Jean Monnet

Lifelong Learning Programme

‘Cross-Border Litigation in Croatia’

Workshop Report No 5

30th-31st May 2013

"This project has been funded with support from the European Commission. This publication reflects the views only of the authors, and the Commission cannot be held responsible for any use which may be made of the information contained therein."

Background

On 30th May 2013, practitioners and academics connected with the Centre for Private International Law met at the fifth of seven workshops dedicated to promoting the debate on how cross-border litigation functions within Europe. The purpose of the workshop was to offer the opportunity for a free and frank exchange of ideas surrounding the Croatian perspective on EU private international law.

This report intends to provide a brief overview of the ideas that emerged from the workshop without attributing any views to any particular individual.

Jurisdiction and Recognition and Enforcement in Civil and Commercial Matters

Jurisdiction

A general overview

It was noted that determining the international jurisdiction of domestic courts within Croatia has not been problematic so far, in part due to the fact that the number of cases with an international element that are seised by the domestic courts are relatively few. An additional factor is due to the legal framework, which provides for a broad application of the criteria for establishing the international jurisdiction of domestic courts. The relevant legislation is found in the Act on ‘Conflict of Laws with the Laws of other Countries in Certain Relations’ otherwise known as the Private International Law Act. It is also possible for subsidiary application of special provisions regulating domestic territorial jurisdiction from the Civil Procedure Act in the absence of a lex specialis or an international agreement regulating the matter.

It was reported that the application of provisions regulating the issue of international jurisdiction had recently been defined in a decision of a second instance Croatian court. The court stated that a special provision did not necessarily exclude the use of the more general provision, providing that the legal nature of the claim corresponded to the scope of both provisions. This pointed to a move away from the rule that special provisions always have priority over general provisions. The dispute in question arose from a tort between two foreign legal persons. The court of first instance declared that it had no jurisdiction since the harmful event had not occurred in Croatia. The court of second instance overturned the decision stating that rules relating to tort do not exclude the application of the rules relating to property claims. It was noted therefore that the jurisdiction of domestic courts in Croatia had been extended to the place where the object of the dispute is situated.

Hierarchy of legal sources

Croatian courts apply international agreements first (bilateral agreements have precedence over multilateral agreements), followed by special provisions such as the PIL Act or the Maritime Code and then in the absence of the above, domestic rules on territorial jurisdiction can be applied directly. It was recalled that in the past, even though the judges were aware that the rules on international jurisdiction were binding and mandatory, the result of the proceedings depended to a large extent on the conduct of the parties and their presentation of the legal reasoning. However it was put forward that this situation has improved significantly in the past 10-15 years.

Private International Law Rules

The general rule of private international law establishes jurisdiction of a domestic court when the defendant is domiciled/seated in Croatia. If the defendant is not domiciled in Croatia, or anywhere else, then the defendant’s residence in Croatia is sufficient to establish jurisdiction. When both parties have Croatian citizenship, the jurisdiction of the domestic courts is dependent on the defendant’s residence in Croatia. In disputes with more than one defendant, international jurisdiction of domestic courts is established over all defendants even if only one of them has his domicile or seat in Croatia provided they are sued on the same legal and factual grounds and this legal and factual connection existed between them even before the lawsuit was initiated. These rules apply to all types of cases except for cases involving prorogation of jurisdiction.

Examination as to jurisdiction

This is done in all types of cases not only in cases over which exclusive international jurisdiction is prescribed. When the court establishes that it has no jurisdiction, the court will declare it has no jurisdiction, set aside all actions taken in the course of the proceedings and dismiss the case.

However it was noted that there have been problems as to the moment when the court should examine whether it has international jurisdiction over a dispute. This is due to the fact that the PIL Act and the Civil Procedure Act lay down different moments for examining this issue. The PIL Act states that the examination should be done when litigation commences and the Civil Procedure Act states that the examination should be done when the proceedings start. However recent practice follows the Civil Procedure Act which is also the view taken by the Supreme Court of the Republic of Croatia. An exception has been created where disputes are dependant on the consent of the defendant. In these cases the examination of the jurisdiction is postponed until the defendant files a response.

Prorogation of jurisdiction

In cases where rules of exclusive jurisdiction do not apply it was noted that it was possible to prorogate international jurisdiction in favour of a foreign court if at least one party to the agreement is a foreign citizen or a legal entity with their seat in a foreign country. The PIL Act gives the possibility for prorogation in favour of a domestic court if at least one party to the agreement is a Croatian citizen or a legal entity with the seat in Croatia. Citizenship or the seat for legal entity is crucial for determining the admissibility of such an agreement.

For the agreement to be valid it has to be concluded in writing. It also is valid if it is concluded through an exchange of letters, telegraphs, telexes or other communication, which provides for a written trace to the concluded agreement. The agreement cannot be concluded orally.

The courts have stated that prorogation agreements cannot be concluded by a lack of response to the offer in contractual relations, even if the silence was sufficient for conclusion of a contract of sale of goods resulting from a permanent business relationship.

Since Croatia’s independence, courts have taken the view that previous agreements on territorial domestic jurisdiction concluded between the former Yugoslav Republics before the disintegration of Yugoslavia, cannot be interpreted as prorogation of international jurisdiction as these agreements are not in effect any more.

Exclusive jurisdiction

In civil matters the PIL Act establishes exclusive jurisdiction of domestic courts in proceedings which have as their object rights in immoveable property, ownership and similar rights over a ship or aeroplane according to the place of registration, organizational units of the Armed Forces of the Republic of Croatia according to the place of command or where proceedings arise from insolvency or enforcement procedures according to the place where the proceedings take place.

The PIL Act does not contain provisions on jurisdiction for commercial status disputes. In these circumstances the international jurisdiction of courts is derived from the Companies Act.

Special jurisdiction

In civil and commercial matters, the PIL Act stipulates special jurisdiction of domestic courts in four circumstances. The first concernsdisputes against Croatian nationals who live abroad, if they were posted by domestic legal entities, providing they were previously domiciled in Croatia. The second concerns property disputes, if the defendant’s property or the claimed item is situated in the territory of Croatia. The third concerns actions against legal persons with the seat abroad for obligations arising in Croatia or to be performed in Croatia if this legal person has its branch or agency in Croatia, or if the seat of the company to which the running of its business is entrusted is situated in Croatia. The fourthconcerns actions for trespass if it occurs within the territory of Croatia.

Three additional jurisdictional bases are actually contained in the provisions on territorial jurisdiction and have been used by the courts for special jurisdiction. One concerns labour disputes where, in addition to the jurisdiction of the court of general territorial jurisdiction over the defendant, the Civil Procedure Act also stipulates that the jurisdiction of the court on whose territory the work is performed or has been performed or the court in whose territory the employment has been established will apply. Another one concerns international jurisdiction in disputes for the protection of warranty rights. The last one concerns consumer protection. Neither the PIL Act nor the Civil Procedure Act regulate this matter. With regards to actions for protection of collective consumer interests, the Consumer Protection Act, which entered into force just under a year ago, provides that in addition to the jurisdiction of a court of general territorial jurisdiction over the defendant the jurisdiction of the place where the infringement has occurred or could have occurred will apply.

Questions were raised around an implication under Croatian law thatthe Croatian equivalent of submission under art 24 of the Brussels I Regulation does not apply to contract but could apply to tort. There appeared to be a contrast between the views of the Croatian academics and practitioners where the academics said that it applied to contract but not to tort and the practitioners viewed it as applying to tort and not to contract. This would have to change when Croatia becomes a Member State of the EU governed by Brussels I. Article 24 of Brussels I applies to all types of actions apart from those governed by the exclusive jurisdictions in article 22.

Difficulties concerning the analysis of the cases concerning international jurisdiction was also raised based on the fact that there is difficulty in obtaining the judgments. This was an area that was seen as in need of improvement.

Jurisdiction and Tort

It was noted that under the Croatian Civil Procedure Act, the basic rules for establishing international jurisdiction of a court in the Republic of Croatia in tort cases is the court where the harmful consequence/damage occurred on the territory of the Republic of Croatia. The interpretation and implementation of this provision has been controversial, especially in deciding on court jurisdiction in maritime tort disputes, which are the most common.

It was noted that until about 2007, domestic courts very rarely declined international jurisdiction. Until 2007, the Croatian Maritime Code did not contain special provisions on the jurisdiction of Croatian courts in maritime tort disputes. Court jurisdiction in such cases was examined on the basis of the Civil Procedure Act of the Republic of Croatia. The interpretation was that, if the harmful event occurred, for example, on a seagoing ship, the harmful consequence occurred in the Republic of Croatia, since the plaintiff who suffered physical injury or health damage was domiciled in Croatia. The financial obligations incurred had to be fulfilled in the domicile or seat of the creditor.

However it was pointed out that this practice changed in 2007. In the decision in the case Katic v. Wijsmuller Bros - No. Revt 51/03 of 27 February 2007, the Supreme Court of the Republic of Croatia took the opposite view – namely, the court concluded that Croatian courts had absolutely no jurisdiction over damage claims of Croatian seamen in tort disputes when the employment contract was concluded with a foreign company and the harmful event happened abroad. This view taken by the Supreme Court of the Republic of Croatia led to the dropping of a whole series of claims by Croatian seamen who had sued foreign companies for compensation of damages due to physical injury or death of a crewmember or sustained health damage. This caused a lot of agitation among the general public in Croatia, which led in 2008 to the Croatian Parliament adopting, in the urgent procedure, the Amendments to the Maritime Code.

The 2008 Amendments of the Maritime Code have resolved all dilemmas with regard to the international jurisdiction of Croatian courts in damage claims for physical injury or death of a crewmember or sustained health damage. An article was added to the Maritime Code providing for international jurisdiction of Croatian courts in damage claims for physical injury or death of a crew member or health damage sustained by a crew member while working on a ship or in connection to working on a ship, if the plaintiff was domiciled in Croatia. The provision applied in all cases in which a final and enforceable decision had not been taken before the date of entry into force of the amended Act.

However it was put forward that with Croatia's accession to the EU this recent provision of the Maritime Code will have to be abandoned and provisions of Brussels I applied instead. This will bring Croatia back, broadly speaking, to the position held previously by the Supreme Court in the Katic case.

Recognition and enforcement of foreign judgments

The PIL Act regulates the recognition and enforcement of foreign judgments in the Republic of Croatia. A foreign judgment, which also includes a court settlement, is considered equal to a Croatian judgment and has legal effect in the Republic of Croatia only if a Croatian court recognizes it. However, a foreign judgment is not defined under Croatian law. Croatian theoreticians agree that a foreign judgment is not a judgment adopted in the name of the country of recognition, but in the name of the foreign body, regardless of the place where it is situated.

The application for recognition and enforcement of a foreign judgment is submitted with the court on whose territory recognition or enforcement is to be implemented. When the court with territorial jurisdiction receives an application for recognition of a foreign judgment, in non-contentious proceedings,it examines the legal basis for recognition of the foreign judgment. If the court deems it necessary, an explanation can be requested from the issuing court and from the parties.

The basic precondition for recognition of a foreign judgment is for the applicant to submit with the judgment a certificate issued by the competent foreign court on enforceability of the foreign judgment under the law of the country in which the judgment was given. A Croatian court is able to refuse recognition of a foreign judgment in the following situations: if, based on the objection of the person against whom enforcement is sought, it is established that this person was not able to participate in the proceedings due to a procedural irregularity; if a domestic court or another body of the Republic of Croatia has exclusive jurisdiction over this matter; if a domestic court or another Croatian body had delivered a final and enforceable judgment in the same matter; if the judgment for which recognition is sought is contrary to the Croatian constitution; and in case of lack of reciprocity. However, with regard to reciprocity, a lack of reciprocity will not be an obstacle for recognition of foreign judgments in family matters. The existence of reciprocity is assumed until proven otherwise.

By looking at the judicial practice in Croatia with regard to recognition of foreign judgements in commercial matters, it can be noted that in most cases the party against whom recognition was sought opposed the recognition of the foreign judgement on the grounds that they had not been able to participate in the procedure in which the foreign judgment was given.

An example was put forward. Inthe proceedings for recognition of a judgment delivered by the County Court in Ljubljana – a failure to appear judgment of 8 December 2008 – theparty against whom recognition was sought claimed that he had not been notified on time about the court proceedings in Ljubljana. The party also claimed that his mother, and not he in person, had received the complaint. In its recognition proceedings for the judgment of the court in Ljubljana, the Croatian court applied the provisions of the Agreement on Legal Assistance in Civil and Criminal Matters concluded between the Republic of Croatia and the Republic of Slovenia, which was to be applied as an international agreement following the provisions of the Croatian Constitution.

One of the preconditions for recognition and enforcement of a foreign judgment is the due and timely notification of the defendant ofthe proceedings in which a judgment is delivered against the party, even if the judgment was given in the party's absence. Examining whether the party against whom the judgment was delivered was duly and timely notified is done under the law of the country on whose territory the proceedings were held – in this case Slovene law. Therefore, in deciding on recognition of the judgment delivered by the court in Ljubljana, the Croatian court also looked into the Civil Procedure Act of the Republic of Slovenia. The Croatian court established that under the provisions of the Civil Procedure Act of the Republic of Slovenia the action has to be served on the defendant in person. If the person to whom the court document (writ) is to be served is not found in the place where service of the document is to be effected, the service agent (bailiff) shall be notified when and where this person could be found and delivered a written notice, either in person or to an adult household member, to be at his residence or work at a certain date and hour for the purpose of service of the court document. Only after that, if the person who is to be served is not found, the court document shall be left either at their residence or work, while the date, hour and reason for refusing service of the document is recorded on the service receipt, as well as the place where the document was delivered. The court document is then considered served.