Case law Developments in PIL

The CJEU ruling in Toplofikatsia – Looking forward to the Service Regulation Recast!

This post was contributed by Vincent Richard, who practices with Wurth Kinsch Olinger in Luxembourg.

On 9 September 2021, the Court of Justice delivered its judgment in cases C-208/20 and C-256/20 Toplofikatsia Sofia e.a. on applying the Evidence and the Brussels I bis Regulations when the domicile of the defendant is unknown. Confronted once again with the recurring issue of defendants who moved away without leaving an address, the CJEU confirms that EU law is of no help at present.

Facts of the Cases

The district court of Sofia submitted two preliminary rulings in May and June 2020 related to four separate but similar cases dealing with classic debt recovery procedures. The first one is a civil claim aimed at recovering debts from an energy supply contract. The three others are payment order procedures.

In all cases, the court were not able serve the judicial documents to the debtors because they were not residing at the addresses they had previously indicated on the Bulgarian population register. When officers of the court tried to serve the statement of claim or the payment orders, they were informed by neighbours, relatives or building managers that the debtors did not reside at the address any longer and lived in France or Germany.

Under national Bulgarian law, when defendants cannot be found, Bulgarian courts are obliged to conduct further research in population and employer registers. None of these registers allow a Bulgarian citizen to register a specific address abroad. Therefore, the court is unable to reach Bulgarian citizens who have exercised their right to free movement and compel them to appear before it. Moreover, Bulgarian law draws severe consequences from registration in the population register. The defendant is deemed domiciled at the registered address except if the court receives direct evidence that his habitual residence is abroad. Indirect evidence such as information provided by neighbours or relatives is insufficient to establish such a habitual residence. Consequently, the court is competent to issue an order for payment that may become res judicata in the absence of opposition as long as the order is served to any person having the addressee’s registered address.

In doubt regarding the compatibility of these harsh consequences with European law, the district court of Sofia asked several questions to the CJEU.

Seeking the Address of a Defendant is not Taking Evidence

In its first question, the Bulgarian court essentially asks whether it should not be obliged under European law to conduct the same kind of investigation into the debtor’s actual residence as that which it is obliged to conduct if the debtor is domiciled in Bulgaria. The question is surprisingly based not only on the right to freedom of movement (Article 20(2) TFEU) read in conjunction with the right to a fair trial (Article 47 of the Charter), the principle of non-discrimination and the principle of equivalence but also on article 1 of the Evidence Regulation.

Regarding this last instrument, the answer of the court is quite logical. The CJEU declares that seeking the address of a person whom a judicial decision is to be served does not constitute taking evidence within the meaning of Article 1(1)(a) of the Evidence Regulation, which is therefore not applicable to the problem at hand.

However, the CJEU’s answer to the first part of the question is a rather puzzling. The court declares that “it is in no way apparent” from the order for reference that the disputes have any connecting factor with the aforementioned provisions. It declares the first question inadmissible. In other words, for the CJEU, the fact that a procedural rule applies differently to Bulgarian citizens habitually resident in Bulgaria and Bulgarian citizens habitually resident in another Member State, to the detriment of the latter, has no link with the freedom of movement, the right to a fair trial, the principle of non-discrimination or the principle of equivalence. One may admit that the question is not straightforward, but such an answer by the CJEU shows a lack of imagination and cooperation that is somewhat worrying.

The answer is all the more disappointing that it was given only a few months after the publication of the recast of the Service Regulation that will apply from 1 July 2022.  These cases constitute perfect examples of the kind of situation that the new Article 7 of Regulation 2020/1784 aims to address. It will oblige Member States to assist in determining the address of a person to be served with legal documents. The scope of application of the Regulation has been changed accordingly so that article 7 is applicable when the defendant’s address is unknown. In the present cases, article 7 would provide a clearly defined avenue for the Bulgarian court to ask the French and the German authorities about the defendants’ whereabouts.

Brussels I bis and the Concept of Domicile

The other questions of the Bulgarian court concerned Article 5(1) of the Brussels I bis Regulation, and they aimed to question the formalistic approach adopted by Bulgarian law regarding debtor’s domicile in payment order procedures. From the preliminary ruling, it seems that a defendant is deemed to be domiciled in Bulgaria if he is registered there except if there is clear and positive evidence that his habitual residence is situated abroad. This evidence may only be submitted by the claimant because the court may not investigate this point. The Bulgarian court was thus unsure that it might declare itself competent under the Brussels I bis Regulation based on this interpretation of the notion of domicile even though the concept of domicile is governed by national law according to article 62 of the Regulation.

The Court of Justice remains stoic and states that there is no need to answer the question because the Bulgarian court has already issued the payment orders. It had therefore necessarily recognised that it had jurisdiction before issuing them. Regarding the declaration of enforceability or the annulment of the payment orders, the CJEU considers that this also has no connection with Article 5(1) of Regulation 1215/2012, which does not deal with the conditions under which judicial decisions become enforceable. The fact that jurisdiction is only based on prima facie evidence or that the court could probably annul a payment order if it realises that it was not competent to issue it in the first place is never discussed. There is little doubt that the Bulgarian court was expecting a more constructive answer.

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