Branch, agency or other establishment

The European Court has given guidance, but which falls short of being a dictionary definition, on what constitutes a branch, agency or other establishment. The gist of it is that the entity must have a fixed place of business with the appearance of permanence, that it is under and subject to the direction and control of the defendant, but that it also has the power to bind the defendant by its own acts. Too great a degree of independence will lead to the conclusion that the body is not a limb of the defendant, but an independent entity whose operations are entirely its own, not those of the defendant. From the decisions of the European Court, it appears that the branch or branch office is the paradigm for the application of Article 5(5). A distribution agency may therefore fall outside Article 5(5) by reason of its having too great a degree of independence in the manner in which it carries on its business.

Four principal decisions paint the overall picture of what constitutes a branch or agency. In De Bloos SPRL v Bouyer SA,™ a French company appointed a Belgian company as its exclusive distributor in Belgium: Article 5(5) did not apply, with the result that the French company was not subject to the special jurisdiction of the Belgian courts. The distributor was free to conduct its business without direction and control from the French company; indeed, if it had been in business as distributor for more than the one company’s products, the case would have been all the stronger. In Somafer SA v Saar-Ferngas AG,™ a French company had an employee who acted as its sales representative in Germany: Article 5(5) did not apply, with the result that the French company was not subject to the special jurisdiction of the German courts. Although headed notepaper furnished evidence of the French company’s being present in Germany, there was no fixed place of business established or maintained in Germany. The judgment noted that the Article, as an exception to the general jurisdictional rule in Article 2, was to be construed restrictively; but more significant was the fact that the representative in Germany had no power to bind the French company. In Blanckaert & Willems PVBA v Trost, an independent commercial agent had been

B JURISDICTION ACCORDING TO LUGANO/BRUSSELS appointed by the defendant, but was allowed also to represent other firms operating in the same sphere of business, and was entitled to fix her own conditions of work. It was held that an action brought against her principal did not fall within Article 5(5) because the principal had insufficient control over the activities of a distinctly independent representative.

Finally, in SAR Schotte GmbH v Parfums Rothschild Sari,a German seller entered into contracts with a German company which appeared to be acting on behalf a French buyer. It was held that the French buyer could be sued in Germany under Article 5(5), on the basis that the German company[1] appeared to be acting on behalf of the French buyer and the French buyer was bound by the appearance it had created. In other words, if a company appears to have set up another to do its business, Article 5(5) will allow the existence of the created entity to found special jurisdiction over the defendant which created it. The principle is not, formally at any rate, one of estoppel, but the outcome of the cases is not very different from what a doctrine of estoppel by representation might have produced. In addition to these commercial cases, it has been held that the embassy of a foreign country may be seen as a branch in proceedings brought against the foreign state.

Once the test of permanence or apparency has been satisfied, the acid test may be to ask whether the body has been invested with the power to make contracts which bind the principal. This, certainly, was identified as the single most decisive factor by the Advocate General in Shearson Lehmann Hutton Inc v TVB,isl and, though the Court did not need to deal with the particular point, the acceptance of this as the touchstone for special jurisdiction would give an objective foundation to a test which is otherwise more impressionistic than perhaps it should be.

  • [1] 218/86,(1987] ECR 4905. 2 Unusually, the German company was in fact the parent of the French company. But this did not prejudice the operation of Art. 5(5), as the relationship of control was sufficient to satisfy the requirements of the Article. 3 Subject to the point that as a matter of English law, estoppel generally does not establish jurisdiction where jurisdiction is defined by statute. 4 C-154/11 Mahamdia v People's Democratic Republic of Algeria EU:C:2012:491, [2013] ICR 1. 5 C-89/91, [1993] ECR 1-139, at [36] of the Opinion. 6 This does appear to be unduly narrow. If the agency contracts in its own name, but it is known (but not expressly said) that it does so on behalf of its principal, should a claim against the principal not be seen to fall within the Article? 7 C-464/18, EU:C:2019:311, [2019] 1 WLR 4202.
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