In a judgment of 11 January 2023, the French supreme court for private and criminal matters (Cour de cassation) ruled that the exclusive jurisdiction of the courts of the place where a public registry is held under Article 24(3) of the Brussels I bis Regulation only covers actions concerned with the formal validity of an entry in such a registry.
Background
The case was concerned with the enforcement of an English judgment over the shares of a French company owned by the judgment debtor.
The creditor, English corporation Barclay Pharmaceuticals, had obtained a judgment in 2012 from the English High Court ordering its debtor, a French individual, to pay over £ 12 million. The judgment was declared enforceable in France under the Brussels I Regulation.
It seems that it was not easy to find assets belonging to the debtor and the creditor sought and obtained from the English high court an order in 2018 declaring that the shares owned by the wife of the debtor in a French company were only held fictitiously by the wife, and that they should be considered as actually owned by the debtor, her husband.
On the basis of the English 2012 judgment and 2018 order, the creditor had a French enforcement authority carry out an enforcement measure over the shares.
Judgment
The debtor challenged the validity of the enforcement measure in French courts on a number of grounds.
Nouveau Tribunal de Commerce et Conseil de Prud’hommes de Bobigny (93)
One of them was that the 2018 English order could not be enforced in France, because the proceedings fell within the exclusive jurisdiction of French courts. The debtor argued that the proceedings had “as their object the validity of an entry in a public register” in the meaning of Article 24(3) of the Brussels I bis Regulation. As a result, the English High Court lacked jurisdiction, and its order could not produce effect in France.
The particular company was a Société Civile Immobilière (SCI). The shareholders of French SCIs appear in the French register for companies (Registre du commerce et des sociétés). The name of the wife presumably appeared in the register. A logical (but, importantly, not necessary, see below) consequence of the English order was that the entry into the registry would become inaccurate. There was, therefore, some potential influence of the English order over an entry into a French registry.
The issue before the Cour de cassation was thus to define the scope of the exclusive jurisdiction under Art. 24(3). The Court defines it as limited to proceedings concerned with the “formal validity” of entries into the registry.
In this case, the English court had ruled on the accuracy of an information appearing in an entry. This was an issue of substance, not form. Nobody was suggesting, and certainly not the English court, that the requirements for registering those shares had not been complied with. The English order had only ruled that the owner of the shares was different from that appearing in the register.
The appeal was thus dismissed, and the enforceability of the 2018 English order confirmed, since the English court had not violated the exclusive jurisdiction of French courts.
Assessment
The rationale for the exclusive jurisdiction over public registries seems to be that such registries are public authorities, and that foreign states cannot interfere with the operation of a public authority. This certainly explain why the procedure for registering a company in a public registry is necessarily governed by the law of the local state, and that only local courts could assess whether it was complied with. That is likely the idea behind the concept of “formal validity”.
Yet, whether formal validity can always be distinguished from substantive validity is not obvious. This might well depend on the effect of the registration. If, under the applicable law, the registration determines the existence of the right (e.g. the ownership of the shares), then it is not easy to distinguish between formal and substantive validity.
But the law was simpler in this case. Under French law, the ownership of shares in SCIs is not determined by the registration. The effect of the registration is merely to extend the effects of the right to certain third parties. But registration is not mandatory. A transfer of ownership of shares would be valid as between the parties and third parties knowing about it without registration.
In this context, the distinction of the Cour de cassation makes sense. If the parties could transfer shares without registration, an English court could equally rule on the ownership of shares without interfering with the French registry.
Conclusion: it is unclear whether the concept of validity of an entry in a public registry under article 24(3) can be defined without reference to national law and the effect of registration in the relevant Member State.
Background
The case was concerned with the enforcement of an English judgment over the shares of a French company owned by the judgment debtor.
The creditor, English corporation Barclay Pharmaceuticals, had obtained a judgment in 2012 from the English High Court ordering its debtor, a French individual, to pay over £ 12 million. The judgment was declared enforceable in France under the Brussels I Regulation.
It seems that it was not easy to find assets belonging to the debtor and the creditor sought and obtained from the English high court an order in 2018 declaring that the shares owned by the wife of the debtor in a French company were only held fictitiously by the wife, and that they should be considered as actually owned by the debtor, her husband.
On the basis of the English 2012 judgment and 2018 order, the creditor had a French enforcement authority carry out an enforcement measure over the shares.
Judgment
The debtor challenged the validity of the enforcement measure in French courts on a number of grounds.
One of them was that the 2018 English order could not be enforced in France, because the proceedings fell within the exclusive jurisdiction of French courts. The debtor argued that the proceedings had “as their object the validity of an entry in a public register” in the meaning of Article 24(3) of the Brussels I bis Regulation. As a result, the English High Court lacked jurisdiction, and its order could not produce effect in France.
The particular company was a Société Civile Immobilière (SCI). The shareholders of French SCIs appear in the French register for companies (Registre du commerce et des sociétés). The name of the wife presumably appeared in the register. A logical (but, importantly, not necessary, see below) consequence of the English order was that the entry into the registry would become inaccurate. There was, therefore, some potential influence of the English order over an entry into a French registry.
The issue before the Cour de cassation was thus to define the scope of the exclusive jurisdiction under Art. 24(3). The Court defines it as limited to proceedings concerned with the “formal validity” of entries into the registry.
In this case, the English court had ruled on the accuracy of an information appearing in an entry. This was an issue of substance, not form. Nobody was suggesting, and certainly not the English court, that the requirements for registering those shares had not been complied with. The English order had only ruled that the owner of the shares was different from that appearing in the register.
The appeal was thus dismissed, and the enforceability of the 2018 English order confirmed, since the English court had not violated the exclusive jurisdiction of French courts.
Assessment
The rationale for the exclusive jurisdiction over public registries seems to be that such registries are public authorities, and that foreign states cannot interfere with the operation of a public authority. This certainly explain why the procedure for registering a company in a public registry is necessarily governed by the law of the local state, and that only local courts could assess whether it was complied with. That is likely the idea behind the concept of “formal validity”.
Yet, whether formal validity can always be distinguished from substantive validity is not obvious. This might well depend on the effect of the registration. If, under the applicable law, the registration determines the existence of the right (e.g. the ownership of the shares), then it is not easy to distinguish between formal and substantive validity.
But the law was simpler in this case. Under French law, the ownership of shares in SCIs is not determined by the registration. The effect of the registration is merely to extend the effects of the right to certain third parties. But registration is not mandatory. A transfer of ownership of shares would be valid as between the parties and third parties knowing about it without registration.
In this context, the distinction of the Cour de cassation makes sense. If the parties could transfer shares without registration, an English court could equally rule on the ownership of shares without interfering with the French registry.
Conclusion: it is unclear whether the concept of validity of an entry in a public registry under article 24(3) can be defined without reference to national law and the effect of registration in the relevant Member State.
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