Provisional text
OPINION OF ADVOCATE GENERAL
RICHARD DE LA TOUR
delivered on 5 September 2024 (1)
Case C‑526/23
VariusSystems digital solutions GmbH
v
GR Inhaberin B & G
(Request for a preliminary ruling from the Oberster Gerichtshof (Supreme Court, Austria))
( Reference for a preliminary ruling – Judicial cooperation in civil matters – Regulation (EU) No 1215/2012 – Jurisdiction and the recognition and enforcement of judgments – Special jurisdiction in matters relating to a contract – Article 7(1)(b) – Provision of services – Software developed and operated in one Member State, adapted to the individual needs of a user resident in another Member State – Place of performance )
I. Introduction
1. Both business professionals and individuals now use software (2) and the internet on a permanent basis. The service consisting in the development of software adapted to specific business needs is also very frequent in practice. The economic stakes in that area are high.
2. It is surprising, therefore, to find that the Court has not thus far been required to consider a question for a preliminary ruling relating to the choice of international jurisdiction in matters relating to a contract, provided for in Article 7(1)(b) of Regulation (EU) No 1215/2012, (3) in the context of international disputes having the provision of online IT services as their subject matter.
3. That is explained, in my view, by the existence of jurisdiction or choice of applicable law clauses, depending on the contractual practices in that sphere of activity. (4)
4. Consequently, the absence of any agreement in the case in the main proceedings provides the Court with the opportunity to clarify the connecting factors with the competent court and to overcome the following contradiction: how is the option of international jurisdiction based on the actual location of the provision of services to be interpreted when those services are provided via the internet? In other words, how is the material criterion decided on by the EU legislature to be defined in an immaterial context?
5. Admittedly, that problem is not a novel one for the Court, as may be seen from its case-law on the choice of jurisdiction in matters relating to tort. However, that case-law is based on approaches that cannot be transposed to matters relating to a contract. Thus, the discussion concerns the specific alternative, as proposed by the Oberster Gerichtshof (Supreme Court, Austria), the referring court, which is as follows: in the absence of contractual provisions, must the place of design of the software or the place of its use be accepted?
6. I am going to set out the reasons why, in the particular context of the provision of IT services over an open network such as the internet, I am of the view that the criterion chosen should be that of the place where the service materialises for the user. (5)
II. Legal framework
7. Recitals 15 and 16 of Regulation No 1215/2012 state:
‘(15) The rules of jurisdiction should be highly predictable and founded on the principle that jurisdiction is generally based on the defendant’s domicile. Jurisdiction should always be available on this ground save in a few well-defined situations in which the subject matter of the dispute or the autonomy of the parties warrants a different connecting factor. …
(16) In addition to the defendant’s domicile, there should be alternative grounds of jurisdiction based on a close connection between the court and the action or in order to facilitate the sound administration of justice. The existence of a close connection should ensure legal certainty and avoid the possibility of the defendant being sued in a court of a Member State which he could not reasonably have foreseen. …’
8. Article 4(1) of that regulation provides:
‘Subject to this Regulation, persons domiciled in a Member State shall, whatever their nationality, be sued in the courts of that Member State.’
9. Article 7(1) of that regulation provides:
‘A person domiciled in a Member State may be sued in another Member State:
(a) in matters relating to a contract, in the courts for the place of performance of the obligation in question;
(b) for the purpose of this provision and unless otherwise agreed, the place of performance of the obligation in question shall be:
– in the case of the sale of goods, the place in a Member State where, under the contract, the goods were delivered or should have been delivered,
– in the case of the provision of services, the place in a Member State where, under the contract, the services were provided or should have been provided;
(c) if point (b) does not apply then point (a) applies.’
III. The facts of the main proceedings and the question referred for a preliminary ruling
10. VariusSystems digital solutions GmbH, (6) which has its registered office in Vienna (Austria), operates in the IT services sector. It developed software for GR, the owner of the company B & G, which is established in Germany, making it possible to evaluate Covid-19 tests in accordance with the requirements of the German legislature and for use in German test centres. (7) The subject matter of the contract was the development (8) and operation (9) of the software in Germany. The parties to the main proceedings did not conclude a written contract and did not designate either a place of jurisdiction or a place of performance in the event of a dispute.
11. VariusSystems claimed payment from GR of a total sum of EUR 101 587.68, plus interest, for the period from 1 January 2022 to 3 June 2022, corresponding to the invoicing for each Covid-19 test carried out. It based the jurisdiction of the Austrian courts on the second indent of Article 7(1)(b) of Regulation No 1215/2012, on the ground that, although the software was specially adapted and developed in accordance with the needs of GR’s company for use in Germany, all the work was carried out in Vienna.
12. It is apparent from the documents in the file submitted by the referring court that the dispute between the parties has its origin in what are alleged by GR to be defects in the software provided, in particular as regards compliance with the requirements of the German legislature and of the Kassenärztliche Bundesvereinigung (Federal Association of Approved Medical Practitioners, Germany) relating to the invoicing of the screening tests and to the method of sending test certificates to the ‘Corona-Warn-App’ application.
13. GR disputed the international jurisdiction of the court before which the action was brought. It observes that the characteristic service in the contract in question was the use of operational software in accordance with the requirements of the German legislature for natural persons in Germany, and infers that the place of performance must be held to be its registered office.
14. The Landesgericht Wien (Regional Court, Vienna, Austria), declined its international jurisdiction and dismissed the action. It classified the contract between the parties as a ‘contract of sale’ and considered that the place of performance is the registered office of GR’s company in Germany.
15. The Oberlandesgericht Wien (Higher Regional Court, Vienna, Austria) upheld that decision, but classified the contract as a ‘provision of services’, within the meaning of the second indent of Article 7(1)(b) of Regulation No 1215/2012, on the ground, in particular, that the software was to be specially adapted and developed to meet the needs of GR’s company, in accordance with the requirements of the German legislature. Taking the view that services which do not relate to a specific place are deemed to be provided in the place where the beneficiary receives those services, it considered that, in this instance, that place is in Germany, where the software that must be specifically adapted to the German situation is available, which constitutes the characteristic service of the contract.
16. VariusSystems then lodged an appeal on a point of law before the Oberster Gerichtshof (Supreme Court), which also considers that the second indent of Article 7(1)(b) of Regulation should be applied where the development of individual software is concerned.
17. According to the referring court, it is necessary to determine the place where the service is mainly provided, (10) which means that the place where the intellectual service is provided, and not the place where the software is accessed and used, should be deemed to be the place of performance of the software development contracts.
18. However, the referring court is uncertain as to the relevance of such a solution because of certain views expressed in the literature, according to which if a service does not relate to a particular place, it is deemed to be provided where the beneficiary of the service has access to it.
19. It emphasises that, in this case, the intellectual service provided in Austria would have no independent value in itself if it could not be accessed and used in Germany, particularly since VariusSystems claims that it was to be remunerated for each successful test carried out. The referring court adds that the courts of the place where the software is used would no doubt be better placed to decide on the substantive issues relating to the performance of the contract owing to the proximity of the facts and evidence. It therefore wonders whether, for the purpose of determining the place of performance in the case of remote services, as is the case here, it is the place where the service provider carried out the work, or rather the place in respect of which the service was provided and where the beneficiary was able to access it, that is decisive.
20. In those circumstances, the Oberster Gerichtshof (Supreme Court) decided to stay the proceedings and to refer the following question to the Court for a preliminary ruling:
‘Must Article 7(1)(b) of Regulation [No 1215/2012] be interpreted as meaning that, in the case of an action relating to a contract, the place of performance for the development and ongoing operation of software designed to meet the individual needs of a customer established in Member State A (in this case Germany) is at the place where
(a) the intellectual creation (“programming”) behind the software is performed by the undertaking established in Member State B (in this case Austria); or
(b) the software reaches the customer, that is to say where it is accessed and used?’
21. VariusSystems, GR and the European Commission lodged written observations.
IV. Analysis
22. The Court has before it a novel question relating to the interpretation of Article 7(1)(b) of Regulation No 1215/2012 in the context of the provision of software developed and operated by an editor in one Member State to meet the specific needs of a user in another Member State.
23. As a preliminary point, it is necessary to determine the classification of the contract. Owing to the characteristics of the contractual obligations in question, (11) I share the view of the parties and the referring court that the contract in question is covered by the concept of ‘provision of services’.
24. Reference should be made to the principles set out in the judgment of 14 September 2023, EXTÉRIA, (12) and to the criteria defined in the judgment of 25 February 2010, Car Trim. (13) They make it possible to decide between two classifications of the contract, that of ‘sale of goods’ or that of ‘provision of services. (14) Thus, according to the Court’s consistent case-law, it is necessary to ascertain the obligation that characterises the contract at issue and the consideration for its performance. In the present case, VariusSytems’ activity consisted in editing software adapted to meet the needs of GR’s company and ensuring the operation of that software. That activity constitutes the provision of services performed in consideration of remuneration payable by GR for each use of the service. (15) The criteria of the ‘provision of services’, within the meaning of the second indent of Article 7(1)(b) of Regulation No 1215/2012, are therefore satisfied. (16)
25. It is therefore appropriate to examine the answer to be given to the single question referred for a preliminary ruling, whereby the referring court asks the Court, in essence, whether the place of performance of a contract for the ‘provision of services’, within the meaning of the second indent of Article 7(1)(b) of Regulation No 1215/2012, in the case of the online provision (17) of software, is to be determined as being the place where the software was developed (18) by an IT services company or, on the contrary, as being the place where the software was used by its customer.
26. In the absence of information that can be derived from contractual provisions that would permit the place of performance of the contract to be determined, given that there is no contract or any other document, (19) the answer to that question must be based on the following two main considerations, recently referred to by the Court: (20)
– the rule of special jurisdiction in matters relating to a contract, laid down in Article 7(1) of Regulation No 1215/2012, based on the existence of a close link between the contract concerned and the court called upon to deal with the matter, supplements the general rule of the jurisdiction of the courts for the defendant’s domicile, and
– the connecting factor in respect of that contract, defined autonomously as being the place in a Member State where, under that contract, the services were provided or should have been provided, was chosen in order to reinforce the objectives of unification and foreseeability of the rules of jurisdiction and, consequently, of legal certainty.
27. In other words, that rule of special jurisdiction, conceived in order to be distinguished from the general jurisdiction rule, is based on a purely factual test which leads to the designation of a court directly connected with the case in order to satisfy the requirements of the good administration of justice. (21)
28. That logic and that purpose lead me to consider, with respect to the provision of online services by an IT services company, and in the absence of any choice by the EU legislature in such an immaterial sphere, that the appropriate connecting factor is that of the place of actual performance of that contract, (22) namely the place from which the customer actually has access to the online service or, in other words, ‘the place where the online activity has the greatest impact’, (23) or again ‘the place of the final provision of the services’. (24)
29. Four types of argument – based on the text, the case-law, practical considerations and the applicable law – favour the choice of the ‘use of the service’ criterion rather than the ‘sending of the service’ criterion.
30. The first of these arguments is a textual argument based on the expression ‘the place … where, under the contract, the services were provided or should have been provided’. (25) The provision of a service (26) must therefore be distinguished from its conception.
31. The second argument relates to the situation not envisaged by Article 7(1)(b) of Regulation No 1215/2012, namely the absence of criteria derived from the contract, where the Court has chosen, for the remote sale of goods, the criterion of the ‘final destination’ of that operation. (27) For the provision of services, where there is more than one place of performance of the obligation that characterises such a contract and it is impossible to identify, on the basis of that contract, the place of the main provision of services, (28) the place where the activities have for the most part been carried out in the performance of the contract has been chosen, in the alternative. (29) The Court confirmed the choice of the criterion of the actual performance of the contract (30) in the judgment in Saey Home & Garden. (31) Thus, the choice of the final use of the online service is consistent with that case-law, (32) which to my mind must not be confined solely to cases where the provision of services is carried out in several Member States. (33)
32. However, I note that opinions to the contrary are also based on the Court’s case-law.
33. First, as is apparent from the request for a preliminary ruling and from the documents on the file, the discussion centres on the criterion adopted in the judgment in Wood Floor as designating the place where the provider carries out the main part of its work, which in the present case would favour the place where the intellectual service was provided.
34. I myself consider that it follows from both the judgment in Wood Floor and the judgment in Saey Home & Garden, both based on the criterion of the actual performance of the contract, in the absence of contractual provisions, that it is necessary to ascertain the place where the provision of service materialises. Thus, in the relationship between a principal and a commercial agent, like that existing between a supplier and a distributor under a commercial franchise agreement, the chosen forum is that corresponding to the essential part of the activity, which consists, in the first case, in providing various services entailing the preparation, negotiation and, where appropriate, conclusion of commercial transactions by the agent on behalf of the principal (34) and, in the second case, in distributing the supplier’s products. (35)
35. It should further be noted that those decisions were adopted in the light of particular circumstances, resulting from the fact that the activities took place in several Member States, and that they are therefore perfectly consistent with (36) the judgment in Color Drack, in a case involving the sale of goods delivered in different places in the same Member State, (37) and the judgment of 9 July 2009, Rehder, (38) in a case where services were provided in two Member States. (39)
36. The scope of that case-law would be too wide if it gave rise to the inference that the place of the provision of the service is in every case that of the recipient of the service performed. The Court identified a number of specific factors that would be of assistance in the identification of the place of performance of the service which it is for the national court to determine according to the situations which it is required to assess. (40)
37. To my mind, moreover, that case-law indicates that for the purpose of ascertaining the location of the activity it is preferable to take an economic approach, in order to better satisfy the requirements of proximity and foreseeability. That approach seems to me to be particularly suitable for the provision of IT services carried out online, owing their immaterial nature, as long as the beneficiary of the services has not had access to them.
38. Second, it may also be maintained, because of that immaterial nature, (41) that the Court has already been required to deal with a similar situation, namely that of a contract for credit agreed by a banking institution. (42) Taking the view that the characteristic obligation of that contract is the granting of the sum loaned, while the borrower’s obligation to repay that loan is merely a consequence of the performance of the service by the lender, the Court held that the place where the services were provided, within the meaning of the second indent of Article 7(1)(b) of Regulation No 1215/2012, is, in the case of a credit institution granting a loan, the place where that institution has its registered office. (43)
39. I note, in that regard, that the Court took into consideration the characteristics of the provision of services by a bank which did not relate to a specific place and that it was not required to rule on a case of a bank transfer to an account in a Member State other than that of the bank’s registered office. (44)
40. For those reasons, the solution adopted in the judgment in Kareda cannot in my view be applied by analogy to a case involving the online provision of software, particularly in a cross-border context.
41. The third argument, relating to the practical considerations that also constitute the basis for the discussion, leads me to reject the argument that, in essence, the obligation that characterises a contract for the provision of online services can only be the obligation for the provider to upload the digital content, on the ground that the location of that supply cannot depend on the intervention of the customer. (45) In that situation, the place from which the provider actually deploys its activity should be chosen.
42. While I support the analysis on which that argument relies in part, namely that activities deployed online can always be connected with actual places, (46) I consider that the recommended solution does not take into consideration the diversity of those activities by reason of both their nature (47) and their potential location. (48)
43. The service provided by an IT services company may take place at different stages, in whole or in part: at the stage of the development of the software (or the creation stage), the stage of deployment (or the stage at which it is implemented for the customer) and the operation stage (or the stage at which its proper functioning is ensured). Those various activities do not necessarily take place at the registered office of the undertaking that provides the service or services in question.
44. I infer, first of all, as does the Commission, that the conception and programming of software do not constitute the obligation that characterises the contract for the provision of software, since, without deployment, the service would not be effective for the customer. (49) It is from that stage that the software can be used, after being tested, and that its quality can be monitored. That activity is carried out at the place where the user can access the software. I am thus of the view that that stage of the service must be distinguished from the operation stage. Since the latter stage does not require new IT developments, it is merely an ancillary obligation that cannot form the basis of a connecting factor.
45. Next, as the Commission correctly submits, the editor’s activity may be located away from the undertaking’s registered office. (50) The same applies to the activity of the deployment of the software. In addition, the latter activity may be carried out by the editor or by any other digital content provider, either directly online to the customer’s devices or, by being made available on line, via the provider’s website, through the internet, for example, or via an IT platform, (51) or under a cloud computing service contract. (52)
46. Accordingly, multiple criteria for the location of the software provision activity may be ascertained on the basis of Article 7(1)(b) of Regulation No 1215/2012, with the exception however of any connection based on the location of the server. (53) In that regard, the actual difficulties of location that the customer of an online service may face seem to me to emerge clearly from the factual circumstances described by the referring court and from its own questions. The following questions arise in the present case: must a distinction be drawn between the service consisting in the initial development (or conception) of the software and the maintenance (or monitoring) service, when they are closely linked because of the regular updating of the software? Are those services both implemented from the same place? How was the software deployed (or made available) by the editor (VariusSytems)? In the absence of detail in the order for reference or findings made in the earlier decisions adopted in the main proceedings, which were submitted to the Court, can it not be presumed, owing to the invoicing method, that software of the ‘Software as a Service’ type (54) was deployed on a platform and not installed on the devices of the customer who downloaded it? To my knowledge, in most cases over the last decade, (55) concerning online IT services, the customer has had access to the software via a network (the internet, for example), from the customer’s own computer or any other device by means of a cloud computing service. (56)
47. Last, the diversity of those methods of providing IT services, and their constant technological and economic development, (57) might in my view be sufficient to justify the only certain and therefore foreseeable place of performance of a contract for the online provision of services being the place where those services are actually enjoyed. (58)
48. That preference for the place where the service or services provided is or are received or used has the advantage that it does not cause the connecting factors to vary depending on the different stages in the provision of services and does not subject the user to the choice of location for carrying out those services, when, in addition, the economic tendency is to outsource them to third countries. Conversely, to consider that in all cases software is developed at the registered office of the editor might constitute a fiction, enshrining a forum actoris, contrary to the objectives of Article 7(1)(b) of Regulation No 1215/2012. (59)
49. Furthermore, such an adaption of the connecting factors to the complexity of the actual performance of the services would not be novel. It has already prevailed in matters relating to air transport, as the Court has favoured the place where the service is enjoyed, namely the departure of the first flight and the arrival of the last flight. (60)
50. Admittedly, choosing the criterion of the final destination of the service may present comparable difficulties, where access to a service deployed for a customer is used in different places. In the present case, that appears to be the situation in Germany, on a reading of the file submitted to the Court. According to the Court’s consistent case-law, it is sufficient to ascertain the place of performance of the essential part of the activity in the Member State concerned. (61) The same would apply if the online service were to be used in several Member States. (62) Last, that place, to my mind, is foreseeable for the IT services provider. The specifications with which the provider must comply in the case of the development of software are generally subject to the law of the State in which it will be deployed. (63) In those circumstances, in the case of equivalent use in different places, it seems pointless to me to apply the jurisdiction rule laid down in Article 7(1)(b) of Regulation No 1215/2012, as the objective of proximity does not warrant it. (64)
51. The fourth argument leads me to address a final supplementary element of the analysis, relating to the law applicable to the contract. In the absence of a choice of law, which is the position here, Article 4(1)(b) of 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), (65) provides that ‘a contract for the provision of services shall be governed by the law of the country where the service provider has his habitual residence’. (66) Thus, the choice of such a connecting factor with the competent court would be confirmed. (67) To my mind, that argument is not decisive. First, there is a legislative discordance between the objective of proximity which results from the choice of a special jurisdiction criterion in matters relating to a contract (68) and the objectives relating to the determination of the law applicable to the contract. Second, where a criterion of jurisdiction according to the place of actual performance of the contract for its beneficiary is chosen, the solution consisting in applying Article 4(3) of the Rome I Regulation (69) is in my view well founded. (70)
52. Consequently, it follows from an examination of the grounds that would justify favouring as a jurisdiction criterion that of the place of the registered office of the company which developed the software that they are not of such a kind as to call in question those which I have set out to support the conclusion that, in the field of the provision of software, whether standard or personalised, where the use of the software is subject to the provision of a service, such as online access, it is particularly appropriate to choose as a criterion of jurisdiction, based on Article 7(1)(b) of Regulation No 1215/2012, that of the place where the person for whom that service is provided actually benefits from it.
V. Conclusion
53. In the light of all of the foregoing considerations, I propose that the Court should answer the question for a preliminary ruling referred by the Oberster Gerichtshof (Supreme Court, Austria) as follows:
Article 7(1) of Regulation (EU) No 1215/2012 of the European Parliament and of the Council of 12 December 2012 on jurisdiction and the recognition and enforcement of decisions in civil and commercial matters
must be interpreted as meaning that the place of performance of the online provision of software is, in the absence of contractual provisions permitting that place to be determined, the place in which the customer uses that software.