 700) in return for the right to use an apartment of a certain
         type in a hotel complex situated in Greece for one week a year until 2031. 
      
      8.     The global sum paid in consideration for the contract was divided, according to its terms, as follows: Membership fee (‘Mitgliedschaftsgebühr’) –  DEM 10 153;
         Fee for ‘use’ (‘Nutzungsgebühr’) – 2 048 DEM; Contract and administrative fees – DEM 432; Maintenance fee for 1993 – DEM 317;
         Membership fee of RCI (an organisation coordinating exchange of holiday ‘slots’ and of apartments) for three years – DEM 350.
         
      
      9.     The contract, which was headed ‘request for and contract of membership’, also provided that the Kleins would become members
         of the Sun Beach Holiday Club. This was a necessary condition of the conclusion of the contract: it was not an option to conclude
         the contract without becoming a member of the club. Contracting parties also had the right to the standard services provided
         by the hotel itself to club members and to other guests, such as reception and bureau‑de‑change services. 
      
      10.   On the day of signing the contract, the Kleins paid by way of deposit the amount of DEM 2 640. They subsequently paid a further
         amount of DEM 13 300, although under the terms of the contract the sum outstanding was only DEM 10 660.
      
      11.   In March 1996, the Kleins brought an action before the Dortmund Landgericht (Regional Court) against, amongst others, Rhodos
         Management, in which they claimed the sum of DEM 15 490 arguing that (1) the said contract was void because it infringed the
         standards of ‘Sittenwidrigkeit’ (i.e., ‘bonnes moeurs’ or good behaviour); and (2) as regards the sum of DEM 2 640 paid in
         excess of the contractual price agreed, this had been paid in error, constituting unjust enrichment giving rise to a claim
         in restitution. 
      
      12.   In its defence, Rhodos Management maintained that the Landgericht did not have jurisdiction to hear the case on the ground
         that the proceedings concerned a tenancy of immovable property situated in Greece and that, under Article 16(1)(a) of the
         Convention, only the Greek courts were competent to hear the action.
      
      13.   By judgment of May 2003, the Landgericht accepted this argument and, as a result, rejected the action as inadmissible. 
      14.   Upon appeal to the Oberlandesgericht Hamm, the Kleins argued that the contract of membership of the club was not a ‘tenancy’
         within the meaning of Article 16(1)(a), having regard to its character as a creature of company law. 
      
      15.   By order of 27 January 2004, the Oberlandesgericht referred the following questions to the Court: 
      ‘(1)      Does the concept of proceedings “which have as their object … tenancies of immovable property” under Article 16(1)(a) of the
         Brussels Convention extend to proceedings concerning the right, for a particular week each year for almost 40 years, to use
         an apartment in a hotel complex, differentiated according to its type and situation? Is this the case even if the contract
         provides for the simultaneous and obligatory membership of a club, the main purpose of which is to guarantee that its members
         may exercise their right to use the apartment? 
      
      (2)      If so, does the exclusive competence resulting from Article 16(1)(a) of the Brussels Convention apply equally to rights which
         flow from such a lease but which, in fact and in law, do not concern the lease, and in particular to the right to reimbursement
         of a sum erroneously paid in excess of the amount demanded in consideration for use of the apartment and for membership of
         the club?’
      
      16.   In accordance with Article 23 of the Statute of the Court of Justice, written observations were lodged in the present proceedings
         by the Kleins, Rhodos Management, and the Commission, as well as by the German and United Kingdom Governments.
      
      IV –  Analysis 
      On the first question
      17.   By its first question, the Oberlandesgericht seeks to know whether the exclusive jurisdiction contained in Article 16(1) covers
         proceedings concerning a contract to use a particular type of apartment in a hotel complex for a specific period each year
         for almost 40 years, even where the contract provides for the simultaneous and obligatory membership of a club. 
      
      18.   As is evident, the contract at issue in the main proceedings constitutes a type of so‑called ‘time‑share’ agreement. Time‑share
         agreements, as is well‑known, involve the right to use property on a part‑time basis – that is, for a specific period of each
         year – and are often entered into by holidaymakers who, rather than purchasing a holiday home outright, simply purchase the
         right to stay in the property for part of the year only. The administration and maintenance fees for the property are usually
         split between the various time‑share ‘owners’. 
      
      19.   As a preliminary matter, I note that, in its submissions, the United Kingdom Government requests the Court to give its view
         on a wider question than that posed by the national court, namely, on whether, and the circumstances in which, time‑share
         agreements in general fall within Article 16(1)(a) of the Convention. 
      
      20.   Although in theory the idea of a generally applicable ‘test’ has certain attractions, I would, however, be very reluctant
         to attempt its formulation. A powerful reason for this is that the content and legal nature of time‑share arrangements vary
         greatly across Member States. For example, such arrangements fall in some Member States under the law of obligations, in some
         under company law, (5) and in some Member States under property law. 
      
      21.   This heterogeneity is recognised in the principal Community law act in the area, namely Directive 94/47 on the protection
         of purchasers in respect of certain aspects of contracts relating to the purchase of the right to use immovable properties
         on a time‑share basis. (6) For example, the preamble to the Directive provides, ‘the legal nature of the rights which are the subject of the contracts
         covered by this Directive [i.e., time‑share contracts] varies considerably from one Member State to another… .’ (7) The Directive was very careful to refrain from an attempt to harmonise the nature of these rights, stating that it was ‘not
         designed to regulate the extent to which contracts for the use of one or more immovable properties on a time‑share basis may
         be concluded in Member States or the legal basis for such contracts … .’ (8) For this reason, application of the Directive, which aims at establishing a minimum basis of common rules on time‑share arrangements
         so as to ensure proper operation of the internal market and to protect purchasers, is confined to very specific aspects of
         such arrangements, namely ‘aspects relating to information on the constituent parts of contracts, the arrangements for communicating
         such information, and the procedures and arrangements for cancellation and withdrawal.’ (9)
      
      22.   As a result of this heterogeneity, a general ‘rule’ on the applicability of Article 16(1)(a) to time‑share arrangements in
         general would, in my view, be inappropriate and could compromise the rationale of this provision, which I have summarised
         above. Such a test would, with regard to this objective, risk being over‑inclusive in some circumstances and under‑inclusive
         in others. Whilst it is true that, as observed by the United Kingdom Government, the interpretation of Article 16(1)(a) cannot
         depend on the formal characterisation of a particular time‑share arrangement under national law, in my view the differences
         in the legal nature of these arrangements between Member States are so substantial that an attempt to formulate a uniformly
         applicable rule would be artificial and counter‑productive. This would be particularly undesirable given that, as an exception
         to the general rules of jurisdiction of the Convention, Article 16(1) must ‘not be given a wider interpretation than is required
         by [its] objective.’ (10)
      
      23.   Bearing this in mind, I turn now to consider whether, on the facts of the present case as communicated to us by the referring
         court, a time‑share arrangement such as that to which the Kleins became a party falls under the rule of exclusive jurisdiction
         set out in Article 16(1)(a). As is clear, the answer to this question depends on the interpretation of the phrase ‘proceedings
         which have as their object … tenancies of immovable property’, a phrase which must be interpreted independently as a matter
         of Community law. (11)
      
      24.   In my view, this question should be answered in the affirmative, for the following reasons. 
      25.   The first point to be made is that, in evaluating whether the contract at issue in the main proceedings falls under Article 16(1),
         it is the substance, and not merely the form, of the parties’ agreement that is decisive. As observed by the German Government,
         it is for the Court, in assessing the true substance of the contract, to ‘lift the veil’ from the form of the contract. Although
         the language used in the contractual agreement, as well as the formal categorisation of the agreement under national law,
         are factors to be taken into account in making the assessment, neither can be decisive. Thus, in the present case, it is not
         decisive that the time‑share arrangement at issue in the main proceedings took the form of participation in a ‘club’, that
         the title of the contract was ‘Request for and Contract of Membership’, and that, according to the terms of the contract,
         most of the contractual sum due was in the form of a ‘membership fee’ (‘Mitgliedschaftsgebühr’). If it were otherwise, this
         would enable circumvention of the Convention’s rules, which would compromise the consistency of their application. I would
         add that the risk of such circumvention is particularly to be avoided in the context of time‑share arrangements, which typically
         involve relationships between consumers and commercial enterprises. 
      
      26.   Second, in evaluating the substance of the agreement, the question is whether the principal object of the parties’ agreement
         amounts to a tenancy of immovable property. Thus in Sanders v Van der Putte, the Court held that an agreement whereby one party agreed to take over the running of a flower shop business, and to pay
         to the other part a sum in respect of goodwill and a monthly rent, did not fall under Article 16(1) as the rationale of that
         provision did ‘not apply where the principal aim of the agreement is of a different nature, in particular, where it concerns
         the operation of a business.’ (12) Similarly, in Hacker v Euro‑Relais, the Court found that a complex contract concerning a range of services provided in return for a lump sum paid by the customer
         did not fall under Article 16(1), on the ground that such an agreement was ‘outside the scope within which the exclusive jurisdiction
         laid down by Article 16(1) finds its raison d’être … .’ (13)
      
      27.   Applying this reasoning to the present case, it is my view that, as noted by the referring court in its order for reference,
         the substance, and principal object, of the contract for the Kleins was, albeit via membership of the Sun Beach Holiday Club,
         the right to use an apartment on a time‑share basis. Aside from this right of use, the additional benefits stemming from membership – in
         particular the right of access to the exchange organisation RCI, as well as the right of access to hotel services such as
         reception services – seem, on the basis of the facts before the Court, marginal. (14) In this respect, the present case can be distinguished from the Hacker case, in which the range of additional services provided – including the provision of information and advice, the reservation
         of accommodation, reservation of seats in connection with travel arrangements, and possibly travel cancellation insurance – were
         clearly more substantial. (15)
      
      28.   The third stage in evaluating the contract’s substance is to consider whether the agreement displays the principal characteristics
         of a tenancy of immovable property. As observed by the German Government, as a general rule the essence of such a tenancy
         is the conclusion of an agreement to lease an immovable property for a specified length of time in return for the payment
         of rent. (16) I find the dictum of the Court in Rösler, in which it listed a number of typical features of a lease, instructive in this regard: 
      
      ‘Leases generally contain terms concerning entry into possession by the tenant, the use to which the property is to be put,
         the obligations of the landlord and tenant regarding the maintenance of the property, the duration of the lease and the giving
         up of possession to the landlord, the rent and the incidental charges to be paid by the tenant, such as water, gas and electricity
         charges.’ (17)
      
      29.   A further instructive aspect of the Rösler case for present purposes is its holding that the Article 16(1) exception applies even to a short term lease related only
         to the use and occupation of a holiday home. In reaching this conclusion, the Court held that, in view in particular of the
         uncertainty that would be created if exceptions were to be allowed to the general rule of Article 16(1)(a), this article applies
         to ‘all tenancies of immovable property irrespective of their special characteristics.’ (18)
      
      30.   In the present case, the arrangement in my view displays sufficient characteristics of a ‘tenancy of immovable property’ to
         bring it within Article 16(1). In particular, the contract entitles the Kleins to use an apartment in a hotel complex for
         a specific period each year in return for rent, subject to maintenance charges. Although it would seem, on the basis of the
         order for reference, possible that the Kleins might not return to precisely the same apartment year on year, I do not find
         this sufficient to alter my assessment. To my mind, the rationale of the attribution of exclusive jurisdiction under Article 16(1),
         namely that the courts of the locus rei sitae enjoy special advantages of legal and geographical proximity to the dispute, applies equally to such a situation. (19) In addition, one way of viewing the legal structure of such a time‑share arrangement, which I find useful for present purposes,
         is as an agreement for tenancy of a specific apartment for a particular period, with the proviso of possible arrangements
         to exchange this for another apartment in future years. 
      
      31.   For these reasons, I would conclude that a time‑share arrangement such as that at issue in the main proceedings falls within
         the scope of Article 16(1)(a) of the Convention. 
      
      On the second question
      32.   By its second question, the Oberlandesgericht asks whether, in the event of an affirmative answer to its first question, the
         exclusive jurisdiction resulting from Article 16(1)(a) would extend to a claim based on the right to reimbursement of a sum
         erroneously paid in excess of the contractual rent. 
      
      33.   In my estimation, the exclusive jurisdiction conferred by Article 16(1)(a) does not extend to such a claim. 
      34.   As already observed, as an exception to the more general rules of jurisdiction found in the Convention, the scope of Article 16(1)(a)
         should be interpreted strictly and applied only insofar as is necessary to achieve its objective. (20) Three cases are in my view of particular interest in interpreting this scope for present purposes. 
      
      35.   The first is Reichert, in which the Court adopted a narrow approach to the types of action covered by the provision, holding that, 
      
      ‘Article 16(1) must be interpreted as meaning that the exclusive jurisdiction of the Contracting State in which the property
         is situated does not encompass all actions concerning rights in rem in immovable property but only those which both come within the scope of the Brussels Convention and are actions which seek
         to determine the extent, content, ownership or possession of immovable property or the existence of other rights in rem therein and to provide the holders of those rights with the protection of the powers which attach to their interest.’ (21)
      
      36.   The Court concluded that claims based on the French action paulienne, an action by which creditors could challenge transactions entered into by their debtors in fraud of their rights, did not
         fall within the scope of Article 16(1) as such actions were ‘based on the creditor’s personal claim against the debtor and
         seeks to protect whatever security he may have over the debtor’s estate.’ (22)
      
      37.   Similarly, in Rösler, the Court held that the scope of Article 16(1) extended to, ‘any dispute concerning the existence of tenancies or the interpretation
         of the terms thereof, their duration, the giving up of possession to the landlord, the repairing of damage caused by the tenant
         or the recovery of rent and of incidental charges payable by the tenant, such as charges for the consumption of water, gas
         and electricity … Disputes concerning the obligations of the landlord or of the tenant under the terms of the tenancy fall
         within that exclusive jurisdiction. On the other hand, disputes which are only indirectly related to the use of the property
         let, such as those concerning the loss of holiday enjoyment and travel expenses, do not fall within the exclusive jurisdiction
         conferred by that Article.’ (23)
      
      38.   The final case to consider is Dansommer, which concerned an action for damages for taking poor care of premises and causing damage to accommodation which a private
         individual had rented for a few weeks’ holiday, where the action was not brought directly by the owner of the property but
         by a professional tour operator, to whom the rights of the owner of the property had been subrogated. In holding that such
         an action fell within the scope of Article 16(1), the Court emphasised that, although an action would not fall under this
         provision merely because it was ‘connected’ with immovable property, (24) the crucial question was whether the subject matter of the proceedings was directly linked to a tenancy of immovable property. (25) The fact that the contract at issue contained a clause relating to insurance to cover the costs in the event of cancellation
         was only an ancillary provision which could not alter the status of the tenancy agreement to which it related, in particular
         as this clause was not in issue before the referring court. (26)
      
      39.   Applying this reasoning to the present case, it seems clear from the order for reference that the claim to restore the amount
         paid in excess of the contractual rent is not based on a right or obligation arising under the time‑share agreement. Rather,
         it would seem that the foundation of the claim is an action for unjust enrichment. (27) In my view, such a claim does not fall within the rationale of Article 16(1), that is to say, the hearing of the claim does
         not involve the assessment of facts or the application of rules and practices of the locus rei sitae in such a way as to justify conferring jurisdiction on a court of the State in which the property is situated. (28) As a result, the claim lacks the necessary link of proximity with the jurisdiction in which the property is situated and
         thus, to my mind, falls outside the scope of Article 16(1). (29)
      
      V –  Conclusion 
      40.   I am therefore of the opinion that the Court should give the following answer to the questions referred by the Oberlandesgericht:
         
      
      1)         The concept of proceedings ‘which have as their object … tenancies of immovable property’ under Article 16(1)(a) of the Brussels
         Convention extends to an action such as that at issue in the main proceedings concerning the right, for a particular week
         each year for almost 40 years, to use an apartment in a hotel complex. 
      
      2)         The scope of Article 16(1)(a) does not extend to the right to reimbursement of a sum erroneously paid in excess of the amount
         demanded in consideration for use of an apartment. 
      
      1 –	 Original language: English.
      
      2  – OJ 1998 C 27, p. 1. 
      
      3  –	Case C‑115/88 Reichert v Dresdner Bank [1990] ECR I‑27, paragraph 10. See also Case 73/77 Sanders v Van der Putte [1977] ECR 2383, paragraphs 13 to 15.
      
      4  –	OJ 1979 C 59, p. 35. 
      
      5  –	The Commission gives the illustration of a purchaser becoming a member of a company, which in turn is the legal owner
         of the time‑share property. Membership of the company would be linked to the right to use the property on a part-time basis
         for a certain number of years at a certain period of the year. 
      
      6  –	Directive 94/47/EC of the European Parliament and the Council of 26 October 1994 on the protection of purchasers in respect
         of certain aspects of contracts relating to the purchase of the right to use immovable properties on a time‑share basis, OJ
         1994 L 280, p. 83. 
      
      7  –	Preamble, paragraph 3. 
      
      8  –	Preamble, paragraph 4. 
      
      9  –	Preamble, paragraph 2; see also, Article 1 of the Directive. 
      
      10  –	Sanders, footnote 3 above, paragraph 18. 
      
      11  –	Reichert, footnote 3 above, paragraph 8. 
      
      12  –	Sanders, footnote 3 above, paragraph 16. 
      
      13 –	Case C‑280/90 Hacker v Euro‑Relais [1992] ECR I‑1111, paragraph 15.
      
      14  –	See, by analogy, Case C‑8/98 Dansommer v Götz [2000] ECR I‑393, paragraph 34. 
      
      15  –	See also, by analogy, the ancillary nature of the insurance services provided in Dansommer, footnote 14 above. 
      
      16  –	See, for example, the Court’s judgment in Case 241/83 Rösler v Rottwinkel [1985] ECR 99. 
      
      17  –	Rösler, footnote 16 above, paragraph 27. 
      
      18  –	Rösler, footnote 16 above, paragraphs 23 and 24. 
      
      19  –	See also, the reasoning of the Court of Appeal of England and Wales (Civil Division) in Jarrett v Barclays Bank [1996] EWCA Civ 847: ‘in the light of the Court’s decision in Rösler v Rottwinkel I can see no reason for denying to the agreements in these cases the status of tenancies within Article 16(1). In each case
         one party is entitled to the exclusive occupation of immovable property assumed by the contract to be owned by the other for
         a specified period in return for a sum of money … All the considerations which led to the Court construing Article 16(1) so
         as to include short term lettings apply as much to the agreements in these cases as to the short term letting in Rösler’ (per Morritt LJ). 
      
      20  –	See, for example, Dansommer, footnote 14 above, paragraph 21. 
      
      21  –	Reichert, footnote 3 above, paragraph 11. This mirrors the reasoning of the Jenard Report, which states that: ‘In providing for the
         courts of the State in which the property is situated to have jurisdiction as regards tenancies in immovable property, the
         Committee intended to cover disputes between landlord and tenant over the existence or interpretation of tenancy agreements,
         compensation for damages caused by the tenant, eviction, etc. The rule was not intended by the Committee to apply to proceedings
         concerned only with recovery of rent, since such proceedings can be considered to relate to a subject matter which is quite
         distinct from the rented property itself.’
      
      22  –	Reichert, footnote 3 above, paragraph 12. 
      
      23  –	Rösler, footnote 16 above, paragraph 29. 
      
      24  –	Dansommer, footnote 14 above, paragraph 22. 
      
      25  –	Dansommer, footnote 14 above, paragraph 25. 
      
      26  –	Dansommer, footnote 14 above, paragraph 34. 
      
      27  –	See by analogy the reasoning of the Court of Appeal on the third question considered in Jarrett v Barclays Bank, footnote 19 above. 
      
      28  –	See by analogy Reichert, footnote 3 above, paragraph 12. 
      
      29  –	See, by analogy, Case 189/87 Kalfelis [1988] ECR 5565, in which the Court rejected argument that only one jurisdiction should be competent to hear all the issues
         arising in a proceeding concerning Article 5(3) of the Convention.