Brussels Ia Regulation
A person domiciled in a Member State may be sued in another Member State:(…)(5) as regards a dispute arising out of the operations of a branch, agency or other establishment, in the courts for the place where the branch, agency or other establishment is situated;(…)
A person domiciled in a Member State may be sued in another Member State:
(5) as regards a dispute arising out of the operations of a branch, agency or other establishment, in the courts for the place where the branch, agency or other establishment is situated;
Article 7(5) Brussels Ia Regulation establishes a special place of jurisdiction at the place of a branch, agency or other establishment for disputes which arise out of their operations. Business partners of a particular establishment can, pursuant to Article 7(5), sue the establishment in the Member State in which it is located which ensures that they do not need to institute proceedings at the place of the company‘s seat in another Member State based on the general place of jurisdiction in Article 4.
The place of jurisdiction for branches, agencies and other establishments has a long-held tradition in the laws of numerous Member States.
Article 7(5) Brussels Ia Regulation adopted Article 5(5) Brussels I Regulation verbatim. The place of jurisdiction for branches, agencies and other establishment already existed in its current form in the first version of the Brussels Convention and in the Lugano Convention 1988, and was adopted without any changes in the Brussels I Regulation. It applies with the same wording in the Lugano Convention 2007.
The Compendium on Article 7(5) Brussels Ia Regulation evaluates the case law of the CJEU and of the courts of the Member States of the EU and the further Lugano Convention States. It takes into consideration:
- the case law regarding Article 7(5) Brussels Ia Regulation;
- the case law regarding Article 5(5) Brussels I Regulation and the preceding Article 5(5) Brussels Convention;
- the case law regarding Article 5(5) Lugano Convention2007 and the preceding Article 5(5) Lugano Convention1988.
Article 7(5) Brussels Ia Regulation requires that the Regulation applies. In order for it to apply, the place of domicile of the defendant must be in a Member State of the EU → Compendium on Article 6 Brussels Ia Regulation, unalex COM-4984. Jurisdiction based on Article 7(5) is therefore not available for a claim against a defendant domiciled in a third State with a branch, agency and other establishment in a Member State of the EU.
Different rules apply, however, for jurisdiction in matters of insurance, consumer contracts and individual contracts of employment. In these areas, Articles 11(2), 17(2) and 20(2) Brussels Ia Regulation extend the territorial scope of the Regulation: if an insurer, contractual partner of a consumer or employer of a third State maintains a branch in an EU Member State, then claims arising out of its operations will be treated as if its seat was in a EU Member State.
Article 7(5) Brussels Ia Regulation establishes international jurisdiction as well as territorial jurisdiction at the place where the branch, agency or other establishment is located. Nonetheless, case law on this question is not unanimous across all Member States.
The CJEU already decided early on in its jurisprudence that the concepts of “branch” “agency” and “other establishment” in Article 7(5) are to be interpreted autonomously.
According to the CJEU definition, a branch, agency or other establishment pursuant to Article 7(5) Brussels Ia Regulation requires that a company with its seat in another EU Member State maintains in the State of the court a long-term place of business that is apparent as an extension of the parent company, has a management, and is materially equipped to negotiate business with third parties so that these third companies do not need to approach the parent company and can directly engage in business transactions with the subsidiary.
A branch, agency or other establishment is characterised by its long-term business activities. An outpost set up just for the development of a single plan or project is not a subsidiary within the meaning of Article 7(5) Brussels Ia Regulation.
Jurisdiction at the place of a branch, agency or other establishment under Article 7(5) Brussels Ia Regulation requires that the establishment, while being dependent upon the main office, has a certain level of autonomy.
A branch, agency or other establishment must hold itself out and be recognisable as an independent entity of the parent company.
It is of no consequence if the branch at the place of which proceedings are brought is the parent company's only branch. The terms branch, agency or other establishment are subordinate cases of the superior term subsidiary.
International jurisdiction pursuant to Article 7(5) Brussels Ia Regulation can also be established in respect of a legally separate company. But a branch of a business partner of the party which is held liable in the jurisdiction of Article 7 (5) may only be attributed to the party if it also acts as a branch of that party in commercial transactions.
For the purposes of establishing jurisdiction over a branch, agency or other establishment pursuant to Article 7(5), it can be sufficient for the company with its seat in another EU Member State to give the external appearance that a branch, agency or other establishment is being maintained at the place where proceedings have been instituted. If a third party relies on this, and carries on business in reliance on the external appearance of the branch, agency or establishment, then the party that has given this impression through their actions or their professional behaviour must allow itself to be treated as if it actually had a subsidiary in the State of the court. By virtue of this appearance, therefore, the court at the place where the party thought the branch, agency or establishment was being maintained has jurisdiction.
The appearance of business operations in the EU Member State in which the branch, agency or establishment is deemed to be located is nonetheless essential. A mere record in a register without a corresponding activity or a record of the company in an exhibition catalogue does not suffice.
The subsidiary must already have existed before the dispute for which jurisdiction is being claimed on the basis of Article 7(5) Brussels Ia Regulation arose. If the subsidiary is first established later, it fails to fulfil the condition that the dispute must have arisen out of a business operation of the subsidiary.
To be able to rely on Article 7(5) Brussels Ia Regulation, the branch must still exist at the time that the claim is raised.
If the subsidiary exists at the time when the claim is raised ,but is subsequently disbanded during the course of proceedings, the ground for jurisdiction once established continues to subsist pursuant to the principle perpetuatio fori.
A branch must be subject to management and control of the parent company. A distributor which acquires products from the manufacturer and distributes them in his own name and for his own account therefore cannot be regarded as a subsidiary of the manufacturer.
A commercial agent or sales representative carrying out sales activities on behalf of a company can generally not be regarded as a branch, agency or other establishment of that company. Other sales partners can also not rely on Article 7(5) Brussels Ia Regulation for actions against the principal or manufacturer on the basis that they were active as the company’s branch, agency or other establishment. However, the case law of Member States in respect of this issue is sometimes uncertain.
With regard to intermediaries of companies, whether they can be regarded as branches, agency or other establishments within the meaning of Article 7(5) Brussels Ia Regulation depends on the concrete form with which they work with the parent company.
The place of jurisdiction established in Article 7(5) Brussels Ia Regulation is only available for claims by third parties against the owner of the subsidiary. If the agent was not working for the parent company but for the subsidiary, and its operations were managed by the subsidiary, then the dispute arises out of the operation of a subsidiary, allowing the agent to take advantage of Article 7(5).
A formally independent group company can be viewed as a branch, agency or other establishment of the parent company, establishing jurisdiction on the basis of Article 7(5), if the group company serves the parent as an outpost.
A group company which does not have any connection to the legal transaction upon which the claim is based cannot be sued solely on the basis of its membership to the company group at the seat of another company of the same group located in another EU Member State.
The dispute which has been initiated on the basis of the jurisdictional ground in Article 7(5) must originate from the operations of the branch, agency or other establishment. To satisfy this requirement, it is necessary that the contractual relationship or any other legal relationship between the parties to the dispute refers to a legal dispute, which has a special relationship to the branch.
If there is no connection with the branch, agency or other establishment, the claim cannot be instituted at the place of the branch, agency or other establishment pursuant to Article 7(5) Brussels Ia Regulation.
It is not necessary that the contractual relationships entered into by the parties with regard to the branch are also fulfilled in the Member State of the branch; equally, regarding tortious acts caused by the branch, the place where the harm occurred or the harm arose must not be located in the same Member State where the branch is situated.
Jurisdiction under Article 7(5) may not be invoked for disputes between a branch and the parent body.
In insurance, consumer as well as individual employment matters, recourse to the special jurisdictional grounds in Articles 7 and 8 is excluded. Derogation from this in favour of Article 7(5) is included in Article 10 (insurance), Article 17(1) (consumer) and Article 20(1) (proceedings concerning individual employment matters). The place of jurisdiction for branches, agencies and other establishments can be chosen as a basis for jurisdiction as well as the possibilities in sections 3, 4 and 5 of the second chapter of Brussels Ia Regulation.
In the case law on insurance and consumer matters, independent insurance agencies as well as independent travel agencies are treated as branches for the purposes of Article 7(5).
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