Posts Tagged Regulation 44/2001

Wathelet AG in Dědouch: Interpretation of the exlusive jurisdictional rule for corporate issues in the case of squeeze-out.

This is effectively my second posting today on Article 24(2) Brussels I Recast.

In C-560/16 Dědouch, Wathelet AG Opined last week, on the scope of the exclusive jurisdictional rule of (now) Article 24(2) of Regulation 1215/2012. The issue arose in proceedings between Michael Dědouch et al, a group of minority shareholders on the one hand, and Jihočeská plynárenská a.s. (established in the Czech Republic) and E.ON Czech Holding AG (‘E.ON’) [established in Germany] on  the other, concerning the reasonableness of the sum which, in a procedure for removing minority shareholders (‘squeeze-out’), E.ON was required to pay Mr Dědouch et al following the compulsory transfer of their shares in Jihočeská plynárenská.

Mr Dědouch et al are suing both companies and are asking the Regional Court, České Budějovice, Czech Republic to review the reasonableness of the sum. In those proceedings E.ON raised an objection that the Czech courts lacked jurisdiction. E.ON argue that, in view of the location of its seat /domicile, only the German courts had international jurisdiction per (now) Article 4.

The regional court initially accepted jurisdiction on the basis of (now) Article 8(1): the anchor defendant mechanism (one of the two defendant companies being a Czech company). Eventually the High Court, Prague found that the Czech courts had jurisdiction under (old) Article 5(1)(a) of the Brussels I Regulation: the special jurisdictional rules for contracts.

Wathelet AG suggests the case raises the complex issue of litigation in intra-company disputes. At 21 he writes that the facts highlight a structural problem in the Regulation, namely ‘the absence of a basis of jurisdiction dedicated to the resolution of internal disputes within companies, such as disputes between shareholders or between shareholders and directors or between the company and its directors.’ That is not quite correct: it is not because the Regulation has no tailor-made regime for this type of dispute that is has no jurisdictional basis for it. That a subject-matter is not verbatim included in the Regulation does not mean it is not regulated by it.

The AG then (at 23) considers that the issue under consideration is complicated by the difficulty of applying (now) Articles 7(1) and (2), ‘since the removal of the minority shareholders and the consideration decided by a resolution of the general meeting are neither a contract nor a tort, delict or quasi-delict.’ I am not so sure. Is there no ‘obligation freely assumed’ between minority and other shareholders of the same company? Are they not bound by some kind of ‘contract’ (in the broad, Jakob Handte sense) when becoming shareholders of one and the same company? That (at 24) ‘The principle of a procedure for squeezing out the minority shareholders is that the principal shareholder can start it without their consent‘ I do not find convincing in this respect. Plenty of contractual arrangements do not limit contracting parties’ freedom to act: except, their actions may have contractual consequences. The AG in my view focuses too much on the squeeze out being one-sided. An alternative view may see a wrongful deployment of squeeze-out a breach of an earlier contractual, indeed fiduciary duty between /among shareholders.

Unlike the AG (at 26), neither do I see great obstacle in the difficulty in determination of a specific place of performance of such contractual duties between shareholders in the company law context. They may not fit within the default categories of Article 7(1), however I can see many a national judge not finding it impossible to determine a place of performance.

On the basis of these perceived difficulties the AG dismisses application of Articles 7(1) and (2) and then considers, and rejects, a strict application of Article 24(2). In other words in the AG’s view Article 24(2) is engaged here.

This is a tricky call. Justified reference is made by the AG to C‑372/07 Hassett, in which (then) Article 22(2) was held no to apply to a decision made by the Board of the Health Organisation not to indemnify two of their members in cases of medical negligence: this was found by the CJEU to be an action relating to the way in which a company organ exercises its functions – not covered by Article 24(2). In Dědouch, the action relates to the amount which the General Meeting of the company fixed as the compensation E.ON was required to pay the minority shareholders following the transfer of the shares. Notwithstanding Czech company law being the lex causae in assisting the GM in that decision, I am not convinced this engages Article 24(2) (hence reserving jurisdiction to the Czech courts).

In summary, I believe the Court should reject application of Article 24(2), and instruct the national courts to get on with the determination of jurisdiction per Article 7, or indeed 8.

Geert.

(Handbook of) EU Private International Law, 2nd ed. 2016, Chapter 2, Heading 2.2.6.5, Heading 2.2.11.1, Heading 2.2.12.1.

 

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Qualifying ‘consumers’ on social media and in the case of assignment. Bobek AG in Schrems v Facebook.

Bobek AG must have picked up his knack for colourful language at Teddy Hall. His Opinion last week in C-498/16 Schrems v Facebook is a delight and one does best service to it by simply inviting one reads it. Now, that must not absolve me of my duty to report succinctly on its contents – the Court itself I imagine will be equally short shrift with claimant’s arugments.

When I asked my students in the August exam to comment on the case, I simply gave them the preliminary questions and asked them how the CJEU should answer them:

1 Is Article 15 of Regulation 44/2001 to be interpreted as meaning that a ‘consumer’ within the meaning of that provision loses that status, if, after the comparatively long use of a private Facebook account, he publishes books in connection with the enforcement of his claims, on occasion also delivers lectures for remuneration, operates websites, collects donations for the enforcement of his claims and has assigned to him the claims of numerous consumers on the assurance that he will remit to them any proceeds awarded, after the deduction of legal costs?

2. Is Article 16 of Regulation (EC) No 44/2001 to be interpreted as meaning that a consumer in a Member State can also invoke at the same time as his own claims arising from a consumer supply at the claimant’s place of jurisdiction the claims of others consumers on the same subject who are domiciled

a. In the same Member State, b. In another Member State: or c. In a non-Member State,

if the claims assigned to him arise from consumer supplies involving the same defendant in the same legal context and if the assignment is not part of a professional or trade activity of the applicant, but rather serves to ensure the joint enforcement of claims?

 

The long and the short of the case is whether the concept of ‘consumer’ under the protected categories of Brussels I (and Recast) is a dynamic or a static one; and what kind of impact assignment has on jurisdiction for protected categories.

On the first issue, I expected my students to point to the CJEU’s precedent of applying the Regulation with a view to predictability and legal certainty; specifically for consumers, to Gruber and the burden of proof in cases of dual use; and to the Court’s judgment in Emrek. Other than the last issue, the AG points to all. Predictability points to a static approach: I would suggest the AG is right. Bobek AG does leave the door ajar for a dynamic interpretation: at 39: in exptional cases, a ‘dynamic’ approach to consumer status should not be entirely excluded. This could be potentially relevant in the event that a contract does not specify its aim, or it is open to different uses, and it lasts a long period of time, or is even indeterminate. It is conceivable that in such cases, the purpose for which a certain contractual service is used might change — not just partially, but even completely. Social media contracts may lead to such circumstances, one imagines, however there would be many ifs and buts to such analysis: including, I would suggest, the terms of the contract wich the service provider initially drew up.

On the issue of assignment the AG’s approach is entirely logical and not surprising: evidently Herr Schrems cannot have claims assigned to him and then exercise those claims using any other jurisdictional prerogatives then present in the original claim. While these may allow him to sue in the forum actoris of the original consumer, there is no valid argument whatsoever to suggest he could join them to his own domicile. The arguments made de lege ferenda (need for forum shopping in collective consumer redress) are justifiably rejected.

Geert.

(Handbook of) EU private international law, 2nd ed. 2016, Chapter 2, Heading 2.2.8.2.

 

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The CJEU in Nintendo. Where will you sue next?

As Bot AG put it, Joined Cases C-24 and 25/16 Nintendo v Big Ben gave the Court an opportunity to  determine the territorial scope of a decision adopted by a court of a Member State in respect of two co-defendants domiciled in two different Member States concerning claims supplementary to an action for infringement brought before that court.

The case concerns the relation between Brussels I and Regulation 6/2002 – which was last raised in the recent BMW case, particularly as for the former, the application of Article 6(1) (now 8(1))’s rule on anchor defendants. And finally the application of Rome II’s Article 8(2): the identification of the ‘country in which the act of infringement was committed’. In this post I will focus on the impact for Brussels I (Recast) and Rome II.

The Landgericht held that there had been an infringement by BigBen Germany and BigBen France of Nintendo’s registered Community designs. However, it dismissed the actions in so far as they concerned the use of the images of the goods corresponding to those designs by the defendants in the main proceedings.

The Landgericht ordered BigBen Germany to cease using those designs throughout the EU and also upheld, without territorial limitation, Nintendo’s supplementary claims seeking that it be sent various information, accounts and documents held by the defendants in the main proceedings, that they be ordered to pay compensation and that the destruction or recall of the goods at issue, publication of the judgment and reimbursement of the lawyers’ fees incurred by Nintendo be ordered (‘the supplementary claims’).

As regards BigBen France, the Landgericht held that it had international jurisdiction in respect of that company and ordered it to cease using the protected designs at issue throughout the EU. Concerning the supplementary claims, it limited the scope of its judgment to BigBen France’s supplies of the goods at issue to BigBen Germany, but without limiting the territorial scope of its judgment. It considered the applicable law to be that of the place of infringement and took the view that in the present case that was German, Austrian and French law.

BigBen France contends that the German courts lack jurisdiction to adopt orders against it that are applicable throughout the EU: it takes the view that such orders can have merely national territorial scope. Nintendo ia takes the view that German law should be applied to its claims relating to BigBen Germany and French law to those relating to BigBen France.

Taking into account the objective pursued by Article 6(1) of Regulation No 44/2001, which seeks inter alia to avoid the risk of irreconcilable judgments, the existence of the same situation of fact must in such circumstances — if proven, which is for the referring court to verify, and where an application is made to that effect — cover all the activities of the various defendants, including the supplies made by the parent company on its own account, and not be limited to certain aspects or elements of them. If I understand this issue correctly (it is not always easy to see the jurisdictional forest for the many IP trees in the judgment), this means the Court restricts the potential for the use of anchor defendants in Article 8(1).

As for the application of Article 8(2) Rome II, at 98 and following inter alia analysis of the various language versions of the Article, the CJEU equates the notion ‘country n which the act of infringement is committed’ with the locus delicti commissi:  ‘it refers to the country where the event giving rise to the damage occurred, namely the country on whose territory the act of infringement was committed.‘ At 103: ‘…where the same defendant is accused of various acts of infringement falling under the concept of ‘use’ within the meaning of Article 19(1) of Regulation No 6/2002 in various Member States, the correct approach for identifying the event giving rise to the damage is not to refer to each alleged act of infringement, but to make an overall assessment of that defendant’s conduct in order to determine the place where the initial act of infringement at the origin of that conduct was committed or threatened.’

At 108 the Court rules what this means in the case at issue: ‘the place where the event giving rise to the damage occurred within the meaning of Article 8(2) of [Rome II] is the place where the process of putting the offer for sale online by that operator on its website was activated’.

At 99 however it warns expressly that this finding must be distinguished as being issued within the specific context of infringement of intellectual property rights: Regulation 6/2002 as well as Rome II in its specific intention for IP rights, aims to guarantee predictability and unity of a singly connecting factor. This is a very important caveat: for while this approach by the CJEU assists with predictability, it also hands means for applicable law shopping and, where the Court’s approach for locus delicti commissi in IP infringement extended to jurisdiction, for forum shopping, too.

Geert.

(Handbook of) EU private international law, 2nd ed. 2016, Chapter 2, Heading 2.2.11.2; Chapter 3.

 

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Sabbagh v Khoury. The Court of Appeal struggles on merits review for anchor defendants.

Sabbagh v Khoury at the High Court was the subject of a lengthy review in an earlier post. The Court of Appeal has now considered the issues at stake, in no lesser detail.

In line with my previous post (readers unfamiliar with it may want to refer to it; and to very good Hill Dickinson summary of the case), of particular consideration here is the jurisdictional test under (old) Article 6(1) Brussels I, now Article 8(1) in the Recast, in particular the extent of merits review; and whether the subject matter of the claim comes within the succession exception of Article 1(2)(a) of the Brussels I Regulation.

As for the latter, the Court, after reviewing relevant precedent and counsel argument (but not, surprisingly, the very language on this issue in the Jenard report, as I mention in my previous post) holds in my view justifiably that ‘(t)he source of the ownership is irrelevant to the nature of the claim. ..The subject matter of the dispute is not whether Sana is an heir, but whether the defendants have misappropriated her property.‘ (at 161).

With respect to the application of Article 6(1) – now 8(1), the majority held in favour of a far-reaching merits review. Lady Justice Gloster (at 166 ff) has a minority opinion on the issue and I am minded to agree with her. As she notes (at 178) the operation of a merits test within Article 6(1) does give rise to risk of irreconcilable judgments, which can be demonstrated by reference to the present facts. She successfully, in my view, distinguishes the CJEU’s findings in Kolassa and in CDC, and the discussion at any rate one would have thought, merits CJEU review.

Geert.

(Handbook of) EU Private International Law, 2nd ed. 2016, Chapter 2, Heading 2.2.12.1

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CJEU in Kabeg: a subrogated employer is to be considered the ‘injured party’ in Brussels I.

A short post mostly for the sake of completeness. In its second recent judgment on insureds as ‘protected category’ under the Brussels I Regulation, the CJEU held last week in C-340/16 Kabeg. Where an employee is injured and the employer is  statutory assignee of the rights of its employee, the employer is subrograted into the rights of the victim and can directly act against the insurer of the vehicle involved.

The Court’s less cautious approach to subrogation than it generally adopts, is influenced by Directive 2009/103, which obliges Member States to put in place such direct action. Article 18: ‘Member States shall ensure that any party injured as a result of an accident caused by a vehicle covered by insurance as referred to in Article 3 enjoys a direct right of action against the insurance undertaking covering the person responsible against civil liability.’

Geert.

(Handbook of) EU private international law, 2nd ed. 2016, Chapter 2.

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HanseYachts: A court asked merely to preserve evidence is (probably) not ‘seized’.

This is one for the conflict of laws anoraks. In C-29/16 HanseYachts the Court of Justice held (on 4 May) that an application for proceedings to preserve or establish, prior to any legal proceedings, evidence of facts on which a subsequent action could be based, does not constitute a proceeding within the meaning of (now) Article 32(1) Brussels I. If it had, it would trigger the lis alibi pendens regime of that Article, impacting therefore on any future substantive proceedings.

At 33 the Court defers to the insight into the relevant provisions of French judicial procedure, offered by the French Government: Although there may indeed be a connection between the court seised on the basis of the relevant French Article and the court having jurisdiction to hear the substance of the case with a view to which the measure of inquiry was ordered, the fact remains that such proceedings for the taking of evidence are independent in relation to the substantive procedure which may, if necessary, be brought subsequently. The Court’s ruling however is dependent (at 34) upon the French courts confirming this interpretation of French civil procedure: for the CJEU does not offer final interpretations on internal State law.

Of note is of course also that the Court seized with the substantive procedure, may en parcours de route take measures to preserve evidence etc.: that court would have already been ‘seized’.

Geert.

(Handbook of) EU Private International Law, 2nd ed. 2016, Chapter 2, Heading 2.2.14.1.

 

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AMT v Marzillier: UK Supreme Court sides with relucant Court of Appeal on inducement to breach choice of court agreement.

I reported on AMT V Marzillier at the High Court, failed to flag its overturn in the Court of Appeal (it’s the Easter period: I am in a confessionary mood), and now report swiftly on the Supreme Court confirming the Court of Appeal’s view early April ([2017] UKSC 13).

MMGR is a company incorporated under the laws of Germany and carries on business as a firm of lawyers in Germany. AMTF alleges that MMGR induced its former clients to issue proceedings against it in Germany and to advance causes of action under German law.  AMTF’s clients were referred to it by ‘introducing brokers’; AMTF in turn is referred to as a non-advisory, “execution only”, derivatives broker. AMTF charged its clients commission for its service and paid commission to the introducing brokers. About 70 former clients, who were dissatisfied with the financial results of their transactions, commenced legal proceedings in Germany against both the introducing brokers and AMTF seeking damages under the German law of delict. The claim against the introducing brokers was that they had given bad investment advice or had failed to warn of the risks of the investments. The claim against AMTF was based on a liability which was accessory to that of the brokers: it was alleged that AMTF had encouraged the brokers to behave as they did by paying them commission from the transaction accounts which it operated for its clients and that it owed and had breached a duty in delict (tort) to the clients to prevent any transactions being undertaken contrary to their interests. AMTF challenged the jurisdiction of the German court. Many of the former clients have recovered damages from AMTF by way of settlement.

AMTF argues that the actions in Germany were in breach of the exclusive jurisdiction and applicable law clauses in their contracts with AMTF. It commenced proceedings in the High Court in London against MMGR, based on the tort, in English law, of inducing breach of contract. It seeks both damages and injunctive relief to restrain MMGR from inducing clients to bring further claims in Germany asserting causes of action under German law. AMTF argues that the English courts have jurisdiction over its claim under article 5.3 of the Brussels I Regulation (Article 7(2) in the Brussels I Recast), which gives jurisdiction in tort claims to the courts for the place in which the harmful event occurred or may occur. MMGR challenges the jurisdiction of the English courts to entertain this action.

Popplewell J in the High Court sided with AMTF – I reviewed his judgment in 2014. He decided that the relevant harm which gives rise to jurisdiction under article 5.3 occurred in England as AMTF had in each case been deprived of the benefit of the exclusive jurisdiction clause, which, he held, created a positive obligation on a former client to bring proceedings in England.

Clarke LJ concluded upon Appeal that the English courts did not have jurisdiction as the relevant harm had occurred in Germany. At 57 he wrote ‘I do not reach this conclusion with any great enthusiasm since there is much to be said for the determination of what is in essence an ancillary claim in tort for inducement of breach of contract to be made in the court which the contract breaker agreed should have exclusive jurisdiction in respect of that contract, rather than in the courts of the country where the inducement and breach occurred. But the governing law of the relationship between the former clients and AMTF (which did not have to be that of England & Wales) is not a determining factor in the allocation of jurisdiction under the Regulation.‘ It is not entirely clear what the German courts’ view is on the matter – the unsettled claims were still pending at the time of the Supreme Court’s judgment.

Lord Hodge, after noting the CA’s reluctance, agrees with its conclusion and does so by once again, concisely yet completely, reviewing the CJEU’s case-law on Article 5(3) [7(2)]. For an even more condensed version, see Jake Hardy. At 24: ‘The task for the court is to identify where the relevant harm occurred. That is relatively straightforward in most circumstances, where there is no need for any special rule such as those which the CJEU has developed when it has not been possible readily to identify one place where that harm occurred. It is straightforward in this case.‘ : namely Germany. ‘It is clear that AMTF did not get the benefit of having any dispute with the former clients determined under English law by English courts. But the former clients were under no positive obligation to sue AMTF, which could have no objection if it was not sued.’ (at 25).

Of note is Lord Hoge’s important emphasis (at 29) that the benefits of connecting factors, which justify the ground of jurisdiction, are not in and of themselves connecting factors. Idem for his instruction at 30 that ‘the inconvenience, which the separation of the resolution of the contractual claims against the former clients from the pursuit of the claims against MMGR entails, (does not) carry much weight when one considers the aims of the Judgments Regulation‘: ‘the CJEU has recognised that the scheme of the Judgments Regulation creates the difficulty that one jurisdiction may not be able to deal with all the related points in a dispute (at 32).

Finally reference to the CJEU was refused on the grounds that the issue is acte claire (at 43, with preceding reference to CJEU precedent).

Delightful.

Geert.

(Handbook of) European Private International Law, 2nd ed. 2016, Chapter 2, Heading 2.2.11.2, 2.2.11.2.7).

 

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