Check the court’s jurisdiction before bringing an action

Picking the correct court to handle a case first time can save time and money. Norwegian company Marin Alpin AS sued Swiss company Würth International AG in the district court where it had its main offices for alleged violation of the unfair competition rules set out in the Marketing Control Act. Marin claimed that Würth was liable for damages after copying a sports jacket. The disputed jackets had been distributed internally in the Würth group in some European countries, but not in Norway. Marin contended that Würth was liable for product imitation under Sections 8(a) and 1 of the Marketing Control Act. Since the jackets had not been distributed in Norway, the issue of jurisdiction came into play. The district court found that it had jurisdiction and ruled in favour of Marin, which was awarded damages of Nkr750,000 and costs of Nkr281,000. Würth appealed.

On 8th October 2010 the Agder Court of Appeal dismissed the case, holding that the Norwegian courts had no jurisdiction. Its decison was based on an interpretation of Article 5(3) of the Lugano Convention, which mirrors the Brussels Regulation.

The appeal court reasoned as follows. The parties agreed that the matter was governed by the Lugano Convention and that Marin’s claim was a non-contractual claim based on tort, delict or quasi-delict, in the sense of Article 5(3) of the Lugano Convention. However, the parties disagreed when it came to deciding where the harmful event occurred. The court held that if an action for damages is to be brought in Norway on the basis of Article 5(3), either the act causing the harm must have occurred in Norway or the damages must have materialised in Norway. In the case in hand, it was the latter alternative that was of interest.

Referring to European Court of Justice (ECJ) Cases C-220/88 (Dumez), C-68/93 (Shevill), C-364/93 (Marinari) and C-168/02 (Kronhofer), the appeal court stated that the place where the immediate damage or harm occured was decisive, not where any indirect losses or damages occurred.

The decision was split. A majority of two judges found that no such direct and immediate damages had been caused to Marin in Norway. They referred to the main rule in Article 2 of the Lugano Convention, which provides that persons domiciled in the contracting state shall be sued in the courts of that state.

The majority referred to the ECJ, which appears to be rather restrictive when it comes to interpreting the term “the place where the harmful event occurred”.

Marin claimed that the loss to be compensated was the loss of income from sale of the jackets to Würth, or alternatively Würth’s profits, which equalled their savings on the jackets being made for them in China instead of buying them from Marin Alpin. Thus, it was Würth’s exploitation of a jacket specially designed by Marin that was the basis for the claim. However, the majority of the judges found that the direct and immediate effects of any violation of the Norwegian fair competition rules, or of a general duty of loyalty during and after contract negotiations, could be deemed to have occurred only where Würth’s jackets had actually been distributed or marketed. The majority found that the financial loss that Marin claimed to have suffered was an indirect consequence of acts that occurred abroad. The fact that the loss was eventually felt by Marin in Norway was irrelevant. If one were to apply the provisions of the Lugano Convention in such a way as asserted by Marin, the main rule and principle in Article 2 would be undermined.

The minority held that since Marin had claimed compensation for the unlawful act – not compensation for the loss – the compensation was an immediate indirect effect that warranted an action in Norway under Article 5(3).

The appeal court dismissed Marin’s action and awarded Würth full costs for the appeal, but did not award the costs incurred in the district court.

Marin has lodged an appeal to the Supreme Court. Only about 15% of all appeals are granted a hearing before the Supreme Court, so it is unlikely that the appeal will be heard. If the case is heard, it will be interesting to see how Norway's highest court views this issue.

Regardless of the outcome, plaintiffs that wish to enforce their rights and their legal advisers are advised to look carefully into the question of jurisdiction to avoid the risks of wasting time and money, and having to start again before the courts of a different country.

This is an Insight article, written by a selected partner as part of IAM's co-published content. Read more on Insight

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