Tag: corporate

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Koza v Akcil: The UK Supreme Court does not follow Court of Appeal on exclusive jurisdiction for company matters.

I reviewed [2017] EWCA Civ 1609 Koza v Akcil in my post here. The case concerns the application of Article 24(2) of the Brussels I Recast Regulation, which assigns exclusive jurisdiction to the Courts of the Member State of the seat in matters relating to the life and death of companies and of the validity of decisions made by their organs:

in proceedings which have as their object the validity of the constitution, the nullity or the dissolution of companies or other legal persons or associations of natural or legal persons, or of the validity of the decisions of their organs, the courts of the Member State in which the company, legal person or association has its seat. In order to determine that seat, the court shall apply its rules of private international law;

Referring particularly to C-144/10 BVG and to C-372/07 Hassett, the Court of Appeal found that the case as a whole fundamentally concerns one and the same issue of the validity of decisions of the organs of the company, Koza Ltd, an English subsidiary of a Turkish company.

Now the Supreme Court has disagreed. At 33, Lord Sales writes for the consensus opinion:

the Court of Appeal held that article 24(2) of the Recast Regulation required the court to “form an overall evaluative judgment as to what the proceedings are principally concerned with” (para 46). But this approach had the effect of expanding the application of article 24(2) (ex article 22(2) of Regulation No 44/2001), contrary to the guidance in the Hassett case and the BVG case, rather than narrowing its application, as the Court of Justice had been at pains to do in its judgments in those cases.

At 34:

it is the guidance in paras 22-25 of the Hassett judgment which is relevant, to the effect that a mere link between a claim which engages article 24(2) and one which does not is not sufficient to bring the latter within the scope of that provision

Further authority was sought in particular from Schmidt v Schmidt (C-417/15) which I reviewed here, and EON Czech Holding AG v Dědouch (C-560/16), my review here. Acte clair – no reference to the CJEU required. Conclusion, at 43: ‘the English courts cannot assert jurisdiction over Koza Altin [Turkey] and the trustees in relation to that claim in the present proceedings on the basis of  [A24(2)], and their appeal in that regard should be allowed.’ However: at 44: given that Turkey is not an EU Member State, the English courts may be able to assert jurisdiction over them by means of a provision in residual English PIL.

Geert.

(Handbook of) EU Private International Law, 2nd ed. 2016, Chapter 2, Heading 2.2.6, Heading 2.2.6.5.

 

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E.ON v Dědouch. Squeeze-outs and the not-so restrictive application of Brussel I Recast’s corporate exception.

I promised a post on C-560/16 E.ON v Dědouch sooner than I have been able to deliver – I have reviewed Wathelet AG’s Opinion here. I do not evidently hold the magic key to the optimal interpretation of Article 24(2) Brussels I Recast’s. Yet regular readers of the blog indeed my students will know I  am not much of a fan of Article 24 full stop – let alone its extensive interpretation.

Briefly, the facts. By a resolution of 8 December 2006, the general meeting of the company incorporated under Czech law, Jihočeská plynárenská, established in the Czech Republic, decided on the compulsory transfer of all the participating securities in that company to its principal shareholder E.ON, established in Munich (Germany). A group of minority shareholders contest not the validity of the sale, but purely the price paid. Czech law moreover holds that any finding on the reasonableness of the price paid cannot have an impact on the very validity of the transfer.

Lower Czech courts consecutively entertained and accepted cq rejected jurisdiction on the basis of (now) Article 8(1) [no details are given but presumably with Jihočeská plynárenská as the anchor defendant, 24(2) and 7(1) [again no details given but presumably a consequence of the purchase of shares by the minority shareholders].

Both Wathelet AG suggested, and the CJEU holds that the action for review of the reasonableness of the consideration that the principal shareholder of a company is required to pay to the minority shareholders of that company in the event of the compulsory transfer of their shares to that principal shareholder, comes within the scope of application of (now) Article 24(2). Both refer extensively to C‑372/07 Hassett and Doherty, among others.

The general line of interpretation is: secure Article 24’s effet utile, but apply restrictively (like all other exceptions to the actor sequitur forum rei rule).  I do not think that the CJEU honours restrictive interpretation in E.ON. Readers best consult the (fairly succinct – ditto for the Opinion) judgment in full. A few observations.

In the majority (not quite all) of the cases of exclusive jurisdictional rules,  Gleichlauf is part of the intention. That generally is a proposition which goes against the very nature of private international law and should not in my view be encouraged. Particularly within the EU there is not much reason not to trust fellow courts with the application of one’s laws – indeed quite regularly these laws may be better applied by others.

Generally at least three of Article 24 Jurisdictional rules (rights in rem; the corporate exception; and IPR) refer at least in part to the issue of publicity (of public records) and their availability in the Member States whose courts haven been given exclusive jurisdiction. That argument in my view is sooo 1968 (which indeed it is). I see little reason to apply it in 2018.

Further, in accordance with the Jenard report, the principal reason for Article 24(2) is to avoid conflicting decisions of EU courts on the existence of the company or the validity of the decisions of its organs. This goal of course may be equally met by the lis alibi pendens rule – Article 24 does not play a unique role here.

Finally the CJEU remarks at 34 ‘In the present case, while it is true that, under Czech law, proceedings such as those at issue in the main proceedings may not lead formally to a decision which has the effect of invalidating a resolution of the general assembly of a company concerning the compulsory transfer of the minority shareholders’ shares in that company to the majority shareholder, the fact nonetheless remains that, in accordance with the requirements of the autonomous interpretation and uniform application of the provisions of Regulation No 44/2001, the scope of Article 22(2) thereof cannot depend on the choices made in national law by Member States or vary depending on them.’ To cross-refer to the aforementioned Jenard Report: if Article 24(2)’s goal is to avoid conflicting decisions on life and death etc. And if that life and death of a national company depends on the applicable national law as the Court acknowledges here and ditto in Daily Mail and Cartesio/Polbud), then of course the lex causae must have an impact on the application of Article 24(2) .

The Court’s finding on 24(2) meant it did not get to the Article 7 analysis – which I did review in my post on the AG’s Opinion.

Geert.

(Handbook of) EU Private international law, 2nd ed. 2016. Heading 2.2.6.5.

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Polish readers: Help required. St Vincent v Bruce Robinson et al: presumably the corporate jurisdictional head of Brussels I Recast.

In [2018] EWHC 1230 (Comm) St Vincent v Bruce Roberston et al Males J set aside a worldwide freezing order in summary judgment but that is not the trigger for this blog post. Rather, consider paras 33 and 34:

  1. St Vincent (and two associated companies) attempted to stop the sale [of a chunk of assets by commencing proceedings in Cyprus against 19 defendants, including Mr Robinson, Winterbourne Pte and the other defendants to these proceedings and also HHL and HDP. On 5 August 2013 the District Court of Nicosia granted an injunction, purporting to restrain any dealings with HDP’s assets. [GAVC: for the jurisdiction of the Cypriot courts: see 12: The Shares Pledge was governed by the law of Cyprus and provided for the exclusive jurisdiction of the courts of that country]
  2. Notwithstanding the Cyprus order, on 30 September 2013 the creditors of HDP approved the sale to KFTP. The arrangement was then approved by the District Court of Gliwice on 24 October 2013. The Polish court did not regard the order of the Cyprus court as an impediment to the sale, taking the view that it had exclusive jurisdiction over a Polish company under its supervision and was not required to recognise the Cypriot order in accordance with the provisions of the Brussels Regulation. The court did not rule on any issue whether the proposed sale to KFTP was at market value and was not asked to do so.

I have tried to locate the Polish judgment but have failed to do so (which is where assistance from Polish readers would be appreciated). Presumably however the Polish courts argued that Article 24(2) Brussels I Recast was engaged, and then either per Weber ignored lis alibi pendens (were it to have found the case was still pending in Cyprus), or applied Article 45(1) e ii to ignore the Cypriot findings. In either case, the relevant point is how widely the Polish courts seem to have interpreted Article 24(2).

Come to think of it this would have been good exam material and I have one or two of those coming up (although there is plenty in the ‘exam material’ ledger).

Geert.

(Handbook of) EU Private International Law, 2nd ed. 2016, Chapter 2, Heading 2.2.6.5, Heading 2.2.16.

 

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Close, but no sigar. The CJEU on libel, internet and centre of interests in Bolagsupplysningen.

The Court held some weeks ago in C-194/16 Bolagsupplysningen OÜ on the application of the Shevill rule, as supplemented by e-Date advertising, to infringements of a company’s personality rights over the internet. I held back reporting on the case for exam reasons – yep, some of the places I teach at already have exams.

Judgment was issued in Grand Chamber. There can be no clearer indication of the relevance the Court attaches to the question. The CJEU introduces in my view further complication in the Article 7(2) rule (jurisdiction for torts) by requiring the court seized carry out analysis of ‘main economic activity’ with those same courts being told not to get carried away however in that analysis. The judgment does not I believe offer a solid conclusion for the issues of removal and rectification.

An Estonian company operating in Sweden was blacklisted for its allegedly questionable business practices on the website of a Swedish employers’ federation. The website attracted a number of hostile comments from its readers. The Estonian company brought an action before the Estonian courts against the Swedish federation. It complained that the published information has negatively affected its honour, reputation and good name. It asked the Estonian courts to order that the Swedish federation rectify the information and remove the comments from its website. It also requested damages for harm allegedly suffered as a result of the information and comments having been published online.

Can the Estonian courts assert jurisdiction to hear this action on the basis of the claimant’s ‘centre of interests’, a special ground of jurisdiction that the Court previously applied to natural persons, but so far not legal persons? If they can, then second, how should the centre of interests of a legal person be determined? Third, if the jurisdiction of the Estonian courts were to be limited to situations in which the damage occurred in Estonia, the referring court wonders whether it can order the Swedish federation to rectify and remove the information at issue.

I reviewed Bobek AG’s Opinion here – let me recap core issues: Bobek AG suggested there are two novelties in the questions referred: a legal person (not a natural one) is primarily asking for rectification and removal of information made accessible on the internet (and only secondarily for damages for the alleged harm to its reputation). This factual setting, the AG suggests, leads to the question of how far the seemingly quite generous rules on international jurisdiction previously established in Shevill with regard to libel by printed media, and then further extended in eDate to the harm caused to the reputation of a natural person by information published on the internet, may be in need of an update.

At the real root of course of the generous rules on jurisdiction for tort, lies the Court’s judgment in Bier. Bobek AG joined Szpunar AG in severely questioning the wisdom of the Bier rule (both locus delicti commissi and locus damni lead to jurisdiction) in the age of internet publications. Not unexpectedly, the Court of Justice further refined Bier, but did not overrule it.

It held first of all that legal persons like natural persons can claim for damages in their centre of interests (at 38): the split in Bier was introduced for reasons of judicial suitability (‘sound administration of justice’), not personal interest of the plaintiff hence the qualification of that plaintiff has no bearing on the rule.

Following e-Date, the national court therefore needs to determine a centre of interests for a legal person just as it would for a natural person. At 41: for legal persons, this centre of interests ‘must reflect the place where its commercial reputation is most firmly established and must, therefore, be determined by reference to the place where it carries out the main part of its economic activities. While the centre of interests of a legal person may coincide with the place of its registered office when it carries out all or the main part of its activities in the Member State in which that office is situated and the reputation that it enjoys there is consequently greater than in any other Member State, the location of that office is, not, however, in itself, a conclusive criterion for the purposes of such an analysis.’ As one knows from the definition of ‘domicile’ under the Brussels I Regulation, leading to positive jurisdictional conflicts (it is perfectly possible for more than one Member State considering itself the domicile of a corporation), it is far from self-evident to determine where a company’s ‘main’ economic activities are located.

At 43 the Grand Chamber reminds the national courts that their role in the application of the Brussels I Recast is limited to the jurisdictional stage: they must not go into the merits (yet), hence if it is ‘not clear from the evidence that the court must consider at the stage when it assesses whether it has jurisdiction that the economic activity of the relevant legal person is carried out mainly in a certain Member State’, the Court must conclude that the Article 7(2) locus damni for the full damage is not available to that claimant.

 

The Court then distinguishes actions for rectification of false information and removal of comments: there is no jurisdiction before the courts of each Member State in which the information published on the internet is or was accessible. The Court follows Bobek AG’s Opinion on this point (although the AG also employed it to support his view on withdrawal of Bier altogether) at 48: ‘in the light of the ubiquitous nature of the information and content placed online on a website and the fact that the scope of their distribution is, in principle, universal …an application for the rectification of the former and the removal of the latter is a single and indivisible application and can, consequently, only be made before a court with jurisdiction to rule on the entirety of an application for compensation for damage [the Court refers to Shevill and e-Date] and not before a court that does not have jurisdiction to do so.’

On this latter point, the judgment is bound to create a need for further clarification: Shevill and e-Date confirm full jurisdiction for the courts of the domicile of the defendant, and of the locus delicti commissi, and of the centre of interests of the complainant. These evidently do not necessarily coincide. With more than one court having such full jurisdiction I do not see a solution in the Court’s approach.

Geert.

(Handbook of) European Private International Law, 2nd ed. 2016, Chapter 2, Heading 2.2.11.2.

 

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Koza v Akcil: The Court of Appeal on exclusive jurisdiction for company matters.

Thank you Angharad Parry for flagging  [2017] EWCA Civ 1609 Koza v Akcil – Angharad has excellent factual background. The case concerns the application of Article 24(2) of the Brussels I Recast Regulation, which assigns exclusive jurisdiction to the Courts of the Member State of the seat in matters relating to the life and death of companies and of the validity of decisions made by their organs:

in proceedings which have as their object the validity of the constitution, the nullity or the dissolution of companies or other legal persons or associations of natural or legal persons, or of the validity of the decisions of their organs, the courts of the Member State in which the company, legal person or association has its seat. In order to determine that seat, the court shall apply its rules of private international law;

Referring particularly to C-144/10 BVG and to C-372/07 Hassett, the Court of Appeal at 28 correctly suggests Article 24’s exclusive jurisdictional rules need to be interpreted with their limited purpose in mind: ‘when article 24(2) speaks of proceedings having an “object” it is not referring to the purpose of the proceedings. Rather that phrase is to be interpreted as “proceedings which are principally concerned with” one of the types of subject matter within the article.’ At 37: ‘The task for the court in each case is therefore to determine whether the proceedings relate principally to the validity of the decisions of an organ of the company. A mere link to a decision of the company, or an issue raised which is ancillary to the heart of a contractual or some other dispute, is insufficient to bring the proceedings within the exclusive jurisdiction.’

Floyd LJ at 46 summarises the direction for courts: ‘I do not take from the English or European authorities which were cited to us any suggestion that one is required in all cases to disentangle issues which are interlinked in this way and apply Article 24(2) to each issue separately. On the contrary, faced with such proceedings, the court is required to form an overall evaluative judgment as to what the proceedings are principally concerned with. The position is obviously different from a case where two quite independent claims are made in the same proceedings. Exclusive jurisdiction in relation to each claim would, in those circumstances, have to be determined separately.’ In the case at hand the case was found overall and fundamentally to concern one and the same issue of the validity of decisions of the organs of the company

Consequently the issue is one of looking beyond the particulars of form and into the true nature of the proceedings. Not a decision always made with ease.

Geert.

(Handbook of) EU Private International Law, 2nd ed. 2016, Chapter 2, Heading

 

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E-date Advertising for companies. Libel, internet and centre of interests. Bobek AG in Bolagsupplysningen OÜ.

Bobek AG opined mid July in C-194/16 Bolagsupplysningen OÜ on the application of the Shevill rule, as supplemented by e-Date advertising, to infringements of a company’s personality rights over the internet.  This is one of those Opinions where summaries fall much, much short of the contents of the original document and I should urge readers to consult the Opinion in full.

An Estonian company operating in Sweden was blacklisted for its allegedly questionable business practices on the website of a Swedish employers’ federation. The Advocate General dryly notes ‘(a)s inevitably happens in the era of anonymous internet bravery, universally known for its genteel style, subtle understanding, and moderation, the website attracted a number of hostile comments from its readers. The Estonian company brought an action before the Estonian courts against the Swedish federation. It complained that the published information has negatively affected its honour, reputation and good name. It asked the Estonian courts to order that the Swedish federation rectify the information and remove the comments from its website. It also requested damages for harm allegedly suffered as a result of the information and comments having been published online.

Can the Estonian courts assert jurisdiction to hear this action on the basis of the claimant’s ‘centre of interests’, a special ground of jurisdiction that the Court previously applied to natural persons, but so far not legal persons? If they can, then second, how should the centre of interests of a legal person be determined? Third, if the jurisdiction of the Estonian courts were to be limited to situations in which the damage occurred in Estonia, the referring court wonders whether it can order the Swedish federation to rectify and remove the information at issue.

The Advocate General suggests there are two novelties in the questions referred: a legal person (not a natural one) is primarily asking for rectification and removal of information made accessible on the internet (and only secondarily for damages for the alleged harm to its reputation). This factual setting, the AG suggests, leads to the question of how far the seemingly quite generous rules on international jurisdiction previously established in Shevill with regard to libel by printed media, and then further extended in eDate to the harm caused to the reputation of a natural person by information published on the internet, may be in need of an update. At the real root of course of the generous rules on jurisdiction for tort, lies the Court’s judgment in Bier. Bobek AG joins Szpunar AG in severely questioning the wisdom of the Bier rule in the age of internet publications.

Now, human rights scholars will enjoy the Advocate General’s tour d’horizon on whether and to what extend companies may enjoy human rights. On the whole I believe he is absolutely right in suggesting that there ought to be no difference between legal persons and natural persons when it comes to the very possession of personality rights (such as the right not to be libelled) and that neither is there any ground to distinguish between natural persons and legal persons when it comes to the jurisdictional consequences of upholding these rights.

Then, to the jurisdictional consequences (para 73 onwards): the AG suggests that ‘putting Shevill online’ (the AGs words) essentially means granting the forum to a large number of jurisdictions simultaneously, 28 within the European Union. That is because allegedly false or libelous information on the internet is instantly accessible in all Member States.

Bobek AG suggests such multiplicity of fora stemming from the distribution criterion is very difficult to reconcile with the objective of predictability of jurisdictional rules and sound administration of justice enshrined in recital 15 of the Brussels I Recast Regulation, and does not serve the interests of claimant (although the AG concedes that in litigation practice, sending the defendant on a goose chase throughout the EU may be an attractive proposition). Now, in Bier the CJEU upheld jurisdiction for both locus damni and for locus delicti commissi on the grounds that this was attractive from the point of view of evidence and conduct of proceedings: this gives both the ‘special link’ which the special jurisdictional rules require. Whether the Court will be swayed by the argument that in the internet context, neither is of relevance, remains to be seen. It is true that number of clicks, which presumably is the relevant criteria to establish ‘damage’ in the context of Article 7(2), can be established just as well outside the jurisdiction as inside it (Google Analytics being used in a variety of national proceedings). It is also true however that Bier and Shevill are dogma for the Court and it is unlikely that it will simply abandon or even vary them.

Variation is all the more unlikely in the direction of the alternative suggested by the AG: locus delicti commissi relates to whoever is in charge of publishing and altering the content of the online information. So far so good: this is a useful clarification of Shevill in the internet age and one that has as such been so applied by national courts.

Harm then would in the AG’s view have to be defined as solely being the place where the reputation of the claimant was most strongly affected. That is the place of his centre of interests. The AG further suggests (at 104 ff) that in the case of a profit-making legal person, that is, a company, the jurisdiction is likely to correspond to the Member State where it attains the highest turnover. In the case of non-profit organisations, it is likely to be the place where most of its ‘clients’ (in the broadest sense of the word) are located. In both cases, such a Member State is likely to be the one where the damage to reputation and therefore to its professional existence is going to be felt the most. However in all cases, assessments needs to be fact-specific, and moreover, more than one centre of interests could potentially be established (at 116); that latter concession of course is not likely to endear the AG to the Court, given the requirement of predictability.

Answering then the query re injunctions (under the assumption that is an injunction sought by way of final remedy, not an interim measure), the AG employs the possibility of conflicting directions issued by courts with jurisdiction as to the merits of the case, as further argument, ad absurdum, to support his view on locus damni. This issue could raise interesting discussions on the usefulness of directions to remove internet content from particular websites only.

All in all, there is an awful lot of to the point analysis by the AG in this opinion. However the Court’s repeated reluctance to vary Bier and Shevill, a formidable obstacle.

Geert.

(Handbook of) European Private International Law, 2nd ed. 2016, Chapter 2, Heading 2.2.11.2.