E.ON Czech Holding (Judgment) [2018] EUECJ C-560/16 (07 March 2018)

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(Reference for a preliminary ruling — Regulation (EC) No 44/2001 — Jurisdiction in civil and commercial matters — Exclusive jurisdiction — Article 22(2) — Validity of decisions of the organs of companies or legal persons having their seat in the territory of a Member State — Exclusive jurisdiction of the courts of that Member State — Decision of the general meeting of a company ordering the compulsory transfer to that company’s principal shareholder of the shares held by the company’s minority shareholders and determining the consideration to be paid to them by the principal shareholder — Judicial procedure for reviewing the reasonableness of that consideration)

REQUEST for a preliminary ruling under Article 267 TFEU from the Nejvyšší soud (Supreme Court, Czech Republic), made by decision of 20 September 2016, received at the Court on 4 November 2016, in the proceedings

composed of R. Silva de Lapuerta (Rapporteur), President of the Chamber, J.‑C. Bonichot, A. Arabadjiev, S. Rodin and E. Regan, Judges,

after hearing the Opinion of the Advocate General at the sitting on 16 November 2017,

1 The present request for a preliminary ruling concerns the interpretation of Article 5(1)(a) and (3) and Article 22(2) of Council Regulation (EC) No 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (OJ 2001 L 12, p. 1).

2 The request has been made in proceedings between E.ON Czech Holding AG (‘E.ON’), on the one hand, and Mr Michael Dědouch, Mr Petr Streitberg and Mr Pavel Suda, on the other hand, concerning the reasonableness of the consideration which, in a procedure for removing minority shareholders, E.ON was required to pay them following the compulsory transfer of the shares which they held in Jihočeská plynárenská, a.s.

‘(2) Certain differences between national rules governing jurisdiction and recognition of judgments hamper the sound operation of the internal market. Provisions to unify the rules of conflict of jurisdiction in civil and commercial matters and to simplify the formalities with a view to rapid and simple recognition and enforcement of judgments from Member States bound by this Regulation are essential.

(11) The rules of jurisdiction must be highly predictable and founded on the principle that jurisdiction is generally based on the defendant’s domicile and jurisdiction must always be available on this ground save in a few well-defined situations in which the subject matter of the litigation or the autonomy of the parties warrants a different linking factor. The domicile of a legal person must be defined autonomously so as to make the common rules more transparent and avoid conflicts of jurisdiction.

(12) In addition to the defendant’s domicile, there should be alternative grounds of jurisdiction based on a close link between the court and the action or in order to facilitate the sound administration of justice.’

‘This Regulation shall apply in civil and commercial matters whatever the nature of the court or tribunal. It shall not extend, in particular, to revenue, customs or administrative matters.’

‘Subject to this Regulation, persons domiciled in a Member State shall, whatever their nationality, be sued in the courts of that Member State.’

(1) (a) in matters relating to a contract, in the courts for the place of performance of the obligation in question;

(3) in matters relating to tort, delict or quasi-delict, in the courts for the place where the harmful event occurred or may occur;

1. where he is one of a number of defendants, in the courts for the place where any one of them is domiciled, provided the claims are so closely connected that it is expedient to hear and determine them together to avoid the risk of irreconcilable judgments resulting from separate proceedings;

‘The following courts shall have exclusive jurisdiction, regardless of domicile:

2. in proceedings which have as their object the validity of the constitution, the nullity or the dissolution of companies or other legal persons or associations of natural or legal persons, or of the validity of the decisions of their organs, the courts of the Member State in which the company, legal person or association has its seat. In order to determine that seat, the court shall apply its rules of private international law;

9 Paragraph 183i of Zákon č. 513/1991 Sb., obchodní zákoník (Law No 513/1991, Commercial Code) in the version applicable to the main proceedings, provides:

‘(1) A person who owns participating securities in a company (a) whose aggregate nominal value makes up at least 90% of that company’s share capital, or (b) which replace participating securities whose aggregate nominal value makes up at least 90% of that company’s share capital, or (c) which carry at least 90% of the voting rights in the company (“the principal shareholder”) is entitled to request the board of directors to call a general meeting, at which a decision shall be made on the transfer of all the company’s other participating securities to that person.

(3) The resolution of the general meeting shall include the identification of the principal shareholder, particulars attesting that that shareholder is the principal shareholder and the amount of consideration as well as the time limit within which the consideration must be provided.’

‘(1) The owners of participating securities may, from the time when they receive the invitation to attend the general meeting or from the time when they are notified that it will take place, request a court to review the reasonableness of the consideration; …

(3) A court decision granting the right to a different amount of consideration shall be binding on the majority shareholder and the company as regards the basis of the right granted, as well as vis-à-vis the other owners of participating securities. …

(4) A finding that the consideration is unreasonable shall not render the resolution of the general meeting adopted under Paragraph 183i(1) invalid.

(5) An application under Paragraph 131 to have the resolution of the general meeting declared invalid may not be based on the unreasonableness of the consideration.’

The dispute in the main proceedings and the questions referred for a preliminary ruling

11 By a resolution of 8 December 2006, the general meeting of Jihočeská plynárenská decided on the compulsory transfer of all participating securities in that company to its principal shareholder, E.ON.

12 That resolution indicated the amount of the consideration that E.ON was required to pay to the minority shareholders following that transfer.

13 By an action brought on 26 January 2007, Mr Dědouch, Mr Streitberg and Mr Suda requested the Krajský soud v Českých Budějovicích (Regional Court, České Budějovice, Czech Republic) to review the reasonableness of that consideration.

14 In those proceedings E.ON raised an objection that the Czech courts lacked jurisdiction, arguing that, in view of the location of its seat, the German courts alone had international jurisdiction.

15 By an order of 26 August 2009, the Krajský soud v Českých Budějovicích (Regional Court, České Budějovice) rejected that objection on the ground that the Czech courts had jurisdiction on the basis of Article 6(1) of Regulation No 44/2001 to hear the action.

16 E.ON appealed against that order to the Vrchní soud v Praze (High Court, Prague, Czech Republic), which by order of 22 June 2010 held that the dispute before it came within the scope of Article 22(2) of Regulation No 44/2001 and that, in view of the location of the seat of Jihočeská plynárenská, international jurisdiction lay with the Czech courts.

17 On a constitutional complaint brought by E.ON, the Ústavní soud (Constitutional Court, Czech Republic), by judgment of 11 September 2012, set aside that order and referred the case back to the Vrchní soud v Praze (High Court, Prague).

18 By an order of 2 May 2014, the Vrchní soud v Praze (High Court, Prague) found that the Czech courts had jurisdiction to deal with the dispute in the main proceedings on the basis of Article 5(1)(a) of Regulation No 44/2001.

20 In those circumstances, the Nejvyšší soud (Supreme Court, Czech Republic) decided to stay the proceedings and to refer the following questions to the Court for a preliminary ruling:

‘(1) Must Article 22(2) of [Regulation No 44/2001] be interpreted as also covering proceedings for the review of the reasonableness of the consideration which the principal shareholder is required to provide, as equivalent value for participating securities, to the previous owners of participating securities which were transferred to it as a result of a decision at a general meeting of a public limited company on the compulsory transfer of the other participating securities to that principal shareholder (otherwise known as a “squeeze-out”), where the resolution adopted at the general meeting of the public limited company determines the amount of reasonable consideration and where there is a court decision granting entitlement to a different amount of consideration which is binding on the principal shareholder and on the company as regards the basis of the right granted, as well as vis-à-vis the other owners of participating securities?

(2) If the answer to the preceding question is in the negative, must Article 5(1)(a) of [Regulation No 44/2001] be interpreted as also covering proceedings for review of the reasonableness of the consideration described in the previous question?

(3) If the answer to both the preceding questions is in the negative, must Article 5(3) of [Regulation No 44/2001] be interpreted as also covering proceedings for review of the reasonableness of the consideration described in the first question?’

21 By its first question, the referring court asks, in essence, whether Article 22(2) of Regulation No 44/2001 must be interpreted as meaning that an action, such as that in the main proceedings, for review of the reasonableness of the consideration that the principal shareholder of a company is required to pay to the minority shareholders of that company in the event of the compulsory transfer of their shares to that principal shareholder comes within the exclusive jurisdiction of the courts of the Member State in which that company is established.

22 In that regard, it should be borne in mind that, in the main proceedings, although the resolution of the general meeting of Jihočeská plynárenská concerned both the transfer of its shares to the principal shareholder and the determination of the amount of consideration to be paid to the minority shareholders, Mr Dědouch, Mr Streitberg and Mr Suda, in their action, merely challenge the reasonableness of that amount.

23 Even if that action should give rise to a decision that the amount is not reasonable, Czech law explicitly precludes that decision from being able to have the effect of invalidating the resolution of the general meeting in so far as it concerned that transfer or from being relied upon for the purposes of an application to have that resolution declared invalid.

24 Consequently, according to a literal interpretation of the wording of Article 22(2) of Regulation No 44/2001, it is by no means certain that such an action comes within the scope of that provision, since the rule of jurisdiction which that provision lays down is applicable in proceedings which have as their object the ‘validity of the decisions of [the] organs’ of companies or legal persons.

25 According to the settled case-law of the Court, the provisions of Regulation No 44/2001 must be interpreted independently, by reference to its scheme and purpose (judgments of 13 July 2006, Reisch Montage, C‑103/05, EU:C:2006:471, paragraph 29; of 2 October 2008, Hassett and Doherty, C‑372/07, EU:C:2008:534, paragraph 17; and of 16 January 2014, Kainz, C‑45/13, EU:C:2014:7, paragraph 19).

26 As regards the general scheme and context of Regulation No 44/2001, it should be recalled that the jurisdiction provided for in Article 2 of that regulation, namely that the courts of the Member State in which the defendant is domiciled are to have jurisdiction, constitutes the general rule. It is only by way of derogation from that general rule that the regulation provides for special and exclusive rules of jurisdiction for cases, which are exhaustively listed, in which the defendant may or must, depending on the case, be sued in the courts of another Member State (judgments of 13 July 2006, Reisch Montage, C‑103/05, EU:C:2006:471, paragraph 22, and of 12 May 2011, BVG, C‑144/10, EU:C:2011:300, paragraph 30).

27 Those rules of special and exclusive jurisdiction must accordingly be interpreted strictly. As the provisions of Article 22 of Regulation No 44/2001 introduce an exception to the general rule governing the attribution of jurisdiction, they must not be given an interpretation broader than that which is required by their objective (judgments of 2 October 2008, Hassett and Doherty, C‑372/07, EU:C:2008:534, paragraphs 18 and 19, and of 12 May 2011, BVG, C‑144/10, EU:C:2011:300, paragraph 30).

28 As regards the objectives and the purpose of Regulation No 44/2001, it should be recalled that, as is apparent from recitals 2 and 11 thereof, that regulation seeks to unify the rules on conflict of jurisdiction in civil and commercial matters by way of rules of jurisdiction which are highly predictable. That regulation thus pursues an objective of legal certainty which consists in strengthening the legal protection of persons established in the European Union, by enabling the applicant easily to identify the court in which he may sue and the defendant reasonably to foresee before which court he may be sued (judgments of 23 April 2009, Falco Privatstiftung and Rabitsch, C‑533/07, EU:C:2009:257, paragraphs 21 and 22; of 17 March 2016, Taser International, C‑175/15, EU:C:2016:176, paragraph 32; and of 14 July 2016, Granarolo, C‑196/15, EU:C:2016:559, paragraph 16).

29 Furthermore, as is apparent from recital 12 of that regulation, the rules of jurisdiction derogating from the general rule of jurisdiction of the courts of the Member State in which the defendant is domiciled supplement the general rule where there is a close link between the court designated by those rules and the action or in order to facilitate the sound administration of justice.

30 In particular, the rules of exclusive jurisdiction laid down in Article 22 of Regulation No 44/2001 seek to ensure that jurisdiction rests with courts closely linked to the proceedings in fact and law (see, with regard to Article 16 of the Convention of 27 September 1968 on jurisdiction and the enforcement of judgments in civil and commercial matters (OJ 1972 L 299, p. 32), the provisions of which are essentially identical to those of Article 22 of Regulation No 44/2001, judgment of 13 July 2006, GAT, C‑4/03, EU:C:2006:457, paragraph 21), in other words, to confer exclusive jurisdiction on the courts of a Member State in specific circumstances where, having regard to the matter at issue, those courts are best placed to adjudicate upon the disputes falling to them by reason of a particularly close link between those disputes and that Member State (judgment of 12 May 2011, BVG, C‑144/10, EU:C:2011:300, paragraph 36).

31 Thus, the essential objective pursued by Article 22(2) of Regulation No 44/2001 is that of centralising jurisdiction in order to avoid conflicting judgments being given as regards the existence of a company or as regards the validity of the decisions of its organs (judgment of 2 October 2008, Hassett and Doherty, C‑372/07, EU:C:2008:534, paragraph 20).

32 The courts of the Member State in which the company has its seat appear to be those best placed to deal with such disputes, inter alia because it is in that State that information about the company will have been notified and made public. Exclusive jurisdiction is thus attributed to those courts in the interests of the sound administration of justice (judgment of 2 October 2008, Hassett and Doherty, C‑372/07, EU:C:2008:534, paragraph 21).

33 However, the Court has held that it cannot be inferred from this that, in order for Article 22(2) of Regulation No 44/2001 to apply, it is sufficient that a legal action involve some link with a decision adopted by an organ of a company (judgment of 2 October 2008, Hassett and Doherty, C‑372/07, EU:C:2008:534, paragraph 22), and that the scope of that provision covers only disputes in which a party is challenging the validity of a decision of an organ of a company under the company law applicable or the provisions of its article of association governing the functioning of its organs (judgments of 2 October 2008, Hassett and Doherty, C‑372/07, EU:C:2008:534, paragraph 26, and of 23 October 2014, flyLAL-Lithuanian Airlines, C‑302/13, EU:C:2014:2319, paragraph 40).

34 In the present case, while it is true that, under Czech law, proceedings such as those at issue in the main proceedings may not lead formally to a decision which has the effect of invalidating a resolution of the general assembly of a company concerning the compulsory transfer of the minority shareholders’ shares in that company to the majority shareholder, the fact nonetheless remains that, in accordance with the requirements of the autonomous interpretation and uniform application of the provisions of Regulation No 44/2001, the scope of Article 22(2) thereof cannot depend on the choices made in national law by Member States or vary depending on them.

35 On the one hand, the origin of those proceedings lies in a challenge to the amount of the consideration relating to such a transfer and, on the other, their purpose is to secure a review of the reasonableness of that amount.

36 It follows that, having regard to Article 22(2) of Regulation No 44/2001, legal proceedings such as those at issue in the main proceedings concern the review of the partial validity of a decision of an organ of a company and that such proceedings are, as a result, capable of coming within the scope of that provision, as envisaged by its wording.

37 Thus, in those circumstances, a court hearing such an application for review must examine the validity of a decision of an organ of a company in so far as that decision concerns the determination of the amount of the consideration, decide whether that amount is reasonable and, where necessary, annul that decision in that respect and determine a different amount of consideration.

38 Furthermore, an interpretation of Article 22(2) of Regulation No 44/2001 according to which that provision applies to proceedings such as those at issue in the main proceedings is consistent with the essential objective pursued by that provision and does not have the effect of extending its scope beyond what is required by that objective.

39 In that regard, the existence of a close link between the courts of the Member State in which Jihočeská plynárenská is established, in the present case the Czech courts, and the dispute in the main proceedings is clear.

40 In addition to the fact that Jihočeská plynárenská is a company incorporated under Czech law, it is apparent from the file submitted to the Court that the resolution of the general meeting that determined the amount of the consideration forming the subject of the main proceedings and the acts and formalities relating to it were carried out in accordance with Czech law and in the Czech language.

41 Likewise, it is not disputed that the court with jurisdiction must apply Czech substantive law to the dispute in the main proceedings.

42 Consequently, bearing in mind the close link between the dispute in the main proceedings and the Czech courts, the latter are best placed to hear that dispute relating to the review of the partial validity of that resolution and the attribution, pursuant to Article 22(2) of Regulation No 44/2001, of exclusive jurisdiction to those courts is such as to facilitate the sound administration of justice.

43 The attribution of that jurisdiction to the Czech courts is also consistent with the objectives of predictability of the rules of jurisdiction and legal certainty pursued by Regulation No 44/2001, since, as the Advocate General observed in point 35 of his Opinion, the shareholders in a company, especially the principal shareholder, must expect that the courts of the Member State in which that company is established will be the courts having jurisdiction to decide any internal dispute within that company relating to the review of the partial validity of a decision taken by an organ of a company.

44 Moreover, inasmuch as the principal shareholder of a company may change during the existence of that company, application of the general rule of jurisdiction of the courts of the Member State in which the defendant is domiciled, laid down in Article 2(1) of Regulation No 44/2001, to a situation such as that at issue in the main proceedings would not ensure that those objectives are achieved.

45 In those circumstances, the answer to the first question is that Article 22(2) of Regulation No 44/2001 must be interpreted as meaning that an action, such as that at issue in the main proceedings, for review of the reasonableness of the consideration that the principal shareholder of a company is required to pay to the minority shareholders of that company in the event of the compulsory transfer of their shares to that principal shareholder comes within the exclusive jurisdiction of the courts of the Member State in which that company is established.

46 In the light of the answer to the first question, there is no need to answer the second and third questions.

47 Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.

Article 22(2) of Council Regulation (EC) No 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters must be interpreted as meaning that an action, such as that at issue in the main proceedings, for review of the reasonableness of the consideration that the principal shareholder of a company is required to pay to the minority shareholders of that company in the event of the compulsory transfer of their shares to that principal shareholder comes within the exclusive jurisdiction of the courts of the Member State in which that company is established.

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You are here: BAILII >> Databases >> Court of Justice of the European Communities (including Court of First Instance Decisions) >> E.ON Czech Holding (Judgment) [2018] EUECJ C-560/16 (07 March 2018) URL: http://www.bailii.org/eu/cases/EUECJ/2017/C56016.html Cite as: [2018] 4 WLR 94, [2018] EUECJ C-560/16, [2018] WLR(D) 149, ECLI:EU:C:2018:167, [2018] ILPr 19, EU:C:2018:167

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