Thursday, 5 November 2015

Jurisdiction in matters relating to a contract for the exchange of cryptocurrency units with traditional currencies

A court addressing the question whether it has jurisdiction to hear and determine a case in commercial matters decides it by applying its rules of jurisdiction. One of the most influential instruments containing rules of jurisdiction is the EU Regulation No 1215/2012 (a.k.a. Brussels Recast or Brussels I-bis). This post will consider under Article 7(1) of this regulation jurisdiction in matters relating to a contract for the exchange of cryptocurrencies with traditional currencies. Article 7 provides:

A person domiciled in a Member State may be sued in another Member State:
(1) (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;
(2) ... 

To begin with, a contract for the exchange of cryptocurrencies with traditional currencies is unlikely to be deemed a sale of goods since "goods" are generally understood to mean tangible objects. There is no good reason to deviate from the interpretation of CISG (see my earlier post) in this respect.
In another of my earlier post, I noted that the Court of Justice had observed that a narrower meaning could be given to the concept of "provision of services" than the similar concept of “[s]upply of services” of the VAT Directive (Falco Privatstiftung and Rabitsch (Case C-533/07) (2009)). This observation might be seen as something of significance in view of the Court's recent ruling that the "[s]upply of services" of the VAT Directive covered transactions exchanging traditional currencies for bitcoin units and vice versa. 
My view, however, is that the concept of "provision of services" of Regulation No 1215/2012 is wide enough to cover such transactions. The Court's observation in the Privatstiftung case was made in the context of ruling that licensing an intellectual property right did not fall within that concept. The ground for the ruling was that the concept of service implied that the party who provided the service carried out a particular activity whereas the only obligation which the licensor undertook was not to challenge the use of the intellectual property right by the licensee. On the other hand, a contract for the exchange of cryptocurrencies with traditional currencies certainly imposes obligation to undertake a particular activity, i.e. exchanging the currencies.
It is also worth noting that the Court has held that a contract for the storage of goods constitutes a contract for the provision of services (Krejci Lager & Umschlagbetriebs v Olbrich (C-469/12) (2013)) on the reasoning that the commitment of the warehousekeeper of such a contract entails a specific activity consisting of the reception of goods, their storage in a safe place and their return in an appropriate state. A contract for the storage of cryptocurrency units, too, would constitute a contract for the provision of services on a similar reasoning. Accordingly, a contract concluded with a wallet provider would fall within the second indent of Article 7(1)(b).
The next question which arises is how to identify the place of provision of services under that provision. I intend to discuss it in my future post.

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