Judgment of the Court of Justice of the European Union (TEU) dated 7 March 2018 in the case E.ON Czech Holding, it held that international cases concerning the determination of the price of the purchase of shares in the squeeze out procedure should be decided in accordance with the internal law of the State in whose territory the company is established.
Despite the fact that the judgment was given on the basis of an act no longer in force — Council Regulation (EC) No Regulation (EU) 44/2001 dated 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters, it shall remain fully up-to-date and shall certainly be appointed in dispute resolution based on Regulation (EU) 1215/2012 dated 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (Brussels I BIS).
The CJEU concluded that Article 22(2) Regulation (EU) 44/2001 it must be interpreted as meaning that such an action, which, for the purpose of examining the fairness of the buy-out price which the majority shareholder of the company is required to pay to minority shareholders, where the ownership of their shares has been transferred to a majority shareholder, falls within the jurisdiction of the exclusive courts of the Member State in which the company is established.
Judgment was given in a case in which, on 8 December 2006 the general meeting of shareholders of the joint stock company of Czech law Jihočeská plynárenská a.s. adopted a resolution on the compulsory redemption of minority shareholders to its majority shareholder, E.ON Czech Holding AG (squeeze out procedure).
The resolution specifies the purchase price E.ON was to pay to minority shareholders. However, minority shareholders – M. Dědouch, P. Streitberg and P. Suda disagreed with its height and on the day 26 January 2007 They brought proceedings against Jihočeská plynárenská and E.ON before the Czech court (Krajský soud v Českých Budějovicích) competent for the company’s headquarters.
- ON raised in the course of the proceedings an allegation of the absence of international jurisdiction of the Czech courts in this case, claiming that, due to its place of residence, only German courts have international jurisdiction. It turned out that the legal problem presented by E.ON became increasingly complex and from 2007 to 2014 the case went through various instances of Czech courts, even in the so-called meantime to the Constitutional Court of the Czech Republic. Finally, the Supreme Court of the Czech Republic decided to ask the TEU for a number of questions for a preliminary ruling.
In the first The Czech Supreme Court questioned whether the procedure for examining the fairness of the buy-out price which the majority shareholder of the company is required to pay to minority holders of securities of the same company under the compulsory buy-out procedure (squeeze out) belongs to the jurisdiction of the exclusive court of the State of the company’s place of establishment, or to the jurisdiction of the special court of the place where the contractual obligation was carried out or was to be carried out, or to the jurisdiction of the special court of the place where the damage occurred or may occur.
The CJEU concluded that Article 22(2) Regulation (EU) 44/2001 it must be interpreted as meaning that such an action, which, for the purpose of examining the fairness of the buy-out price which the majority shareholder of the company is required to pay to minority shareholders, where the ownership of their shares has been transferred to a majority shareholder, falls within the jurisdiction of the exclusive courts of the Member State in which the company is established.
Therefore, the court competent in the case in question, in accordance with Czech law, could only be the court of the Czech Republic.
This judgment concerns a seemingly non-problematic issue.
According to Article 22(2) Regulation (EU) 44/2001 and Article 24(2) Brussels I BIS The following courts of a Member State have exclusive jurisdiction irrespective of the place of residence of the parties (...) in matters of validity, nullity or termination of a company or legal person or the validity of decisions of their authorities, the courts of the Member State in whose territory the company or legal person is established.
On first This provision should not give rise to much doubt, but in very many cases in matters relating to the company's relations, where this provision could apply, other provisions of Union law will be relevant.
For example, relations related to the responsibilities of board members – e.g. loyalty obligations on board members – will be decided according to Article 5(1) point (a) Regulation (EU) 44/2001 (Article 7(1)) point (a) Regulations of Brussels and BIS), i.e.
by the court of the place where the commitment was carried out or was to be carried out (TEU dated 10 September 2015 on Holterman Ferho Exploitatie and Others.
The same applies, for example, to proceedings against members of the board of directors of a company or shareholders for debts of that company when it was uncapitalised and should have been wound up (judgment of dated 18 July 2013 on ÖFAB, Östergötlands Fastigheter AB).
Nevertheless, the TEU favours a broad interpretation Article 22(2) Regulation (EU) 44/2001 and Article 24(2) Regulations of the Brussels I BIS, although this provision introduces an exception to the rule which is, in principle, the jurisdiction of the court by the defendant's place of residence or residence.
As pointed out by the ECJ in its judgment dated 2 October 2008 in the case of Hassett and Doherty, the courts of the Member State in which the company is established are always the most suitable for resolving disputes such as: the existence of companies, the validity of the resolutions of their bodies, as ‘...
formalities relating to the company's duty of transparency are materialised in the same State.’
Author:
Aleksandra Księżyk
Director of the Legal Department in Warsaw. Legal advisor, from 2013 associated with Russell Bedford. He runs the Legal Department at the Chancellery Russell Bedford. He has many years of experience in working in Warsaw Law Firms mainly for medium and large enterprises, but also for companies of the State Treasury.
In her practice, she dealt with legal and administrative proceedings, as well as the creation of various types of contracts, including elements of intellectual property law, agreements, regulations, internal documentation, as well as purchasing.
However, the main area of practice and interest is commercial law and business transformation processes with elements of tax and balance sheet law. He prepares and then implements and conducts merger, division and transformation processes, as well as the creation and elimination of entities.
In the field of proceedings, he shall develop procedural or negotiated strategies. It implements custom projects and implements custom solutions, prepared according to individual customer needs. The author of articles on mainly aspects related to transformation processes.