Société générale alsacienne de banque SA v Walter Koestler (15/78)

II —Written observations submitted to the Court

The Société Générait Alsacienne de Banane, the plaintiff in the main action considers the fact that its customer is a German national to be irrelevant: according to the case-law of the Bundesgerichtshof (Federal Court of Justice) a customer who is a French national may also avoid payment of a debt due to a French bank arising out of a stock exchange time-bargain by moving to the Federal Republic of Germany.Articles 59 and 60 of the EEC Treaty have direct effect and take precedence not only over Articles 764 and 762 of the BGB and Articles 58 and 60 of the Law relating to stock exchanges and commodity markets but also over the rule on conflict in private international law contained in Article 61 of this Law and the exception of public policy contained in Article 30 of EGBGB.Articles 59 and 60 prohibit restrictions on freedom to provide services within the Community where nationals of the Member States are concerned. Article 60 defines the concept of ‘provision of services’: activities of a commercial character are considered to be such services, in so far as they are not governed by the provisions relating to freedom of movement for goods and capiul. In this case the operations of the Société Générale Alsacienne de Banque cannot be assigned to the categories of movement of capiul or of goods; the transactions in question were a specific provision of services for a customer subject to the business conditions of a bank.The respective registered office and residence of the two parties, who are nationals of a Member Sute, were in France. However this fact does not preclude the application of Article 59: the provision of services continues until the business relations between the parties have been brought to an end. The situation envisaged by Article 59, namely that nationals of Member States established in a Member Sute other than that of the person for whom the service is intended are to enjoy the benefit of freedom to provide services, arose at the latest when Mr Koestier took up his residence in the Federal Republic of Germany.Having regard to the case-law of the Court of Justice on the interpretation of restrictions on freedom to provide services and the prohibition of discrimination on ground of nationality Article 59 must be interpreted as prohibiting every anual or legal restriction and obstacle likely to have an effen on freedom to provide services within the Common Market.The interpretation of Articles 59 and 60 must at the very least prevent the plea that the contran was an agreement to pay differences under German law being raised to defeat payment of a debt which arose in France, according to French law, out of stock exchange time-bargains. Otherwise German law or case-law could in fan nullify a debt payable under French law simply because the debtor has taken up residence in the Federal Republic of Germany and thus submitted to the law of that country. Freedom to provide services within the Community would be subjected to a restriction owing to the fan that it is in practice impossible for a French bank to carry out on French territory stock exchange time-bargains for customers through stockbrokers: it would always be apprehensive lest the plea that the contract was an agreement to pay differences under German law be raised at a later date and its customers avoid payment by moving to the Federal Republic of Germany as soon as a large debt arose from the time-bargains covered by a credit.Community law does not allow a Member State such hegemony; Article 5 of the Treaty does not permit one Member Sute to put its own legal provisions into effen in another Member Sute, especially if as a result they adversely aften undertakings and citizens of that Sute.Freedom to provide services does not allow Articles 764 and 762 of the BGB and Article 61 of the Law relating to stock exchanges and commodity markets to be interpreted as meaning that they can apply to a time-bargain based in French law and governed by the French legal system; it matters little in this connexion whether the German customer has capacity or not under German law, in accordance with Article 53 of the Law relating to stock exchanges and commodity markets, to enter into time-bargains.Should the Court of Justice not accept this interpretation of Articles 59 and 60 of the EEC Treaty the fan remains that the prohibition by Community law of restrictions on freedom to provide services does not assume that a customer, who has capacity to enter into time-bargains within the meaning of Article 53 of the Law on stock exchanges and commodity markets, is entitled to raise the plea that a time-bargain in currencies which is valid in France, is an agreement to pay differences. The view of the Bundesgerichtshof that all time-bargains on foreign nock exchanges are amenable to the plea that the contran was an agreement to pay differences, because foreign stock exchanges do not fulfil the conditions of Article 50 in conjunction with Articles 61 and 58 of the Law on stock exchanges and commodity markets is clearly incompatible with Articles 59 and 60 of the EEC Treaty. The consequential discrimination not only lies in the fan that the Paris stock exchange suffen a disadvanuge compared with the Frankfurt stock exchange; as far as banks are concerned the discrimination lies primarily and conclusively in the fan that carrying out time-bargains on the Paris stock exchange for a customer and the opening of a credit for this purpose are given a different legal interpretation in the Federal Republic of Germany, having regard to Article 50 of the Law relating to stock exchanges and commodity markets, from similar transactions carried out on a German stock exchange in the same securities. The discrimination in question occurs in the laws relating to the running of stock exchanges.The Commission of the European Communities points out that the Court is requested in the first question to rule whether, having regard to the facts therein mentioned, the application of German law, and in particular those provisions which provide for the plea that a contract is an agreement to pay differences lead inevitably to a restriction on the freedom of the plaintiff company in the main action to provide services. In this connexion it is necessary to take into consideration the fact that Article 61 of the German Law on stock exchanges and commodity markets is generally regarded as a rule on conflict in German private international law and Article 50 as an integral part of the provision relating to German public policy within the meaning of Article 30 of the EGBGB.The Société Générale Alsacienne de Banque in the course of its business relations with Mr Koestler engaged in activities of a commercial character and therefore provided services within the meaning of Article 60 of the EEC Treaty. Article 59 implies that services are provided beyond the frontiers of Member States of the Community either where the person providing the services and the person for whom the services are intended are resident in different Member States or where the services are provided in a Member Sute other than that in which the person providing the services resides. Only the first alternative could be applied to this case; however, it is uncertain whether it can be substantiated: Mr Koestier was resident in France when the transactions in question with the plaintiff in the main action were concluded and it has not been proved that he was still resident in the Federal Republic. It is for the national court, for the purpose of determining the preliminary question whether the business relations between the parties to the main action are to be classified as provision of services within the meaning of the EEC Treaty, to decide whether Mr Koestler arranged from his residence in France for all the transactions to be carried out or whether he gave some of his orders from Germany.Subject to this reservation it must be said that the concept of ‘restrictions’ within the meaning of Article 59 of the Treaty must be given a broad interpretation as is shown by the case-law of the Court of Justice and the General Programme for the abolition of restrictions on freedom to provide services, adopted by the Council on 18 December 1961 (Official Journal, English Special Edition January 1974, Second Series, IX. Resolutions of the Council and of the Representatives of the Member States, p. 3). According to this programme any difference of treatment as between persons providing services and nationals, in particular ‘provisions and practices which, in respect of foreign nationals only, exclude, limit or impose conditions on the power to exercise rights normally attaching to an activity as a self-employed person and in particular the power to enter into contracts… and to enjoy all rights arising under such contracts’ is regarded as a restriction. ‘Any requirements imposed, pursuant to any provision laid down by law, regulation or administrative anion or in consequence of any administrative practice, in respect of the provision of services … where, although applicable irrespective of nationality, their effen is exclusively or principally to hinder the provision of services by foreign nationals’ are also to be regarded as restrictions.The mere fact that there are differences between the national provisions which allow time-bargains in securities is not sufficient to show that there is a ‘restriction’ within the meaning of Article 59 of the EEC Treaty. Should the need arise measures for the co-ordination or the approximation of national laws can be envisaged in this field.The question to be determined is whether the fact that the plea that a contraa is an agreement to pay differences provided for by the German Law relating to stock exchanges and commodity markets prevents a French bank from enforcing claims arising out of services which it provided, solely because the defendant in the main action resides in Germany or, at least, was resident in that country when the bank asserted its rights is a prohibited ‘restriction’ on the right to provide services. The Commission inclines to the view that there is a ‘restriction’ of the activities of the bank providing services in France owing to the fact that it has been subjected to a legal order which in the last resort prevents it from carrying out stock exchange time-bargains on behalf of customers resident in Germany. In this case all the services were provided in France; the unconditional applicability of the German Law relating to stock exchanges and commodity markets does not appear to be in any way objectively justified or necessary in order to protect German public policy in a case where a German national of his own accord concludes. outside the field of application of the German legal system, time-bargains governed by the law of another country. Such an ‘export’ of the German legal system cannot be justified as being in the interest of the general public. A comparison with Council Directive 63/340/EEC of 31 May 1963 (Official Journal, English Special Edition 1963-1964. p. 31) makes it clear that the considerations which, according to the German view, might justify the application of the German Law relating to stock exchanges and commodity markets to time-bargains concluded abroad must give way before the principles of Article 59 of the Treaty and the introduction of the free movement of services within the Community which is the objective of that article.The question whether the defendant in the main action at the time when the transaction at issue was concluded fulfilled the requisite conditions to have capacity to enter into time-bargains assumes decisive importance for the application of German law; however, in view of the answer which has to be given to the first question this question is not relevant in the present context.The questions referred by the Oberlandesgericht Köln should be answered as follows:1. Article 59 of the EEC Treaty must be interpreted as meaning that a Member State may not make the provision of services subject to any restriction which subjects the exercise of the rights invoked by the person providing the services as against the person for whom the services are intended to the latter's domestic legal system, if the recovery of debts arising out of the provision of services is thereby barred, even if the whole of the service has been provided in the country of the person providing the services.2. The question whether the person for whom the services are intended has capacity or not under his domestic law to conclude time-bargains is irrelevant in interpreting Article 59 of the EEC Treaty.