The CJEU confirms a corporation’s general duty of care is not caught by the corporate carve-out. Judgment in ZK v BMA (Peeters Gatzen suit) impacts on business and human rights litigation, too.

The CJEU a little while back held in C‑498/20 ZK v BMA on the applicable law for the Dutch ‘Peeters Gatzen’ suit, for which I reviewed the AG Opinion here. The suit is  a tortious suit brought by a liquidator. In Nk v BNP Paribas the CJEU held at the jurisdictional level it is covered by Brussels Ia, not by the Insolvency Regulation.

A first issue of note, which I discuss at some length in my earlier post, is whether the liability is carved-out from Rome II as a result of the lex societatis provision. The CJEU confirms the AG’s contextual analysis, without repeating his general criterion, emphasises the need for restrictive interpretation, and specifically for the duty of care holds that liability resulting from a duty of care of a corporation’s bodies and the outside world, is covered by Rome II. This is important for business and human rights litigation, too: [55]

Pour ce qui concerne spécifiquement le manquement au devoir de diligence en cause au principal, il convient de distinguer selon qu’il s’agit du devoir spécifique de diligence découlant de la relation entre l’organe et la société, qui ne relève pas du champ d’application matériel du règlement Rome II, ou du devoir général de diligence  erga omnes, qui en relève. Il appartient à la seule juridiction de renvoi de l’apprécier.

The referring judge will have to decide whether the case engages the duty of care vis-a-vis the wider community (including the collectivity of creditors) however it would seem most likely that it does. If it does, locus damni is held, confirming the AG view, to be The Netherlands if the referring judge finds that the insolvent corporation’s seat is based there. The financial damage with the creditors is indirect only and does not establish jurisdiction.

[44] Should a judge decide that they do not have jurisdiction over the main claim, they also and necessarily have to relinquish jurisdiction over the warranty /guarantee claim against a third party under A8(2) BIa. CJEU Sovag is referred to in support.

Geert.

Sánchez-Bordona AG in ZK v BMA on applicable law for the Peeters Gatzen insolvency suit. Includes important suggestions for the corporate life (lex societatis) exception and duty of care.

Sánchez-Bordona AG opined at the end of October on the law applicable to the Peeters /Gatzen suit (of Nk v BNP Paribas fame) in Case C‑498/20 ZK, in his capacity of successor to JM, insolvency practitioner in the insolvency of BMA Nederland BV v BMA Braunschweigische Maschinenbauanstalt AG – ZK v BMA for short. An English version of the Opinion is still not available.

Peeters /Gatzen is a tortious suit brought by a liquidator. In Nk v BNP Paribas the CJEU held it is covered by Brussels Ia, not by the Insolvency Regulation. The obvious applicable law port of call is Rome II. A first point which the AG reviews is a rather important discussion on the lex societatis exception to Rome II. The extent of that exception is important e.g. also for business and human rights cases, for the Peeters /Gatzen suit essentially engages duty of care towards third parties.

The AG emphasises (35) one of my points of attention in the BIa /Rome I/II interplay: that in accepting a certain amount of consistency in interpretation, the courts must nevertheless appreciate each instrument’s autonomy and quite different subject-matter. (46) The reasoning behind the exclusion of the lex societatis from the 1980 Rome Convention is said to be the ambition at the time to harmonise company law across the EU which, as we know from CJEU Daily Mail and all its successors, has still not come true. The AG then refers to the internal /external dimension of corporate relations such as discussed in C‑25/18 Kerr and C‑272/18 Verein für Konsumenteninformation. However he then suggests (51) that the reference to the ‘internal’ dimension of the life of a corporation does not suffice to justify 2 of the examples which Rome II explicitly lists in A1(2)d as being part of the corporate exception: the personal liability of officers and members as such for the obligations of the company or body and the personal liability of auditors to a company or to its members in the statutory audits of accounting documents.

At (52-53) he then posits his way out of the conundrum, immediately acknowledging that the criterion he suggests may not be easily applicable: all contractual and non-contractual elements for which a specific solution exists which emanates from the relationship between those elements and the internal life and mechanisms of a corporation (whether they relate to the internal workings or the external relations), are covered by one statutory corpus, namely the lex societatis. Put differently, they are excluded insofar as and because their corporate law element absorbs all other. Specifically viz non-contractual obligations, if the relevant rule is so ‘drenched’ with elements specific to the corporate law context that it looses its meaning outside that context, that rule qualifies as being part of the lex societatis exception.

He immediately acknowledges (56) that this kind of litmus test is not easy to apply in practice and suggest (57 ff) to employ the ratio legis of the liability at stake to assist with the exercise. If that ratio lies in the general neminem laedere rule, Rome II is engaged. If that ratio however immediately follows from corporate law considerations, such as a director’s loyalty to the corporation, the exception is engaged. The AG lists examples (63), including the scenario at stake in CJEU OFAB. At (66) the AG concludes, albeit not directly, that the Peeters Gatzen suit in all likelihood is not covered by Rome II and he discusses the other questions in subsidiary fashion.

(67ff) with reference ia to CJEU Lazar the CJEU refers to the tricky characterisation of damage as (in)direct and opts in cases such as these that the direct damage occurs in the insolvent (or otherwise facing liquidity issues) corporation: the diminishing impact on the creditors is indirect, ricochet. Locus damni therefore is The Netherlands if the referring judge finds that the insolvent corporation’s estate is based there. (76) Whomever initiates the suit (the insolvency practitioner and /or the creditors) is irrelevant, as is (80) the fact that some of the creditors are located outside the EU.

(83ff) then follows the discussion of A4(3) Rome II’s escape clause (most recently discussed in Scott v AIG). A pre-existing contractual relationship (which the AG suggests (95ff) may also be called upon by claimants that are not party to that relationship) is just one among many factors that may play a role – not a particularly dominant one: (93-94) particularly where such relationship (such as here, taking the form of a credit facility) is one where choice of law was made: A4(3) RII is directed at situations where the non-contractual relationship has a closer connection to a law other than the locus damni. Lex voluntatis does not necessarily reflect the tort’s closer relationship but rather the parties’ voluntary expression.

An important Opinion.

Geert.

EU Private International Law, 3rd ed 2021, para 4.22.,  para 4.39 ff.

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