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CRUZ VILLALÓN AG Opined yesterday in C-47/14 Holterman (no EN version of the Opinion was available at the time of writing). What if a defendant is pursued both on the basis of his capacity as a director of the company, and for alleged failure properly to have carried out his duties as employee?

Applicant Holterman is incorporated in The Netherlands. Defendant is Mr Spies, a German national, domiciled in Germany. He was employed by applicant between 2001 and 2005/06, first as employee, subsequently also as director of Holterman’s establishments in Germany. Applicant alleges that defendant has caused damage as a result of improper fulfillment of his duties, indeed intentional recklessness, as director. Application is made at the court at Arnhem, where Spies successfully argues that the court has no jurisdiction on the basis that application has to be made of the protective category of ‘individual contracts of employment’.

Questions referred, were

1.    Must the provisions of Section 5 of Chapter II (Articles 18-21) of Regulation (EC) No 44/2001 1 be interpreted as precluding the application by the courts of Article 5(1)(a) or of Article 5(3) of that Regulation in a case such as that at issue here, where the defendant is held liable by the company not only in his capacity as director of that company on the basis of the improper performance of his duties or on the basis of unlawful conduct, but quite apart from that capacity, is also held liable by that company on the basis of intent or deliberate recklessness in the execution of the contract of employment entered into between him and the company?

2    (a) If the answer to question 1 is in the negative, must the term ‘matters relating to a contract’ in Article 5(1)(a) of Regulation (EC) No 44/2001 then be interpreted as also applying to a case such as that at issue here, where a company holds a person liable in his capacity as director of that company on the basis of the breach of his obligation to properly perform his duties under company law?

(b) If the answer to question 2(a) is in the affirmative, must the term ‘place of performance of the obligation in question’ in Article 5(1)(a) of Regulation (EC) No 44/2001 then be interpreted as referring to the place where the director performed or should have performed his duties under company law, which, as a rule, will be the place where the company concerned has its central administration or its principal place of business, as referred to in Article 60(1)(b) and (c) of that Regulation?

3    (a) If the answer to question 1 is in the negative, must the term ‘matters relating to tort, delict or quasi-delict’ in Article 5(3) of Regulation (EC) No 44/2001 then be interpreted as also applying to a case such as that at issue here, where a company holds a person liable in his capacity as director of that company on the basis of the improper performance of his duties under company law or on the basis of unlawful conduct?

(b) If the answer to question 3(a) is in the affirmative, must the term ‘place where the harmful event occurred or may occur’ in Article 5(3) of Regulation (EC) No 44/2001 be interpreted as referring to the place where the director performed or should have performed his duties under company law, which, as a rule, will be the place where the company concerned has its central administration or its principal place of business, as referred to in Article 60(1)(b) and (c) of that Regulation?

Spies essentially argues that the employment section of the Regulation trumps concurrent jurisdiction on the basis of contract. ‘Contract of employment’ so far has not been addressed in the abstract by the ECJ, other than incompletely in Shenavai Case 266/85, where it referred to the need for a durable relation between individual and company. In particular of course, a contract for employment needs to be distinguished from a contract for the provision of services. The Advocate General takes inspiration from the protective intent of the employment contracts heading, to suggest that supervision and instruction, jointly summarised as ‘subordination’, are determining factors for positions of employment. Even higher management can find itself in such position, given that and provided its actions, notwithstanding a wide independent remit, are subject to control and direction of the companies’ bodies. Review of the company’s by-laws should reveal the existence of such control vis-a-vis higher management, read together with the terms and conditions of the contract of employment at issue (at 32). It is only, per Asscher, C‑107/94, if management itself through its shareholding, exercises control over those bodies, that the position of subordination disappears.

Once the national court, on the basis of ad hoc analysis, holds that there is a position of employment, the national court has to apply Brogsitter per analogia: namely whether the action concerned follows from an alleged improper fulfillment of that agreement (as opposed to an improper fulfillment of duties as a director).

In subsidiary fashion only, does the AG entertain the questions relating to Article 5(1) and 5(3) (now 7(1) and 7(2) respectively). Spies’ duties as a director (again, should the ECJ find against applicability of the employment section) have to be considered ‘contractual’ within the meaning of the Regulation. The place of performance of the obligation in the view of the AG needs to be determined using Article 7(1)b, ‘the place in a Member State where, under the contract, the services were provided or should have been provided;’. Using Car Trim and Wood Floor Solutions and quoting Stephanie Francq, the AG suggests the national court identify the location where the service was mainly provided.

The AG’s views on the employment heading, however, seem solid and I would be surprised were the ECJ to have to go into the subsidiary questions.

Geert.

In Case C-483/13 KA Finanz AG, the ECJ is asked to clarify the ‘corporate exception’ to the Rome Convention and subsequent Regulation on the law applicable to contractual obligations. The two main questions ask whether the ‘company law’ excepted area includes (a) reorganisations such as mergers and divisions, and (b) in connection with reorganisations, the creditor protection provision in Article 15 of Directive 78/855 concerning mergers of public limited liability companies, and of its successor, Directive 2011/35.

(Creditor protection, incidentally, was also addressed in C-557/13 Lutz, judgment held last week, within the context of insolvency proceedings. I shall have a posting on that case soon).

Reuters tells me ‘KA Finanz was split off from nationalised lender Kommunalkredit in an attempt to secure a sustainable future for the rest of the public sector finance specialist firm following the global financial crisis’. KA Finaz therefore is what is generally referred to as a ‘Bad Bank’.

The referring court, Austria’s Oberster Gerichtshof, would seem to be hedging its bets on whether the Rome Convention or the Regulation applies to the contract, and ditto for the 1978 Directive or the 2011 Directive aforementioned. The file may reveal more factual detail than the application as published, however the questions as phrased (namely quite speculatively rather than file related) probably will run into trouble on the admissability front, I imagine.

At the time of adoption of the convention, the Giuliano Lagarde Report went into a bit more detail as to what is and is not excluded:

Confirming this exclusion, the Group stated that it affects all the complex acts (contractual administrative, registration) which are necessary to the creation of a company or firm and to the regulation of its internal organization and winding up, i. e. acts which fall within the scope of company law. On the other hand, acts or preliminary contracts whose sole purpose is to create obligations between interested parties (promoters) with a view to forming a company or firm are not covered by the exclusion.

The subject may be a body with or without legal personality, profit-making or non-profit-making. Having regard to the differences which exist, it may be that certain relationships will be regarded as within the scope of company law or might be treated as being governed by that law (for example, societe de droit civil nicht-rechtsfahiger Verein, partnership, Vennootschap onder firma, etc.) in some countries but not in others. The rule has been made flexible in order to take account of the diversity of national laws.

Examples of ‘internal organization’ are: the calling of meetings, the right to vote, the necessary quorum, the appointment of officers of the company or firm, etc. ‘Winding-up’ would cover either the termination of the company or firm as provided by its constitution or by operation of law, or its disappearance by merger or other similar process.

At the request of the German delegation the Group extended the subparagraph (e) exclusion to the personal liability of members and organs, and also to the legal capacity of companies or firms. On the other hand the Group did not adopt the proposal that mergers and groupings should also be expressly mentioned, most of the delegations being of the opinion that mergers and groupings were already covered by the present wording.

This explanation does not necessarily of course clarify all. For instance, the Report would seem to suggest that ‘mergers and groupings’, at issue in KA Finanz, are covered by the exception. Presumably, given the nature of the remainder of the exception, this is limited to the actual final agreement creating the JV or merged company, and not to the complex set of agreements leading up to such creation, such as Memoranda of Understanding (MOUs), or non-disclosure agreements (NDAs). Along those lines and without at this time having revisited relevant scholarship outside my own, I would suggest creditor protection is not covered by the exception.

The Gerichtshof also seks clarification on whether there are ‘any requirements concerning the treatment of mergers in relation to conflict of laws to be inferred from European primary law such as the freedom of establishment under Article 49 TFEU, the freedom to provide services under Article 56 TFEU and the free movement of capital and payments under Article 63 TFEU, in particular as to whether the national law of the State of the outwardly merging company or the national law of the target company is to be applied?’ Again, without having seen more reference to fact in the actual referral, this question to me seems far too academic to prompt the ECJ into entertaining it.

The Court’s ledger shows the application as having been lodged on 31 October 2014. That means some movement on it ought to be expected soon.

Geert.

 

 

The German Federal Labour Court, the ‘Bundesarbeitsgericht’, has provided the ECJ with an opportunity to provide much needed clarity on the application of Rome I to continuing (employment) contracts, and on the Regulation (or as the case may be, the Rome convention)’s provisions on overriding mandatory law. The Bundesarbeitsgericht has issued a press release on the case, Giesela Rühl flagged the case in March, and Lisa Günther has more detailed input on the overall context. Claimant is a Greek, employed by the Greek State at the Greek primary school in Nuremberg (Germany). His salary was reduced in accordance with relevant Greek Saving Laws. Claimant asks for payment of the sums withheld. Is the German court bound to apply the Greek Saving Laws?

The case (which as yet to appear on the ECJ’s website) first of all seeks clarification on the temporal scope of Rome I. Article 28 Rome I provides that it applies to contracts concluded ‘as from 17 December 2009′ (this is the corrected format; initially Article 28 read ‘after’). When exactly a contract is ‘concluded’ needs to be determined in accordance with the lex causae as identified by the Regulation (an extension of Article 10(1), suggested by most if not all of relevant scholarship). There has hitherto been much less noise about the application of Article 28 to ‘continuing’ contracts': those concluded before the temporal scope of the Regulation, continuing after, however renewed, renegotiated, amended…: do these continue to be covered by the Rome convention ad infinitum, or is there a cut-off point at which these continuing contracts become newly concluded? Any suggestion along these latter lines presumably requires determination of a threshold. For instance, adaptation of price in line with inflation presumably is not sufficient to speak of a ‘new’ contract. But would contractually foreseen price renegotiation to take account of economic cycles, lead to such a new contract?

One’s intuitive assumption may be to prefer autonomous interpretation of the concept ‘concluded’ however in the current state of (lack of) harmonisation of contractual law, it is more likely that the Court will prefer an Article 10(1) type solution.

Next up is the application of Article 9’s provision on overriding mandatory provisions. This is the first time the ECJ will rule on that Article (Unamar was held under the Rome Convention). The Regulation quite deliberately limited the room for manoeuvre for the court seized to apply overriding mandatory law other than that of the forum: only such laws of the country where the obligations arising out of the contract ‘have to be performed’ can come into calling. That place is likely to be Germany in the case at issue (the Regulation does not define ‘place of performance’ under Article 9(3)).

No doubt the ECJ will cut some corners, per judicial economy, however the case nevertheless promises to be entertaining.

Geert.

In East Sussex County Council Case C-71/14, the question under consideration is the application of Directive 2003/4 ‘s reasonableness test. Article 5 of the Directive provides that in situ access to information to for example public registers has to be free of charge. Further, that charges for supplying any environmental information must be ‘reasonable’.

In particular, how ‘objective’ must a reasonable cost be, seen against the light of English statutory law which allows local authorities to specify access (and other) fees providing that the amount ‘shall not exceed an amount which the public authority is satisfied is a reasonable amount’. Application in that case is made by a property search group with a view to commercial conveyancing. Sharpston AG on 16 April 2015 opined that even for commercial applicants, authorities’ hands are quite tied. In particular,

• that Article 5(2) of Directive 2003/4 does not authorise a public authority to recover, through a charge for supplying information, all or part of the costs of establishing and maintaining a database in which it has organised the environmental information it holds and which it uses to answer requests for information of the type listed in a questionnaire such as that at issue in the main proceedings.
• that a charge which does not exceed a reasonable amount within the meaning of Article 5(2) of Directive 2003/4 is a charge which: (i) is set on the basis of objective factors that are known and capable of review by a third party; (ii) is calculated regardless of who is asking for the information and for what purpose; (iii) is set at a level that guarantees the objectives of the right of access to environmental information upon request and thus does not dissuade people from seeking access or restrict their right of access; and (iv) is no greater than an amount that is appropriate to the reason why Member States are allowed to make this charge (that is, that a member of the public has made a request for the supply of environmental information) and directly correlated to the act of supplying that information; that
• In particular, a charge of a ‘reasonable amount’ under Article 5(2) of Directive 2003/4 is to be based on the costs actually incurred in connection with the act of supplying environmental information in response to a specific request. That will include the costs of staff time spent on searching for and producing the information requested and the cost of producing it in the form requested (which may vary). However, it is not permissible for such a charge also to seek to recover overheads such as heating, lighting or internal services. And that
• Article 5(2) of Directive 2003/4 requires public authorities to ensure that their charges do not exceed a reasonable amount, judged by the yardstick of what a ‘reasonable amount’ means objectively under EU law. That does not, as such, preclude a rule of national law according to which a public authority must satisfy itself that a charge levied meets that standard, however, Member State to ensure that there is (first) administrative and (then) judicial review of whether a public authority’s decision on what constitutes a reasonable charge is in conformity with the autonomous EU law meaning of what is ‘reasonable’ under Article 5(2) of Directive 2003/4.

In other words: the current wording in the relevant English statute, in the view of the AG, does not infringe the Directive. (It does in my view at least however add a layer of complication: for the authority’s subjective finding of reasonableness subsequently has to be checked, in two tiers of appeal (administrative cq judicial), against the Directive’s objective standard).

Aarhus is considered throughout the appeal and hence Charles Banner’s book on the Aarhus Convention, just out with Hart, a timely publication I would think.

Geert.

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