In a recently published judgment of the Federal Supreme Court (Bundesgerichtshof), an Israeli party failed to get a judgment of the court in Haifa recognized. The German party had, throughout the proceedings, challenged the jurisdiction of the Haifa court. The issue at hand was whether, under the bi-lateral treaty between Germany and Israel, the German courts were bound by the findings of the Israeli court on jurisdiction, or whether the German courts were entitled to review the underlying findings as to jurisdiction independently.
The Israeli party had entered into a sales contract with a German party. The latter had used a local agent to facilitate the establishment of the business relationship. When things became litigious, the Israeli party sued for damages in Haifa, where the local agent was domiciled. Proceedings were served on the local agent. The German party only challenged the international jurisdiction of the Haifa court. The Haifa court held that it had jusidiction and issued judgment against the German party.
The first and second instance courts in Germany had found the Haifa judgment to be enforceable. Before the Federal Supreme Court, it all came down to an interpretation of Article 8 para 2 of the Treaty on the Mutual Recognition and Enforcement of Judgments in Civil and Commercial Matters of 1977, which states that “the court in the state in which recognition is being applied for, is bound in its assessment of the jurisdiction of the court in the state of origin (Article 5 para. 1 no.1) by the factual and legal findings, on which this court has based its decision on jurisdiction.”
The lower courts had granted recognition of the Haifa judgment on the basis that Article 8 stopped them from a review of the decision on jurisdiction. The wording of Article 8 para. 2 of the Treaty notwithstanding, the Federal Supreme Court held that the German court was still entitled, under Articles 5 and 7 of the Treaty, to verify independently whether the Israeli court had jurisdiction.
On the one hand, Article 5 para. 1 no. 1 of the Treaty states that judgments will not be recognized if the court in the state of origin had no jurisdiction, either based on one of the eleven heads listed in Article 7 of the Treaty, or based on a contractual agreement. Article 7 of the Treaty, on the other hand, contains a catalogue of eleven grounds of jurisdiction.
The Federal Supreme Court therefore held that Article 5 permitted a review of Haifa judgment, and thus construed Article 8 para. 2 narrowly. If the courts in the country of recognition had no right to a limited review of the judgment with respect to Article 7, then the provision in Article 5 para. 1 no. 1 of the Treaty would be redundant. On that basis, the Federal Supreme Court reviewed the factual findings of the Haifa court to see whether these established jurisdiction under Article 7. It then came to a different conclusion, namely that the facts established in the Israeli court did not support the jurisdiction of the Israeli court against the German party, and denied recognition and enforcement, as no head of jurisdiction under Article 7 was, in the Federal Supreme Court’s analysis, established.
The judgment is well-argued and has convinced me. It clarifies the position under the Treaty with Israel, but its ruling should be applicable to similar treaties with other states as well.
The picture gallery above shows the Haifa court house. It apppears to be a rather impressive piece of modern architecture.