The group-of-companies doctrine allows attributing obligations of one group member to another. It may also be used to justify a head of jurisdiction to sue all members of one group at the same place.
Yet this doctrine does not apply under the Brussels I bis Regulation, at least not in the consumer contract context, as the CJEU has held in Club la Costa (judgment of 14 September 2023, Case C-821/21). In the same decision, the Court also clarified the burden of proof regarding the domicile of a corporation. The points of the judgment addressing the applicable law under the Rome I Regulation will be commented in a subsequent post.
A British resident had entered for private purposes into a timeshare contract through the Spanish branch of a British company (Club La Costa). The contract stipulated the exclusive jurisdiction of the courts of England and Wales.
The consumer then brought a claim in a Spanish court against Club La Costa, which apparently went into liquidation subsequently, and various other British companies belonging to the same group.
The Spanish court asked the CJEU whether the term ‘other party to the contract’ in Article 18(1) Brussels I bis Regulation could also refer to other group members. It furthermore wanted to know how the group members would have to prove that they are not domiciled in Spain but abroad.
Ruling on the Group-of-Companies Doctrine
The CJEU first underlines that the application of Article 18(1) Brussels I bis Regulation presupposes the existences of a contract, and that it is decisive “that the parties to the dispute are also the parties to the contract in question” (para 48) (on the wider scope of Article 7(1) Brussels I bis in this respect, see CJEU, Joined Cases C-274/16, C-447/16 and C-448/16, flightright v Air Nostrum, paras 62-65). Therefore, a consumer’s action under this head of jurisdiction must be brought against the other party to the contract (para 50). Consequently, it cannot be brought against other members of the group, with whom the consumer had been contractually linked as well, but not by the timeshare contract.
The Court of Justice distinguishes this case from its decision in Maletic (Case C-478/12). In the latter, a consumer couple had booked a vacation trip with an internet platform and a travel agency. The CJEU had ruled at the time that the contractual relationship with the platform operator was ‘inseparably linked’ to that with the travel agency and that both would therefore fall under the consumer heads of jurisdiction of the Brussels I Regulation. This is, however, not the case with the contracts between the consumer and the members of the group in Club La Costa, which can be neatly separated from each other.
Ruling on the Proof of Corporate Domicile
The second question requires a little more explanation. The domicile of corporations is determined by Article 63(1) Brussels I bis in a three-fold manner (statutory seat, central administration and principal place of business), with a special definition of the statutory seat of British companies in Article 63(2). The burden of proof for these places is a procedural question, thus falling outside the scope of the Brussels I bis Regulation.
Yet the reference for a preliminary ruling reported the opinion of some Spanish courts which interpret Article 63(2) Brussels I bis Regulation as merely creating a ‘presumption of fact’. If it were ascertained that a defendant company carries out activities in Spain, the international jurisdiction of the Spanish courts would be justified. Hence, it would be for the defendants to show that their domicile is located outside of Spain (para 31).
The CJEU gives this interpretation short shrift. It underlines that Article 63 Brussels I bis must be subject to autonomous interpretation under EU law (para 60). The provision gives the consumer the right to choose between the three locations set out there (para 63). Hence, it does not limit the consumer’s choice (para 64), but on the contrary expands it. The provision of Article 63(2) Brussels I bis, in turn, provides a clarifying definition of the statutory seat of English companies (para 65). It can therefore not be accepted that these provisions would merely create presumptions that could be rebutted (para 66).
On both points, the ruling of the CJEU is clear, straight-forward, and firmly anchored in the text of the Regulation. The binding wording must be upheld against the tendency to disregard it when this suits the consumer in the individual case. As important as the goal of consumer protection is, it does not justify bending the rule of law.
— Thanks to Paul Eichmüller for reviewing this post.