Bulgarfrukt and Service Requirements: National EOP Implementation Legislation vs the Service Regulation
This post was written by Elena Alina Onţanu, Assistant Professor at the University of Tilburg, and Carlos Santaló Goris, Postdoctoral Researcher at the University of Luxembourg.
The Bulgarfrukt judgment is the latest in a series of cases submitted by national judges to the Court of Justice of the European Union (CJEU) in which the service of an European Order for Payment (EOP Regulation) had proved problematic while the EOP was declared enforceable.
In the present judgment, the CJEU was requested by the German Court of Berlin-Wedding to interpret whether the national rule providing for the annulment of a wrongly declared enforceable EOP due to service issues is in line with the duties set by the EOP and the 2007 Service Regulations (Regulation 1393/2007). The solution chosen by Section 1092a German Code of Civil Procedure (‘ZPO’) lead to the annulment of an EOP, but such outcome raised doubts from the perspective of the 2007 Service Regulation interpretation of consequences of problematic service and prior CJEU judgments on the matter.
Before Bulgarfrukt, There Was eco-cosmetics and Catlin Europe
Prior to Bulgarfrukt, in Joined Cases C‑119/13 and C‑120/13, eco cosmetics, the CJEU was asked whether it was possible to request the review under Article 20 of the EOP Regulation of an already declared enforceable EOP which had not been served on the debtor following the standards of service set in Articles 13 to 15 of the EOP Regulation. The review procedure allows declaring null and void an enforceable EOP under certain circumstances. The CJEU adopted a restrictive interpretation of the review remedy, considering that the lack of service in accordance with the minimum standards is not among the valid grounds to request the review of the EOP. Nonetheless, at the same time, it considered that national law should provide a specific remedy to invalidate the declaration of enforceability of an EOP which is not served on the defendant in accordance with the referred minimum standards on the service of documents.
Following the eco cosmetics case the German legislator introduced a specific solution in the German Code of Civil Procedure (‘ZPO’): Section 1092a that establishes that:
(1) The defendant may apply for the annulment of the European order for payment, if the European order for payment
-
- was not served on him or her, or
- was served on him or her in a manner that does not meet the requirements of Articles 13 to 15 of Regulation [No 1896/2006].
The application must be filed within one month from the time at which the defendant had or could have had knowledge of the issuance of the European order for payment or the lack of service. Should the court allow the application for one of the reasons set out in the first sentence, the European order for payment shall be annulled.
(2) Should the court already have declared the European order for payment enforceable pursuant to Article 18 of Regulation [No 1896/2006] at the time of the application under the first sentence of subparagraph 1, and should it now allow the application, it shall declare the compulsory enforcement under the order for payment to be inadmissible. The third sentence of subparagraph 1 shall apply accordingly.
(3) The decision shall be delivered by court order. The court order shall not be open to appeal. Paragraph 1092(2) to (4) shall apply mutatis mutandis.
As it will be exposed, this provision is the core issue in Bulgarfrukt.
After eco cosmetics, the second case in which an issue of service of an EOP reached the CJEU is C-21/17, Catlin Europe. In this case, the issue concerning the service of the EOP was not about the minimum standards of the EOP Regulation. Instead, it was a matter regarding the language in which the documents were served. Article 8 of the 2007 Service Regulation (now Article 12 of the 2020 Service Regulation) provides that the documents have to be served in a language that the recipient understands or an official language of the Member State where the documents are served. It also requires informing the recipients of the documents about their right to refuse them, if the documents are not served in one of those languages. There is a specific standard form to inform the recipients about their right to refuse the documents and its use is mandatory according to the Regulation and CJEU case law.
In Catlin Europe, the defendant, a German-registered company, was served an EOP issued in the Czech Republic. The EOP was issued in the Czech language and the defendant was not informed about its right to refuse the documents when the EOP was served. The EOP was declared enforceable and the defendant requested its review. The ground to justify the review was that the EOP had not been properly served because it had not been informed about its right to refuse the EOP which was not in the German or a language it understood. The CJEU considered that not informing the recipient about its right to refuse the documents that are not served in the correct language ‘cannot render invalid either the document to be served or the procedure for service’ (para. 49). It also added that ‘in the case of irregular service such as that at issue in the main proceedings, the European order for payment has not validly become enforceable and the period in which the defendant may lodge a statement of opposition has not started to run’ (para. 53). Therefore, since the EOP is not validly enforceable, it cannot be reviewed. The review remedy is only open against enforceable EOPs.
The case Bulgarfrukt the service had not been carried out in accordance with the minimum standards established by Articles 13-15 EOP Regulation, nor had the defendant been informed about its right to refuse the documents based on the standard form contained in Annex II of the 2007 Service Regulation. This sets the Bulgarfrukt judgment at the crossroads of the cases eco cosmetics and Catlin Europe, with the CJEU trying to clarify whether the infringement of the standards of service under the EOP Regulation and Service Regulation have the same consequences on an EOP.
Factual and Legal Background
This case has its roots in an EOP issued by the Local Court of Berlin-Wedding in Germany against a debtor domiciled in Bulgaria. When the EOP was served in Bulgarian, the German court was informed that ‘the person has left the address and its [current] address is not entered in the register. The notifications are deemed to have been lawfully served’ (para. 18). The German court considered it a valid service, and after the deadline to oppose the EOP expired, it declared the EOP enforceable.
Upon learning about the enforceable EOP, Bulgarfrukt considered that the EOP had not been served respecting the minimum standards set in Articles 13 to 15 of the EOP Regulation. Therefore, the debtor decided to apply for the annulment of the EOP before the Local Court of Berlin-Wedding based on Section 1092a ZPO, the specific German remedy against enforceable EOPs that have not served following the EOP’s minimum standards on service. However, this court had doubts about the compatibility of Section 1092a ZPO with the EOP and Service Regulations. The main problem appeared to be the fact that Bulgarfrukt could apply for this remedy ‘even though the time limit for lodging a statement of opposition to such a European order for payment has not yet started to run’ (para. 24). Among other arguments, the court also wondered whether the lack of service in accordance with those minimum standards could have as a consequence the invalidity of the service itself. In particular, the court referred to the case Catlin Europe, where the CJEU had the possibility of ‘subsequently correct an omission’ on the service of an EOP effected following the rules on service of the 2007 Service Regulation (para. 27).
At this stage, the Local Court of Berlin-Wedding decided to submit a preliminary reference with three questions. Only the first one would be addressed by the CJEU, and it reads as follows:
‘Are Regulation [No 1393/2007] and Regulation [No 1896/2006] to be interpreted as precluding a provision of national law which provides that a European order for payment must be annulled by the court in the context of proceedings in the event of failure to serve or to effect proper service on the defendant?’
In other words, the CJEU was asked to determine whether the provision under the ZPO that establishes the annulment was compatible with the EOP and the 2007 Service Regulations. In answering the question the CJEU proceeds to rephrase it from the perspective of the EOP Regulation and the minimum standards regarding service contained in Articles 13-15 of the Regulation.
The CJEU’s Analysis
In its judgement, the CJEU proceeds on a detailed step-by-step examination of the characteristics of the EOP procedure, when and how the defendant is able to become aware of the order, the possibility of the debtor to oppose the EOP, the effects the opposition has in terminating the European procedure, its transfer to a national or European Small Claims Procedure, and its reliance on national procedural rules for all the aspects not dealt with by the regulation (Case C-144/12, Goldbet Sportwetten; Case C‑18/21, Uniqa Versicherungen). The Court turns then to the minimum standard requirements contained in Articles 13-15 regarding the service of the EOP reminding the reader of its judgment in the eco cosmetics discussing these minimum rules and the consequences for not complying with them (i.e. opposition does not start to run, effect on declaration of enforceability).
In Para 42 the Court sets that the aspects regarding the service of EOPs not regulated by the EOP Regulation must be decided in accordance with the Service Regulation based on Article 27 EOP Regulation and in accordance with its interpretation in Catlin Europe. From this point on the analysis of the CJEU focuses on the language requirements that have to be observed to guarantee the recipient of the documents is able to understand the meaning and scope of the action brought against him and that this is able to effectively prepare for his defence in accordance with the requirements of the Service Regulation. The documents appear not to have been served on Bulgarfrukt in accordance with Article 8(1) 2007 Service Regulation (now more extended in 12(1)-(2) 2020 Service Regulation), informing the recipient via the Annex II standard form of its right to refuse the documents served if these are not drafted in a language this understands or the official language of the Member State where service is carried out. As the use of the standard form is mandatory, there is no margin of discretion for involved authorities in accordance with CJEU judgments in Henderson case, as well as in relation to the EOP procedure according to the Catlin Europe judgment. The failure to attach the standard form in Annex II requires the authorities to remedy the situation by transmitting the form and appropriately informing the recipient of its rights. A breach of fulfilling these obligations under Article 8(1) 2007 Service Regulation would not render invalid the document serve – in this case, the EOP – or the service procedure because this would be ‘incompatible with the objectives pursued by that regulation’ (para 48). Hence, a national legislation that would establish as penalty for those omissions the invalidity of the document served or of the service would be infringing the 2007 Service Regulation according to the Henderson judgment (para 49). Therefore, such interpretation of the national legislation would not be possible.
In the last part of the analysis the Court brings together the requirements of the Articles 13-15 of the EOP Regulation, the solution of the national law providing legal remedies for situations in which it becomes apparent that the EOP was not served in accordance with the minimum standards, and their interaction with the duties set by the 2007 Service Regulation, deciding to prioritise the objectives of the EOP Regulation over the Service Regulation.
The CJEU concludes that ‘in order not to undermine the objectives pursued by Regulation No 1393/2007 [n.n. 2007 Service Regulation], it must be held that that case-law is not applicable where the national court annuls a European order for payment’ for service issues. The solution establish by the German law in Section 1092a ZPO is not precluded by the provisions of the EOP and 2007 Service Regulation; hence, the national court before which the remedy of Section 1092a ZP is requested can annul an EOP.
Between Service Regulation and National Implementation Legislation: Which to Prioritise?
In Bulgarfrukt, the CJEU was tasked with a challenging choice: keeping on its prior case-law establishing that the requirements of the Service Regulation are applicable in EOP procedures, or follow a new path, namely: prioritise the national remedies for invalidly issued declarations of enforceability of EOPs due to service problems. The Court decided to go with the second option. In doing so the Court had to make a distinction between the non-compliance with the minimum standards of service set by Articles 13-15 EOP Regulation and the failure to communicate the standard form set in Annex II of the 2007 Service Regulation.
In making this disjunction, the Court is able to exit the conundrum of which of the two regulations should apply as well as not affecting the mandatory nature of communicating to the recipient the Annex II standard form and the right to refuse the documents served. If the CJEU retained the Service Regulation applicable and ruled the solution of invalidity of the EOP or of the service procedure established by the German legislation as compatible with the provisions of the two regulations, this would have led to a change of the CJEU case-law in relation to service. A failure to communicate the standard form would no longer request only a remedy of the omission by providing the information but could result in an annulment of the documents served. Would such interpretation be applicable only for EOPs or also in case of other procedures? This would have been a problematic development in relation to the service of other type of court procedures.
Furthermore, establishing that a national rule adopted to provide a solution to deal with a situation as that in the eco cosmetics is incompatible with the Service Regulation would set aside the use of such solution based on Article 26 EOP Regulation. The Bulgarfrukt judgment avoided this problematic by deciding that the Service Regulation case-law is not applicable in these circumstances. Furthermore, it allowed to retain a national legislation for the implementation of EOP Regulation that appeared reasonable with the objective the EOP aims to achieve in case the claim is contested. This also permitted the Court to retain the German legislative implementation of the eco cosmetics case-law as consistent with the EOP Regulation.
The irregularity of the service not complying with the minimum standards is sufficient to activate the national mechanism in conjunction with Article 26 EOP Regulation. The downside of this solution is that it can lead to different approaches as to when the Service Regulation is applicable or not. When national legislation annuls the EOP that is not regularly served, the Service Regulation is not applicable. What should the solution be when such national legislation does not set for the annulment of the EOP? Germany seems to be an exception in this regard as most Member States did not adopt specific national legislation following the eco cosmetics judgment. Is the Service Regulation and its case-law to be retained applicable in this second instance? Maybe the CJEU will have other occasions to clarify such hypothesis. The service of EOP in accordance with the minimum standards set by Articles 13-15 EOP Regulation has proven a challenge for national authorities in a number of cases, and Bulgarfrukt is likely not to be the last one in which service issues come up for the CJEU consideration.
Green Light to the German Legislative Implementation of eco-cosmetics
For the time being, the other main contribution of Bulgarfrukt is that it dissipates the doubts concerning the compatibility of the German legislative solution to eco cosmetics judgment and the EOP Regulation. The German case on the implementation is quite unique since it is the only Member State that adopted a specific legislative solution in response to eco cosmetics. For instance, in Luxembourg, the courts fabricated an ad hoc solution by extending by analogy the general appeal remedy foreseen in the Luxembourg civil procedural system against enforceable EOPs which were not served in accordance with the minimum standards of service of the EOP Regulation.
The fact that national law has to provide a solution for the remedy against an enforceable EOP that was not properly served following the minimum standards exposes the need to address this issue within the text of the EOP Regulation. In the event of a reform of the EOP Regulation, the EU legislator should consider introducing a specific remedy for such cases. For example, it could also expressly expand the review mechanism to these specific cases. Such a solution would be in line with what AG Bot defended in his Opinion on eco cosmetics. The existence of a solution within the EOP Regulation is also a guarantee of uniformity, assuring that defendants will have clear access to remedy against enforceable EOPs no matter the Member State in which they apply for an EOP. This would also solve some of the problematic of considering the Service Regulation or not based on the diversity of the national solutions of dealing with a wrongly declared enforceable EOP.