Resolution of 27 October 2021, Case No 27 Cdo 3037/2020 –⁠⁠⁠⁠⁠⁠ Unjust enrichment and local jurisdiction

Resolution of the Supreme Court of 27 October 2021, Case No 27 Cdo 3037/2020

(Art. 7(2, 5) of the Brussels I bis; unjust enrichment; local jurisdiction; branch)

The Supreme Court of the Czech Republic dismissed an extraordinary appeal of the defendant and commented on the application of special jurisdiction rules under Art. 7 of the Regulation (EU) No 1215/2012 of the European Parliament and of the Council of 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (hereinafter “Brussels I bis”).

In the original proceedings, the plaintiff (a Czech collective administrator of rights of performing artists and producers of phonograms and audio-visual fixations) filed a claim seeking restitution for unjust enrichment by the defendant (a Luxembourgish company). The latter is considered to have obtained unjust enrichment by broadcasting television and radio programs in the Czech Republic without a license, where those broadcasts included protected subject-matter (i.e., original works of authorship) for which the plaintiff exercised collective rights management. The plaintiff brought the action before the Regional Court in Brno since the defendant had its branch (a P. O. Box) in the same region. Therefore, the court resorted to the application of the Brussels I bis.

The Regional Court, acting as the court of first instance, dismissed the defendant’s objection regarding the alleged lack of local jurisdiction. Both the Regional Court and the High Court (as the appellate court) held that the Czech courts have international jurisdiction pursuant to Art. 7(2) of the Brussels I bis, which applies to matters relating to tort, delict, or quasi-delict. As the unjust enrichment occurred across the entire territory of the Czech Republic, any court with subject-matter jurisdiction was also locally competent to adjudicate the claim, thereby granting the plaintiff the discretion to choose the venue. Given that the defendant maintained a P. O. Box in the relevant region, the proceedings were initiated before the Regional Court in Brno, with reference to Art. 7(5) of the Brussels I bis.

Subsequently, an extraordinary appeal was filed with the Supreme Court by the defendant arguing that a P. O. Box is not a branch of a company, and that the plaintiff should not have had the right to choose a jurisdiction. Otherwise, it would lead to a violation of the defendant’s right to a lawful judge under Art. 38(1) of the Charter of Fundamental Rights and Freedoms.

Article 7(2) of the Brussels I bis states that “a person domiciled in a Member State may be sued in another Member State in matters relating to tort, delict or quasi-delict, in the courts for the place where the harmful event occurred or may occur.” Article 7(5) of the Brussels I bis states that “a person domiciled in a Member State may be sued in another Member State as regards a dispute arising out of the operations of a branch, agency or other establishment, in the courts for the place where the branch, agency or other establishment is situated.”

Firstly, the Supreme Court addressed the notions of a “branch” and a “dispute arising out of the operations of a branch” under Art. 7(5) of the Brussels I bis. The Court emphasised that these notions ought to be interpreted autonomously. Moreover, the Court of Justice of the European Union in its judgment of 22 November 1978 C-33/78, Somafer (points 12 and 13) commented on the characteristics of a branch, therefore it is deemed to be an acte éclairé. The Supreme Court thus referred to this judgment and stated that: a branch is a representation of a foreign entity established in another member state for business purposes that is materially and personally equipped to transact business on behalf of its founder and it appears as a permanent "extended arm" of the foreign entity; disputes arising from the operations of a branch include both contractual and non-contractual relations into which the branch entered on behalf of its founder in the territory of the member state where the branch office is located.

Having regard to the above, the Supreme Court ruled that a P. O. Box used only to receive correspondence from customers does not meet the criteria of a branch and disputes arising out of the operation of a branch. Article 7(5) of the Brussels I bis is therefore not relevant for the assessment of local jurisdiction and the opinion of the high court in this matter is, in this respect, erroneous.

Secondly, the Supreme Court addressed the notion of a “court for the place where the harmful event occurred or may occur” under Art. 7(2) of the Brussels I bis. Here, the Court stressed that Art. 7 determines both international and local jurisdiction. Since unjust enrichment falls within the category of a tort or a quasi-delict the court with local jurisdiction is the court where the harmful event occurred or may occur [Art. 7(2) of the Brussels I bis].

The Supreme Court, once more, supported its decision with reference to the case-law of the Court of Justice[1]. The special jurisdiction rule of Art. 7(2) is justified by the close connection between a tort or a quasi-delict  and the court which is to rule on the dispute. If there are several places where the harmful event occurred or may occur, the notion “court for the place” must be understood to mean the place that ensures the closest connection. However, if such a place cannot be determined, each of the places where the harmful event occurred or may occur has a sufficiently close connection with the dispute and therefore a significant connection  with regard to the jurisdiction.

In the original proceedings, the defendant would transmit television and radio broadcasts of objects protected by copyright law to users throughout the Czech Republic. This means there were more places where the harmful event may have occurred. And since it is impossible to determine the closest connection between the conduct and one particular court, any court in the Czech Republic in whose district the harmful event occurred or may have occurred, and which has subject-matter jurisdiction to hear the dispute in question, has also the local jurisdiction. The choice ultimately rests with the plaintiff.

The Supreme Court concluded that the findings of the appellate court stating that the Regional Court of Brno has the local jurisdiction were as a result correct. The defendant’s extraordinary appeal was thus rejected.

[1] Particularly judgment of the Court of Justice of the European Union, C-386/05 Color Deck; 3 May 2007, C-386/05, Color Drack GmbH v Lexx International Vertriebs GmbH.