Case law Developments in PIL

Jurisdiction over a Branch, Agency, or Other Establishment: The German Federal Court on ‘Air France (Germany)’

Jurisdiction over branches (Article 7(5) of the Brussels I bis Regulation) is shrouded in a cloud of mystery. A judgment dated 16 March 2021 by the German Federal Court (Bundesgerichtshof) provides some helpful clarification in this regard.

Facts

The claimant had booked a first-class flight with Air France from San Francisco to London, with a connecting flight through Paris, for the cut-throat price of 582,97 Euro (!). The booking was made through a webpage with a German domain name (“airfrance.de”). The contact information on the website referred, besides the main seat in Paris, to an “Air France Direktion” (department) with a physical address in Frankfurt am Main (Germany). The actual department located at this place had mainly marketing functions and was not involved in the administration of the webpage “airfrance.de”. The ticket showed the abbreviation “DIR WEB Allemagne, FRANKFURT AM MAIN”.

Air France cancelled the ticket alleging an error in its issuances. The claimant then brought an action before a court in Frankfurt, seeking damages for more than 10.000 Euro. The defendant disputed the jurisdiction of the German court.

Legal Issue

The main question of the case was whether the defendant can be sued on the basis of an establishment in Germany under Article 7(5) of the Brussels I bis Regulation. The heads of jurisdiction for consumer contracts were not at issue because of the exception for transport contracts in Article 17(3) of the Regulation.

Holding

The Federal Court ruled that the Frankfurt office qualified as an establishment and that the dispute arose out of the operations of the Frankfurt office, despite the fact that the office’s employees were not managing the webpage and were not involved in the booking process. The decisive factor was not the internal business processes, but the way in which the establishment appears in business dealings with third parties.

Rationale

The Federal Court referred to the case law of the CJEU, which requires a branch, agency, or other establishment to have a management and material equipment to negotiate business with third parties, a centre of operations and an “appearance of permanency” (see CJEU, Case C-464/18, ZX v Ryanair, para 33; Case C‑804/19, BU v Markt24, para 47).

In determining whether the dispute arose out of the operations of this branch, the German Federal Court specifically highlighted that the Frankfurt office of Air France develops special offerings for business passengers and travel agencies based in Germany and the managing director for Germany is based at this very branch. Importantly, the Federal Court emphasised that the internal organisation of the company is less of relevance than its appearance towards the outside world (Federal Court, para 23, with reference to CJEU, Case C-218/86, SAR Schotte GmbH, para 14 et seq.). It ruled that the contact information on the webpage, which indicated an establishment in Germany, was of special importance.

The court attributed this to the fact that the information on the website was mandatory by law and that the purpose of this obligation was to ensure a minimum level of transparency and information for the user of a website about the person operating the website. According to the legislator’s intention, this information should also serve as a starting point in the event of a legal dispute. The information on the website would imply that the establishment mentioned is offering the service and issues or accepts the relevant contractual declarations.

The customer must be able to rely, in the Federal Court’s words (para 33), on this establishment’s appearance.

The latter would be further corroborated by the use of the German top-level domain (“.de”), the use of the German language and the mention of “Frankfurt” as the place where the ticket was issued. Against this background, if an existing establishment is referred to as “Air France in Germany”, a customer may understand this to mean that this establishment is the entity offering the bookings.

The fact that the website also mentioned the main seat of Air France in Paris would not offset this impression, as this would only serve to comply with the legal requirement to identify the contractual counterparty of the customer. Nor would the fact that the officers of the establishment in Frankfurt were not involved in the management of the website change the analysis, as this would merely relate to the internal organisation of the defendant. Equally unimportant was the use of the suffix “.fr” in the email addresses mentioned on the website, as the customer may rationally have attributed this to the need for uniformity within the company.

Assessment

The Federal Court’s judgment is very customer-friendly. Under the ruling, the existence and the role of an establishment is first and foremost to be assessed from the perspective of the customer. The judgment, however, stretches the concept of a “branch, agency or establishment” to its limits. The CJEU had at least required that the branch, agency or establishment is “materially equipped to negotiate business with third parties” (CJEU, Case 33/78, Somafer, para 12). This restriction is not sufficiently reflected in the decision Federal Court, which seems to be primarily inspired by the wish to protect the supposedly weaker party outside the scope of Article 17 et seq. of the Brussels I bis Regulation. This may create the danger that offices with merely clerical functions may be used by claimants as a launching pad for legal action. In the end, this could lead to a backlash: Companies may decide to centralise all of their operations within one country to avoid creating jurisdictional bases under Article 7(5) of the Brussels I bis Regulation. This would not be in the interest of the customers nor of the Single Market.

Amy Held, Verena Wodniansky-Wildenfeld and Felix Krysa have contributed to this post.

1 comment on “Jurisdiction over a Branch, Agency, or Other Establishment: The German Federal Court on ‘Air France (Germany)’

  1. Marta Requejo Isidro

    In light of C-913/19 (May 2021: too late to be taken into account) I would say that indeed, the Bundesgerichtshof, is much too lenient.
    The overall impression is that decisions on jurisdiction concerning air passengers claims are trying to make up for the lack of a specific protective head in the regulation. To be considered, maybe, in the recast of the recast.

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