On 13 March 2019, the Swiss Supreme Court (case No. 4A_444/2018, selected for official publication) held that a contract may contain several characteristic performances, each of which establishes territorial jurisdiction at the place of performance under the Swiss Code of Civil Procedure (CCP) or the Swiss International Private Law Act (PILA). Although this finding follows the prevailing view of the scholars, it partially conflicts with the principles enacted under the Lugano Convention. A Swiss court’s jurisdiction may thus vary depending on the applicable procedural law.

The reported dispute originates from a contract entered into for the construction of a filling station. The claimant filed action before the court at the place of the construction site. The court of first instance decided that the contract qualified as an “architect’s or planner’s contract” providing, on one hand, for planning and advisory tasks, governed by the statutory provisions on contracts for work and services, and, on the other hand, for monitoring and construction management responsibilities, governed by the statutory provisions on agency contracts. As none of the two areas prevailed, the court of first instance held that the contract contains more than one characteristic performance and accepted territorial jurisdiction because the disputed monitoring and construction management responsibilities were to be performed at the construction site.

Until the Federal Supreme Court’s decision, it had been controversially discussed which principle should apply to determine the territorial jurisdiction under the CCP or the PILA if a contract provides for several non-monetary performances, none of which appears to be characteristic on a prima facie basis. According to Article 31 CCP “[t]he court at the domicile or registered office of the defendant or at the place where the characteristic performance must be rendered has jurisdiction over actions related to contracts“. Similarly, for international transactions, Article 113 PILA grants Swiss courts with territorial jurisdiction “[i]f the characteristic performance of the contract is to be rendered in Switzerland […]”. The majority of the scholars are of the opinion that these provisions give way to multiple places of jurisdiction if a contract has more than one performance, which qualifies as characteristic performance under the contract. Other commentators, however, deny that more than one contractual performance may be qualified as characteristic because this would unnecessarily multiply the possible places of jurisdiction.

In its reasoning, the Federal Supreme Court followed the majority opinion. The judges held that the wording of Articles 31 CCP and 113 PILA does not exclude the possibility that a contract may have more than one characteristic non-monetary performance and that therefore several places of performance may exist. Also, in their opinion, the closest connection test, invoked under the PILA to determine the law applicable to a contract in the absence of a parties’ choice, does not apply to the determination of a court’s jurisdiction. Rather, the reference to the closest connection was ultimately intended to prevent individual aspects of a contract from being judged according to different laws. With regard to the question of jurisdiction, however, there is no comparable situation, since a competent court has jurisdiction over all objectively connected claims. Lastly, the Federal Supreme Court held that from a practical perspective, parties would often be in a situation where a contract provides for more than one contractual performance. In order to avoid legal uncertainties in such situations, the parties should thus be able to bring their dispute before any of the courts at the place of these characteristic performances.

For the sake of completeness, it must be highlighted that the Federal Supreme Court’s decision was rendered under the rules of the Swiss CCP/PILA. The Lugano Convention, on the other hand, provides for a partially different legal regime. Under Article 5.1 of the Lugano Convention, territorial jurisdiction is at the place of performance of the disputed contractual performance [1], except for purchase and service contracts, where jurisdiction is at the place of the characteristic performance [2]. The place of performance for purchase and service contracts is established independently from the lex causae, whereas in the case of the other contracts, the lex causae determines the place of performance.

The Federal Supreme Court, in its decision, left it open to what extent the considerations under the Lugano Convention shall be decisive also with regard to establishing a jurisdiction under the CCP/PILA. In order to avoid uncertainties with regard to jurisdictional competence to the greatest extent possible, it may thus in the future be advisable to contractually define both the characteristic performance(s) as such as well as the place where such performances shall be rendered.

(1) Article 5.1.a Lugano Convention: “A person domiciled in a State bound by this Convention may, in another State bound by this Convention, be sued: in matters relating to a contract, in the courts for the place of performance of the obligation in question“.

(2) Article 5.1.b Lugano Convention: “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 State bound by this Convention 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 State bound by this Convention where, under the contract, the services were provided or should have been provided“.

Valentina Hirsiger
Author

Dr. Valentina Hirsiger is a member of Baker McKenzie’s Arbitration and Litigation Group in Zurich. Prior to joining the Firm as an associate in 2016, Dr. Hirsiger worked as a law clerk in a Swiss district court. She was also an associate lecturer and research assistant at the University of Zurich. Dr. Hirsiger obtained a PhD (Dr. iur.) for her doctoral thesis on arbitration clauses in articles of association of Swiss corporations.

Author

Lukas Innerebner is a trainee lawyer in the Arbitration and Litigation Group of Baker McKenzie in Zurich.