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Jurisdiction battles: Employment rules win

Jurisdiction battles: Employment rules win

Jacques Algazy QC, an expert at Cloisters on international and territorial jurisdiction and conflicts of laws, comments on the recent judgment of the European Court of Justice below.

 

In Holterman Ferho Exploitatie BV and others v Spies von Bullesheim C-47/14, the CJEU definitively ruled in favour of the jurisdiction provisions applicable to employment contracts as prevailing over all and any other jurisdiction provisions that might be in play.

Mr Spies von Bullesheim (“SVB”) was a German National and resident in Germany. He was an employee of Holterman Ferho Exploitatie BV (“HFE”), a Dutch Holding Company, and also a director of HFE and a number of German Subsidiaries.

HFE and the German companies brought proceedings against SVB in the Netherlands. The claims included allegations of serious misconduct in the performance of his duties as well as deceit or recklessness in the performance of his contract in breach of the Dutch Civil Code (BW).

SVB denied that the Dutch Courts had jurisdiction, relying on Section 5 of Regulation (EC) No. 44/2001,the Brussels Regulation (Articles 18 to 21 and Article 20 in particular). That dispute reached the Supreme Court (the “Hoge Raad”) which referred a number of questions to the CJEU.

For present purposes, we can concentrate on the first question referred:

“Must the provisions of Chapter II, Section 5 (Articles 18 to 21) of Regulation (EC) No 44/2001 be interpreted as precluding the application by the courts of Article 5(1)(a) and Article 5(3) of that Regulation in a case such as the present where the defendant is being sued by the company of which he is the manager, not only in his capacity as manager on the basis that he improperly fulfilled his duties or that he acted wrongfully, but also, quite apart from that capacity, on the basis of his deceit or recklessness in the performance of the contract of employment concluded with that company?”

 

Put simply, do the employment provisions trump all others so that an employee can insist on only being sued in his/her country of domicile in reliance on article 20?

The CJEU replied clearly that Section 5 of the Brussels Regulation, when applicable, precluded the application of Articles 5(1) and (3) (respectively relating to contract disputes generally and tortious claims).

In other words, where the employee is both a Director and an Employee, the employee can only be sued in his/her home country, in accordance with the more favourable rules applicable to employees.

This latest case reinforces the protection of the employee’s “right” to only be sued in his or her country of domicile Since Samengo-Turner v J & H Marsh & McLennan (Services) Ltd [2008] ICR 18, there have been academic and judicial doubts expressed about the existence of such a right. However, this latest decision, together with the Court of Appeal decision in Petter v EMC Corporation [2015] EWCA CIV 828, would seem to put the position beyond doubt. Whilst understandable in the context of Recital 13 of the Regulation which refers to protecting the “weaker party”, it is questionable if high level employees such as SVB and Mr Petter can properly be so characterized.

A few points that emerge from the judgment are worth remembering:

  • The concept of an “individual contract of employment” is not defined in the Brussels Regulation and, as the Advocate General observed, the CJEU has not had occasion to interpret that concept in the context of the Regulation. However, case law in other areas does assist. The elements of “subordination” or “direction by another” are considered important. The Court held that the essential feature of an employment relationship is that a person performs services for and under the direction of another in return for which he receives remuneration [para 41]. The CJEU referred to a relationship of subordination [paras 46 and 47].
  • The concept of an “individual contract of employment” must be given an independent EU-wide interpretation to ensure full effectiveness of the Brussels Regulation (see Mahamdia, C‑154/11, EU:C:2012:491, paragraph 42); the issue cannot be resolved on the basis of National law [paras 36/37] although it is for the National Court to determine whether such a contract exists as a matter of fact in light of the CJEU case law.
  • The CJEU qualified the application of Section 5 on the facts. The Court spoke of “a situation such as that at issue in the main proceedings in which a company sues a person, who performed the duties of director and manager of that company, in order to establish misconduct on the part of that person in the performance of his duties and to obtain redress from him….”  [para 49]; the Advocate General suggests that the claim which is the subject matter of the proceedings “should derive” from the contract of employment.

 

This last point may give rise to arguments that, even where a contract of employment exists, the particular dispute is not sufficiently connected to it. Such arguments have not fared well in previous cases however. The Courts, at least in this jurisdiction, have been generous in their classification of what comes within the scope of Section 5 of the Brussels Regulation. This has included tortious claims such as conspiracy where the issue of “employee status” was “legally relevant” to the claim - see CEF Holdings V Mundey [2012] IRLR 912.

The coming into force of the recast Brussels Regulation (1215/2012) on 10 January 2015 does not change the legal analysis.

  

 

For an analysis of Petter v EMC Corporation at first instance, read “The recast Brussels regulation: to sue or not to be sued: J. Algazy QC, Cloisters and F. Bolton, Eversheds, in ELA Briefing, Vol 22 No. 7 (August 2015).

 

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