THE BOTTOM LINE
- Sellers Gain Home-Court Advantage: If you sell goods “Ex Works” (EXW) from multiple locations within one EU country, you can now sue a non-paying foreign buyer in the local court of your choice corresponding to any of those delivery locations.
- Reduced Costs and Complexity: This ruling allows businesses to pursue cross-border claims more efficiently. Litigating in your own country is typically faster and less expensive than having to sue in your customer’s Member State.
- Contract Certainty is Key: The decision empowers sellers but highlights the need for precise contract drafting. Clearly specifying the exact EXW collection points in your sales agreements is now crucial to securing this jurisdictional advantage.
THE DETAILS
The case before the Court of Justice of the European Union (CJEU) involved a common commercial scenario: a cross-border sale gone wrong. A Lithuanian company, Linas Agro, sold rapeseed to a Polish company, Polcotton, under a single framework agreement. The contract specified delivery on an “Ex Works” (EXW) basis from various locations across Lithuania. When the Polish buyer failed to pay the full amount, the Lithuanian seller sued in a Lithuanian court. The buyer contested this, arguing that under EU law, they should be sued in their home country of Poland. This created a critical question of jurisdiction that impacts any business trading goods across EU borders.
Under the EU’s Brussels I Regulation, which governs jurisdiction in civil and commercial matters, the general rule is that a defendant must be sued in the courts of their own Member State. However, a crucial exception exists for contracts involving the sale of goods: the seller can instead sue in the courts for the “place of performance,” meaning the location where the goods were, or should have been, delivered. The legal ambiguity here was what happens when a single contract has multiple places of delivery. Polcotton argued that this ambiguity meant the general rule (suing in Poland) should apply. Linas Agro contended that any of the Lithuanian delivery locations provided a valid basis for a Lithuanian court to hear the case.
The CJEU sided decisively with the seller. The Court clarified that for an EXW contract, the “place of performance” is the specific physical location where the seller makes the goods available for the buyer to collect. More importantly, the Court ruled that when a contract identifies several such places of performance within a single Member State, the seller has the right to sue the buyer for the entire claim in the court of their choosing for any one of those locations. The Court’s reasoning was based on predictability and proximity; a court close to a delivery location is best placed to gather evidence. This judgment provides welcome clarity and a significant strategic advantage for sellers engaged in intra-EU trade.
SOURCE
Source: Court of Justice of the European Union
