International trade offers not only many opportunities, but also some risks.
One of these risks is the choice of the right forum. Although more and more contracts provide for an agreement on the place of jurisdiction, it happens again and again that legal action is brought before the wrong court abroad.
The problem is that even if you decide in favour of these proceedings, you often have to sit on your lawyer’s fees.
In particular, the reimbursement of extrajudicial attorney fees is a German speciality.
If you are therefore wrongly sued in the USA, Belgium or Denmark, for example, you cannot demand reimbursement of your – sometimes very high – costs there.
From a commercial point of view, the question always arises, of course, how to get your money anyway. This is where the new case law of the Federal Court of Justice comes into play.
BGH: Compensation for damages in case of lawsuit before wrong court
In its decision of 17.10.2019 (III ZR 42/19), the BGH addressed this unfortunate situation.
In the case at issue, two telecommunications companies were linked by a contract. The so-called “Internet Peering Agreement” provided for the application of German law and the place of jurisdiction was Bonn.
Nevertheless, the Washington D.C. based plaintiff filed a lawsuit in the District Court. The latter dismissed the action, citing the agreement conferring jurisdiction on the Bonn court.
The only problem for the defendant was that, according to the American Rule of Costs, its attorneys’ fees were not recoverable.
Now that the plaintiff had filed its suit before the Bonn District Court, the defendant made its $196,118.03 in attorneys’ fees count as a counterclaim.
In the last instance, the BGH ruled in principle in favour of the counterclaim.
The agreement on the place of jurisdiction and the agreement on German law shall impose on the parties an obligation to bring an action before the competent court. According to the BGH, the purpose of a jurisdiction agreement is to make legal disputes economically plannable. This can only be guaranteed if this agreement is accompanied by a claim for reimbursement of costs.
The choice of German law meant that § 280 (1) BGB was also applied. Accordingly, the breach of an obligation led to a claim for compensation for that damage.
The culpable appeal to the court in Washington D.C. thus led to the obligation to reimburse the lawyer’s fees.
This must be taken into account in the case of jurisdiction agreements
Agreements on the place of jurisdiction are thus more than just procedural rules.
Lawsuits in the wrong court can cost a lot of money. These costs are avoidable if you know what to consider.
When choosing your lawyer, pay attention to your expertise in international business.
We at O&W Rechtsanwälte have been advising companies in international trade for over 30 years. We navigate you safely to the right place of jurisdiction.
Do you act internationally and want to protect yourself against legal disputes? Our lawyers specializing in international trade will examine your case and get you safely to your destination