2016/1/28 - 29 Cdo 452/2014 (summary)

Judgement of the Supreme Court dated 28 January 2016, file number 29 Cdo 452/2014

(international jurisdiction, proprietary right, shares)

In this case a citizen of the Czech Republic claimed determination of proprietary right to a security – a share issued by a company domiciled in the Czech Republic. The defendant, an original owner of the share, was a company domiciled in the Commonwealth of Dominica. The court of the first instance discontinued the proceeding by its decision due to irremovable lack of procedural conditions – authority. The appellate High Court affirmed the resolution. In accordance with argumentation of the lower courts, the share issued by the issuer, a joint-stock company domiciled in the Czech Republic, may not have been considered as the property of the defendant located on the territory of the Czech Republic in accordance with Section 86 para. 2 of Act No. 99/1963 Coll., Rules of Civil Procedure, as amended. That was why international jurisdiction of the courts of the Czech Republic may not have been claimed (considering Section 37 of Act No. 97/1963 Coll., on international private and procedural law). The plaintiff didn’t agree with the resolutions and he lodged an application for appellate review in the Supreme Court. The plaintiff argued namely close relationship between the share representing the right to participate in the company business and the company itself.

At first, the Supreme Court noted that the above-mentioned national provisions may not have created jurisdiction of the courts of the Czech Republic if the person’s place of residence (registered office or the place of business) was on the territory of the EU member state, considering Art. 3 of Council Regulation (EC) No. 44/2001. Then the Supreme Court bore the appellant out as it summed up that there was no reason for differentiation between the business share in other trading companies not represented by securities, and the security commonly represented by a stock certificate, a security. A stock certificate holder may not necessarily be the company shareholder. That is why the share should be considered as property in accordance with Section 86 para. 2 of Rules of Civil Procedure, because it falls within the category “other rights and valuables assessable by money” in accordance with the preceding judgements of the Supreme Court. That is why the shareholder may be sued within the judicial district where the registered office of the joint-stock company holding the share is located regardless of the place where the stock certificate is found. The lower courts incorrectly qualified the issue. Moreover, the Supreme Court reproached the lower courts for the procedure as they considered their international jurisdiction, and discontinued the proceedings without giving the defendant a chance to establish international jurisdiction of the courts of the Czech Republic using the procedure in accordance with Art. 24 of Council Regulation (EC) No. 44/2001. For the above-mentioned reasons the Supreme Court admitted the application for appellate review, and cancelled the resolutions of the lower courts.