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;
||Subject matter of Art. 7(5) Brussels Ia Regulation |
Art. 7(5) Brussels Ia Regulation establishes a special 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 sue the establishment in the Member State in which it is located pursuant to Art. 7(5). This ensures they do not need to institute proceedings at the place of the company‘s seat in another Member State based on the general ground for jurisdiction in Art. 4.
The place of jurisdiction for branches, agencies and other establishments is a long held tradition in the laws of numerous different Member States.
Art. 7(5) Brussels Ia Regulation adopted Art. 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 of 1988, and was adopted without any changes in Brussels I Regulation. It applies with the same wording in the Lugano Convention of 2007.
The Compendium on Art. 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 Art. 7(5) Brussels Ia Regulation;
- the case law regarding Art. 5(5) Brussels I Regulation and preceding Article 5(5) Brussels Convention;
- the case law regarding Art. 5(5) Lugano Convention of 2007 and preceding Art. 5(5) Lugano Convention of 1988.
||Scope of application of Art. 7(5) Brussels Ia Regulation |
Art. 7(5) requires that the Brussels Ia Regulation applies. For it to apply, the place of domicile of the defendant must be in a Member State of the EU → Compendium on Art. 6 Brussels Ia Regulation, unalex COM-4984. Jurisdiction based on Art. 7(5) is therefore not available for a claim against a defendant domiciled in a third State with a branch, agency or 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 an 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.
||Branch, agency or other establishment |
||Autonomous interpretation of the concept of branch, agency or other establishment |
The CJEU already decided early on in its jurisprudence that the concepts of “branch” “agency” and “other establishment” in Art. 7(5) are to be interpreted autonomously.
||The concept of a "subsidiary" |
According to the definition of the ECJ, the concept of branch, agency, or other establishment within the meaning of Art. 7(5) Brussels Ia Regulation implies that a business domiciled in another Member State has a place of business in the Member State of the forum that has the appearance of permanency, such as the extension of a parent body, has a management, and is materially equipped to negotiate business with third parties so that the latter does not have to deal directly with such parent body but may transact business at the place of business constituting the extension.
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 Art. 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 so that it may enter into and perform contracts independently.
A branch, agency or other establishment must act as such externally out and be recognisable as an independent entity of the parent company.
It is of no importance if the branch at the place of which proceedings are brought is the parent company's only branch. The concepts of agency or other establishment are sub-categories of the broader concept of a branch.
International jurisdiction pursuant to Art. 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 Art. 7 (5) may only be attributed to the party if it also acts as a branch of that party in commercial transactions.
||External appearance of a branch, agency or other establishment |
In order to establish jurisdiction at a branch, it may suffice that a company domiciled in another Member State can be attributed with the appearance of maintaining a branch in the Member State of the forum. If a third party has relied on such an appearance, the party who created that appearance through its actions or business appearance must be treated as if it actually has a branch in the Member State of the forum. The consequence of this legal appearance is that such a party is subject to the jurisdiction of the courts of that Member State.
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.
||Timing for existence of branch, agency or other establishment |
The branch must already have existed before the dispute for which jurisdiction is being claimed on the basis of Art. 7(5) Brussels Ia Regulation arose. If the branch is first established later, it fails to fulfil the condition that the dispute must have arisen out of a business operation of the branch.
To be able to rely on Art. 7(5) Brussels Ia Regulation, the branch must still exist at the time that the claim is raised.
If the branch 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.
||Sales partners and group companies |
||Sales partners |
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 Art. 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 ground of jurisdiction in Art. 7(5) Brussels Ia Regulation is only available for claims by third parties against the owner of the branch, agency or other establishment. If the agent was not working for the parent company but for the branch, and its operations were managed by the branch, then the dispute arises out of the operation of a branch, allowing the agent to take advantage of Art. 7(5).
||Group Companies/Affiliates |
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 Art. 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.
||Dispute arising out of operations of the branch, agency or other establishment |
The dispute which has been initiated on the basis of the jurisdictional ground in Art. 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 Art. 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 Art. 7(5) may not be invoked for disputes between a branch and the parent body.
||Art. 7(5) Brussels Ia Regulation and insurance, consumer and individual contract matters |
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 Art. 7(5) is included in Art. 10 (insurance), Art. 17(1) (consumer) and Art. 20(1) (proceedings concerning individual employment matters). The jurisdictional ground 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 an independent travel agencies are treated as branches for the purposes of Art. 7(5).