Posts Tagged Establishment
Jurisdiction in intellectual property cases is notoriously complex and frankly opaque, in the case of the EU exacerbated by the impact of secondary law. My colleague Marie-Christine Janssens has a great overview in the Belgian reports at the Congress of Washington of the International Academy of Comparative Law. Brussels: Bruylant, 611-652.
At stake in C-617/15 Hummel v Nike was Regulation 207/2009, in the meantime superseded by Regulation 2015/2424. Article 94 of the former, entitled ‘Application of Regulation … No 44/2001’, contains rules on jurisdiction and procedure in legal actions relating to EU trade marks. It states that ‘Unless otherwise specified in this Regulation, Regulation … No 44/2001 shall apply to proceedings relating to [EU] trade marks and applications for [EU] trade marks, as well as to proceedings relating to simultaneous and successive actions on the basis of [EU] trade marks and national trade marks.’ Article 94 essentially varies, to some degree, the jurisdictional rules of the Brussels I (now Recast) Regulation.
Now, what needed specific interpretation was Article 97’s
‘1. Subject to the provisions of this Regulation as well as to any provisions of Regulation … No 44/2001 applicable by virtue of Article 94, proceedings in respect of the actions and claims referred to in Article 96 shall be brought in the courts of the Member State in which the defendant is domiciled or, if he is not domiciled in any of the Member States, in which he has an establishment.
2. If the defendant is neither domiciled nor has an establishment in any of the Member States, such proceedings shall be brought in the courts of the Member State in which the plaintiff is domiciled or, if he is not domiciled in any of the Member States, in which he has an establishment.
3. If neither the defendant nor the plaintiff is so domiciled or has such an establishment, such proceedings shall be brought in the courts of the Member State where [EUIPO] has its seat.
More specifically, the notion of ‘establishment’: Under which circumstances is a legally distinct second-tier subsidiary, with its seat in an EU Member State, of an undertaking that itself has no seat in the EU to be considered as an “establishment” of that undertaking.
Nike, which has its seat in the US, is the ultimate holding company of the Nike Group, which sells sports goods across the world. Nike Retail, which has its seat in the Netherlands, also belongs to that group. Nike Retail operates the website on which Nike goods are advertised and offered for sale, in Germany in particular. In addition to online sales on that website, Nike goods are sold in Germany through independent dealers supplied by Nike Retail. Wholesale or retail sales in Germany are not directly conducted by the companies in the Nike Group.
Nike Deutschland GmbH, which has its seat in Frankfurt am Main and is not a party to the main proceedings, is a subsidiary of Nike Retail. Nike Deutschland does not have its own website and does not sell goods to end consumers or intermediaries. However, it negotiates contracts between intermediaries and Nike Retail, and supports Nike Retail in connection with advertising and the performance of contracts. Nike Deutschland also provides aftersales service for end consumers. Hummel Holding claims that some Nike products, in particular basketball shorts, infringe its trade mark and that most of the infringements took place in Germany. It brought an action against Nike and Nike Retail before the Landgericht Düsseldorf (Regional Court, Düsseldorf, Germany), which ruled that it had jurisdiction on the ground that Nike Deutschland was an establishment of Nike, but dismissed the action on the merits. This judgment is now being appealed.
The CJEU first of all (at 22 ff) warns for caution in the conjoined application of concepts used in both the Trademark Regulation and the Brussels I (Recast). The Trademark Regulation is, so the Court says specifically, lex specialis and one cannot therefore assume the same words mean the same thing. Readers of this blog are aware that I always give the CJEU thumbs-up when it mentions this (such as in Kainz), however the Court itself very regularly ignores its own instruction when the discussion involves the application of Brussels and Rome.
The point of Article 97, the Court notes (at 37) is to ensure that a court within the EU always has jurisdiction to hear and determine cases concerning the infringement and validity of an EU trade mark. In line with the AG’s suggestion the Court consequently opts for a broad interpretation of the concept, holding that the concept requires (1) a certain real and stable presence, from which commercial activity is pursued, as manifested by the presence of personnel and material equipment. (2) In addition, that establishment must have the appearance of permanency to the outside world, such as the extension of a parent body. However what is not required is for that establishment to have legal personality. Third parties must thus be able to rely on the appearance created by an establishment acting as an extension of the parent body. Furthermore and importantly, it is, in principle, irrelevant for the purposes of Article 97(1) of Regulation No 207/2009 whether the establishment thereby determined has participated in the alleged infringement.
A word of warning evidently: given the Court’s emphasis on the context of Article 97, with a view to its wide application, readers must not be tempted to read the judgment’s view on the concept of ‘establishment’ as applying across the board in EU conflicts law, let alone EU law as a whole.
The Rotterdam court in Hanjin Europe held on the opening of secondary proceedings in The Netherlands, in application of the European Insolvency Regulation (EIR), with main proceedings and COMI in Germany. On the application of the insolvency Regulation there are few that match prof Wessels’ insights and I am happy to refer to them. Indeed it is Bob who alerted me to the case. Prof Wessels in particular points us to the following considerations:
- the relationship between Annex A, Annex C and the abstract definition of ‘insolvency’ in the EIR. Useful precedent is Eurofood.
- the power of a provisionary liquidator to request the opening of secondary proceedings.
- the exact meaning of ‘establishment’, inter alia following judgment in Interedil.
- whether applicant has to show an interest in requesting secondary proceedings.
(Handbook of) European private international law, 2nd ed. 2016, Chapter 5.
Burgo Group: Some not altogether shocking revelations on the Insolvency Regulation. Useful revelations nevertheless.
There’s case-law of the Essent, Kylie Minogue (eDate Advertising), Seal Pups, or Kiobel type. And then there is case-law of the, well, Burgo type. In Burgo Group v Illochrama SA, Case C-327/13, the ECJ held on 4 September. The judgment does not reveal anything shocking. (Some might argue at least some of the questions could have been acte claire). However the Court’s findings nevertheless put to bed some concerns which insolvency practitioners might have had.
On 21 April 2008, the Commercial Court, Roubaix-Tourcoing (France) placed all the companies in the Illochroma group — including Illochroma, established in Brussels (Belgium) — into receivership and appointed Maître Theetten as agent. On 25 November 2008, it placed Illochroma in liquidation and appointed Maître Theetten as liquidator.
Burgo Group, established in Altavilla-Vicentina-Vicenza (Italy), is owed money by Illochroma for the supply of goods. On 4 November 2008, Burgo Group presented Maître Theetten with a statement of liability in the amount of EUR 359 778.48. Maître Theetten informed Burgo Group that the statement of liability could not be taken into account because it was out of time.
Burgo Group then requested the opening of secondary proceedings in respect of Illochroma. The referring court (The Brussels Court of Appeal) observed that the Insolvency Regulation defines ‘establishment’ as any place where the debtor carries out a non-transitory economic activity with human means and goods, which is the situation in the present case. Illochroma is a company with two establishments in Belgium, where it is the owner of a building, buys and sells goods and employs staff. Illochrama and the liquidator contend that, since Illochroma has its registered office in Belgium, it cannot be regarded as an establishment within the meaning of Regulation No 1346/2000. They argue that secondary proceedings are restricted to establishments without legal personality (issue 1).
Belgian law applicable to the present case provides that any creditor, including a creditor established outside Belgium, may bring an action before a Belgian court for the opening of insolvency proceedings against its debtor. However, Illochroma maintains that that right is restricted to creditors established in the Member State of the court before which the action seeking the opening of secondary proceedings has been brought, since the sole purpose of such proceedings is to protect local interests (issue 2).
Finally, the referring court observes that Regulation No 1346/2000 does not state whether the possibility for the persons referred to in Article 29 thereof to request, in the Member State within the territory of which the establishment is situated, the opening of secondary proceedings is a right that must be recognised by the court having jurisdiction in that regard or whether that court enjoys a discretion as to whether it is appropriate to grant that request, with a view, in particular, to protecting local interests (issue 3).
With respect to issue 1, the ECJ first of all dismissed any suggestions that COMI may be second-guessed by courts in other Member States. Even if the French courts erred in accepting primary jurisdiction, per Bank Handlowy the courts in other Member States have to stick by that judgment. Any challenge to it must be brought in the national courts of the Member States were main proceedings were opened. The Regulation nevertheless of course has inserted the possibility of secondary proceedings precisely to protect local interests in other Member States. (Even though correction of COMI was not as such thought of when secondary proceedings’ architecture was conceived, in practice they do serve to offset some of the consequences of (alleged) wrong COMI assessment).
‘Establishment’ is defined in Article 2(h) of Regulation No 1346/2000 as ‘any place of operations where the debtor carries out a non-transitory economic activity with human means and goods’. Per Interedil, the fact that that definition links the pursuit of an economic activity to the presence of human resources shows that a minimum level of organisation and a degree of stability are required. It follows that, conversely, the presence alone of goods in isolation or bank accounts does not, in principle, satisfy the requirements for classification as an ‘establishment’. On the other hand, the definition does not refer to the place of the registered office of a debtor company or to the legal status of the place in which the operations in question are carried out.The Member State where the company has its registered office clearly is not excluded from the definition: otherwise local interests would be denied the opportunity of seeking protection, which would exist in other Member States where an establishment is present.
As for the second issue, the Regulation draws a clear distinction between territorial proceedings opened prior to the opening of main proceedings, and secondary proceedings. It is only in relation to territorial proceedings that the right to request the opening of proceedings is limited by the Regulation to creditors who have their domicile, habitual residence or registered office within the Member State in which the relevant establishment is situated, or whose claims arise from the operation of that establishment (at 48, with reference to Zaza Retail). Any other conclusion would amount to indirect discrimination on the grounds of nationality, since non-residents are in the majority of cases foreigners (at 49).
Finally, with respect to issue 3, the Regulation grants broad discretion, with regard to the opening of secondary proceedings, to the court before which an action seeking the opening of secondary proceedings has been bought. Article 28 of the Regulation determines in principle as the law applicable to secondary proceedings, that of the Member State within the territory of which those secondary proceedings are opened. Whether opening of the proceeding is ‘appropriate’ has to be determined by that applicable law. EU law does have an impact on that assessment, though (at 64 ff): in deciding appropriateness, Member States must not discriminate on the basis of place of residence or registered office; the Regulation’s motifs for allowing secondary proceedings must be respected (in the main: protection of local interests, given that universal proceedings may be preferred however do often lead to practical difficulties); and finally the principle of sincere co-operation implies that the court assessing the secondary proceedings, must have regard to the objectives of the main proceedings.
All in all therefore very much a common sense judgment, with the final instruction to the courts being quite relevant: secondary proceedings must not operate as isolated incidents and they have to take some lead from the main proceedings.
‘Establishment’ within the meaning of the Insolvency Regulation: the Court of Appeal in Olympic Airlines
[Update 5 May 2015: the Supreme Court confirmed the Court of Appeal’s findings on 29 April 2015 and declined to refer to the ECJ, (justifiably in my view) citing acte clair].
Under the EU’s Insolvency Regulation, core of the procedure takes place in the Member State with ‘COMI’: the centre of main interests of the company concerned.
‘Secondary’ and ‘territorial’ proceedings may only be opened if the debtor possesses an establishment within the territory of that other Member State, and only vis-a-vis the debtor’s assets in that State. Article 2(h) of the Regulation defines ‘establishment’ as ‘any place of operations where the debtor carries out a non-transitory economic activity with human means and goods’, which the Court of Justice in Interedil has specified in less philosophical terms as ‘a structure with a minimum level of organisation and a degree of stability for the purpose of pursuing an economic activity‘, basically a combination of pursuit of an economic activity and the presence of human resources. Per Interedil, this has to be determined in the same way as the location of the centre of main interests, namely on the basis of objective factors which are ascertainable by third parties.
In Olympic Airways, the Court of Appeal combined Interedil and ECJ guidance with respect to COMI, as well as extensive reference to the Virgos Schmit Report, to hold that the Regulation’s definition of “establishment” a meaning which requires more to its “economic activity” than the mere process of winding-up. In the words of Sir Bernard Rix (at 33) ‘The definition is clearly intended to lay down a rule that the mere presence of an office or branch, a “place” at which the debtor is located, is not sufficient. It has to be a place “of operations”: human and physical resources have to be involved in those operations; and there has to be “economic activity” involving those resources. ‘ He later emphasises that this economic activity needs to be ‘external’, ie market oriented.
Of note is also the temporal element: per Office Metro, the possibility to open up secondary proceedings requires there to be such establishment at the time of the request for opening of such proceeding.