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.
Facts
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.
Legal Issues
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).
Assessment
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.
Do you think that this means that the approach of the English Court of Appeal in Samengo-Turner (https://www.bailii.org/ew/cases/EWCA/Civ/2007/723.html), which treated a close-associate company which provided the employee with an ‘incentive’ to remain employed, as though it were an employer, is now to be seen as wrong ?
That is a very good point, Adrian.
I do not think that Samengo-Turner is now to be seen as wrong. The CJEU has dealt with triangular work relationships and accessory contracts to an employment contract in several cases, most importantly in Voogsgeerd (https://curia.europa.eu/juris/liste.jsf?language=en&num=C-384/10) and ROI Land Investments (https://curia.europa.eu/juris/liste.jsf?language=en&td=ALL&num=C-604/20). I think these cases support a wide interpretation of the concept of ‘individual employment contract’ and ’employer’ for the purposes of Brussels I.
In Voogsgeerd, the Court stated at [62] that ‘it is for the referring court to assess what the real relationship between the two companies is in order to establish whether Naviglobe is, indeed, the employer of the personnel engaged by Navimer. The court seised must, in particular, take into consideration all the objective factors making it possible to establish that there exists a real situation different from that which appears from the terms of the contract’.
In ROI Land Investments, the Court held that the defendant, a company that provided a guarantee for the performance of obligations under an employment contract with a related third party, could be sued under the protective jurisdictional rules in the courts for the habitual place of work.
Furthermore, the Court has clearly stated that the concept of ‘individual employment contract’ in Brussels, Lugano and Rome is related to the concept of ‘worker’ used in substantive EU law. That concept tends to be widely interpreted, allowing for co-employment situations.
In light of this, I think the more interesting question is whether there is indeed a discrepancy in the Court’s approach to consumer and employment cases and, if so, what is the driving force behind this.
Dear Adrian, Although I am no expert in labour law, I tend to agree with Ugljesa. It cannot be excluded that the CJEU treats employment and consumer contracts differently. If it were to look for an argument, one could underline that Art 18 speaks of ‘the other party to the contract’, suggesting a single party, while Art 21 Brussels Ibis talks of the ‘employer’, which arguably could also be a group. More substantially, the economic reality of employment, which is a long-term relation, may also call for a different treatment. But we’ll know only after the Court has ruled on precisely this issue. Best wishes, Matthias
Many thanks. The point about Articles 18 and 21 does not do it for me, though. Surely the counterparty to the consumer is thus described because we do not (in English, at least) have a single word which cover the ground: seller, supplier, professional, trader, do not quite do what we need them to do, so we just refer to ‘the other party’, and then apply some descriptors to him/her. With employment it is otherwise: ’employer’ is a perfect and familiar term of art for the one who pays the wages: if someone referred to ‘the other party to the employment contract (or should it be relationship?), I think we’d think there was something wrong with them. Thus does language make the law.
I do think there is a good question why there appears to be a pro-employee preparedness, in various courts, to look beyond the strict contractual formality, but where consumers are concerned, a lingering (though far from consistent) mean-spiritedness whose aim is to deprive the weaker party of the protection offered by Section 4 of Chapter 2.
I do not think that it is ‘mean-spiritedness’ which inspires the (possible) divergence in interpretation. In my view, a consumer is involved in every day, one-off transactions, usually of limited value. In light of this, it would be exaggerated to allow her to sue a whole group of companies. In contrast, an employment relationship is of long duration and typically has significant importance for the employee’s life. It does not seem exaggerated here to allow the employee to sue members of a group, all the more as it may often be unclear who precisely is he working for.