Court of Justice 22-11-1978 ECLI:EU:C:1978:205

I — Facts and procedure

The company Établissements Somafer, the defendant in the main action and appellant on the appeal (hereinafter referred to as ‘Somafer’), whose principal place of business is at Uckange (France) engages in demolition and blasting and in 1974, on behalf of the Ministry of the Interior of the Saarland, blew up a bunker. Since there were in the immediate vicinity of the bunker gas mains belonging to Saar-Ferngas AG (hereinafter referred to as ‘Ferngas’), the plaintiff in the main action and respondent to the appeal, the latter took safety measures, by agreement or without it — the parties are at variance on the issue — to protect the gas mains and sought reimbursement of the expenses from Somafer. In the Federal Republic of Germany Somafer uses in its dealings with its customers note-paper headed:

‘SOMAFER

Vertretung fur Deutschland [Representation for Germany]

6639 Beckingen (Saar)

Tel. 0 68 35/28 24

Bankverbindung [Bankers]: Credit Lyonnais Saarbrücken Nr. [No] 10146’

At the bottom of this note-paper there appears ‘Hauptverwaltung Uckange (Frankreich)’ [‘Central Administration Uckange (France)]. A representative or employee of Somafer stays at Beckingen occasionally and Ferngas alleges that it was with him that it agreed the security measures to be taken. Since it did not receive satisfaction Ferngas summoned Somafer for payment before the Landgericht Saarbrücken. When Somafer demurred that the court had no jurisdiction, Ferngas countered by claiming first that the action related to enforcement of a contractual obligation which had to be performed in Germany’ so that under Article 5 (1) of the Convention of 27 September 1968 the German courts had jurisdiction and alternatively that it related to the operations of a branch, agency or other establishment within the meaning of Article 5 (5) of the said Convention and that this also gave the court jurisdiction. In the view of Ferngas, the facts which it cites, namely the existence of an address with a telephone number and the presence of a representative show that Somafer has an establishment or agency at Beckingen or that at least by the establishment of this connexion it has created the appearance of such an establishment or agency. In both cases it must be inferred in the circumstances that the German courts have jurisdiction. Somafer maintains on the other hand that its representation is completely dependent on its principal place of business in Uckange and that its representative for Germany conducted the negotiations with the Saarland authorities in close co-ordination with Uckange. Furthermore it does not even have its own office accommodation and furniture in Beckingen, there is no separate accounting and it is not entered in the commercial register as a branch (Zweigniederlassung) so that the German courts have no jurisdiction.

When the matter came before the Oberlandesgericht Saarbrücken by way of appeal the latter took the view that the case involved questions of the interpretation of the Convention of 27 September 1968 and by order of 21 February 1978 referred the following questions to the Court of Justice for a preliminary ruling:

1. Are the conditions regarding jurisdiction in the case of “the operations of a branch, agency or other establishment” mentioned in Article 5 (5) of the said Convention to be determined:

   1. under the law of the State before the courts of which the proceedings have been brought; or

   2. under the law of the States concerned (qualification according to the law to be applied in the main action); or

   3. independently, i.e. in accordance with the objectives and system of the said Convention and also with the general principles of law which stem from the corpus of the national legal systems (Judgment of 14 October 1976 in Case 29/76 LTV Lufttransport-untemehmen GmbH & Co. KG v Eurocontrol [1976] ECR 1541)?

2. What criteria apply in the case of the last question (1 (c)) for interpreting the expressions “branch” and “agency” with reference to capacity to take independent decisions (inter alia to enter into contracts) and also to the extent of the outward manifestation?

3. In this connexion are the principles governing liability for holding oneself out in law to others, i.e. to third parties, to be applied to the question whether there is in fact a branch or agency, with the legal consequences that anyone who creates the appearance of such a situation is to be treated as having operated a branch or agency — as is for example the case under German law (cf. Article 21 of the Zivilprozessordnung [Code of Civil Procedure]) Baumbach, 36th Edition. Note 2 A, Stein-Jonas, 19th Edition, Note II 2; Oberlandesgericht Köln, Neue Juristische Wochenschrift 1953, 1834, Oberlandesgericht Breslau Höchstrichterliche Rechtsprechung 1939 (Case No 111)?

The order making the reference to the Court of Justice was lodged at the Court Registry on 13 March 1978.

The United Kingdom and the Commission of the European Communities submitted written observations under Article 5 of the Protocol of 3 June 1971 in accordance with Article 20 of the Protocol on the Statute of the Court of Justice of the EEC.

After hearing the report of the Judge-Rapporteur and the views of the Advocate General, the Court decided to open the oral procedure without any preparatory inquiry:

II — Observations under Article 20 of the Protocol on the Statute of the Court of Justice of the EEC

The first question

3 The first question asks

“Are the conditions regarding jurisdiction in the case of “the operations of a branch, agency or other establishment” mentioned in Article 5 (5) of the said Convention to be determined.

1. under the law of the State before the courts of which the proceedings have been brought; or

2. under the law of the States concerned (qualification according to the law to be applied in the main action); or

3. independently, i.e. in accordance with the objectives and system of the said Convention and also with the general principles of law which stem from the corpus of the national legal system (Judgment of 14 October 1976 in Case 29/76 LTU Lufttransportunternehmen GmbH & Co. KG v Eurocontrol [1976] ECR 1541)?”

4 The Convention, concluded pursuant to Article 220 of the EEC Treaty, is intended according to the express terms of its preamble to implement the provisions of that article on the simplification of formalities governing the reciprocal recognition and enforcement of judgments of courts or tribunals and to strengthen in the Community the legal protection of persons therein established. In order to eliminate obstacles to legal relations and to settle disputes within the sphere of intra-Community relations in civil and commercial matters the Convention contains, inter alia, rules enabling the jurisdiction in these matters of the courts of Contracting States to be determined and facilitating the recognition and execution of courts’ judgments. Accordingly the Convention must be interpreted having regard both to its principles and objectives and to its relationship within the Treaty.

5 The Convention frequently uses words and legal concepts drawn from civil, commercial and procedural law and capable of a different meaning from one Contracting State to another. The question therefore arises whether these words and concepts must be regarded as having their own independent meaning and as being thus common to all the Contracting States or as referring to substantive rules of the law applicable in each case under the rules of conflict of laws of the court before which the matter is first brought. The answer to this question must ensure that the Convention is fully effective in achieving the objectives which it pursues.

6 The meaning of the words ‘dispute arising out of the operations of a branch, agency or other establishment’, which are the basis of the jurisdiction give by Article 5 (5), are different from one Contracting State to another, not only in the respective laws but also in the application given to bilateral conventions on the recognition and enforcement of foreign judgments.

7 Their function in the context of the Convention must be decided in relation to the general rule conferring jurisdiction contained in Article 2 (1) of the Convention which states ‘Subject to the provisions of this Convention, persons domiciled in a Contracting State shall, whatever their nationality, be sued in the courts of that State’. Although Article 5 makes provision in a number of cases for a special jurisdiction, which the plaintiff may choose, this is because of the existence, in certain clearly-defined situations, of a particularly close connecting factor between a dispute and the court which may be called upon to hear it, with a view to the efficacious conduct of the proceedings. Multiplication of the bases of jurisdiction in one and the same case is not likely to encourage legal certainty and the effectiveness of legal protection throughout the territory of the Community and therefore it is in accord with the objective of the Convention to avoid a wide and multifarious interpretation of the exceptions to the general rule of jurisdiction contained in Article 2. This is all the more so since in national laws or in bilateral conventions the similar exception is frequently due, as the United Kingdom rightly points out in its written observations, to the notion that a national State serves the interests of its nationals by offering them an opportunity to escape the jurisdiction of a foreign court and this consideration is out of place in the Community context, since the justification for the exceptions contained in Article 5 to the general rule of jurisdiction in Article 2 is solely in the interests of due administration of justice.

8 The scope and limits of the right given to the plaintiff by Article 5 (5) must be determined by the particular facts which either in the relations between the parent body and its branches, agencies or other establishments or in the relations between one of the latter entities and third parties show the special link justifying, in derogation from Article 2, the option granted to the plaintiff. It is by definition a question of factors concerning two entities established in different Contracting States but which in spite of this must be considered in the same way, whether from the point of view of the parent body or of an extension or extensions which the parent body has established in the other Member States or from that of the third parties with whom legal relations are created through such extensions. In these circumstances the need to ensure legal certainty and equality of rights and obligations for the parties as regards the power to derogate from the general jurisdiction of Article 2 requires an independent interpretation, common to all the Contracting States, of the concepts in Article 5 (5) of the Convention which are the subject of the reference for a preliminary ruling.

The second and third questions

9 In the event of the words referred to being interpreted independently, the second question asks what criteria apply with reference to the capacity to take independent decisions (inter alia to enter into contracts) and also to the extent of the outward manifestation. The third question asks

‘Are the principles governing liability for holding oneself out in law to others, i.e. to third parties, to be applied to the questions whether there is in fact a branch or agency, with legal consequences that anyone who creates the appearance of such a situation is to be treated as having operated a branch or agency — as is for example the case under German law (cf. Article 21 of the Zivilprozeßordnung [Code of Civil Procedure] Baumbach, 36th Edition Note 2 A, Stein-Jonas, 19th Edition, Note II 2; Oberlandesgericht Köln Neue Juristische Wochenschrift 1953, 1834, Oberlandesgericht Breslau Hochstrichterliche Rechtsprechung 1939 (Case No 111))?’

10 These two questions must be taken together.

11 Having regard to the fact that the concepts referred to give the right to derogate from the principle of jurisdiction of Article 2 of the Convention their interpretation must show without difficulty the special link justifying such derogation. Such special link comprises in the first place the material signs enabling the existence of the branch, agency or other establishment to be easily recognized and in the second place the connexion that there is between the local entity and the claim directed against the parent body established in another Contracting State.

12 As regards the first issue, the concept of branch, agency or other establishment implies a place of business which has the appearance of permanency, such as the extension of a parent body, has a management and is materially equipped to negotiate business with third parties so that the latter, although knowing that there will if necessary be a legal link with the parent body, the head office of which is abroad, do not have to deal directly with such parent body but may transact business at the place of business constituting the extension.

13 As regards the second issue the claim in the action must concern the operations of the branch, agency or other establishment. This concept of operations comprises on the one hand actions relating to rights and contractual or non-contractual obligations concerning the management properly so-called of the agency, branch or other establishment itself such as those concerning the situation of the building where such entity is established or the local engagement of staff to work there. Further it also comprises those relating to undertakings which have been entered into at the above-mentioned place of business in the name of the parent body and which must be performed in the Contracting State where the place of business is established and also actions concerning non-contractual obligations arising from the activities in which the branch, agency or other establishment within the above defined meaning, has engaged at the place in which it is established on behalf of the parent body. It is in each case for the court before which the matter comes to find the facts whereon it may be established that an effective place of business exists and to determine the legal position by reference to the concept of ‘operations’ as above defined.

14 The above considerations make it unnecessary to answer the third question.

Costs

15 The costs incurred by the Government of the United Kingdom and by the Commission of the European Communities, which have submitted written observations to the Court, are not recoverable and as the proceedings are, so far as the parties to the main action are concerned, a step in the action pending before the national court, the decision on costs is a matter for that court.