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CJEU Judgment (1st Chamber) – Case C-560/16 – E.ON Czech Holding AG v. Michael Dědouch, Petr Streitberg, Pavel Suda – 7 March 2018 – Regulation (EC) No 44/2001 – Article 22(2) — Exclusive jurisdiction of the courts of the Member State in whose territory the organs of companies or legal persons have their seat – Validity of decisions of the organs of companies or legal persons

On 7March 2018, the Court of Justice of the European Union issued a judgment in the case C-560/16, between E.ON Czech Holding AG v. Michael Dědouch, Petr Streitberg, Pavel Suda, on a request for a preliminary ruling under Article 267 TFEU from the Nejvyšší soud (Supreme Court, Czech Republic) concerning the interpretation of Article 5(1)(a) and (3) and Article 22(2) of Council Regulation (EC) No 44/2001 of 22 December 2000, in respect of a claim 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.

Facts of the case

By a resolution of 8 December 2006, the general meeting of the aforementioned company decided on the compulsory transfer of all participating securities in that company to its principal shareholder, E.ON., indicarting the amount of consideration due to the minority shareholders.

The latter brought an action before the Czech court of first instance (Regional Court, České Budějovice) to review the reasonableness of that consideration. In those proceedings the majority shareholder 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. The aforementioned court 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, in view of the seat of the company.

After the appeal of the majority shareholder, the High Court of Prague confirmed the decision of first instance and rejected the objection.

E.ON. appealed before the Supreme Court. 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?’

Decision of the CJEU

Preliminarly, the Court noted that, under the Czech law, the decision on the reasonability of the consideration does not have the effect of invalidating the resolution of the general meeting. 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.

Nonetheless, the Court ruled that “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”. The ruling is based on the following reasons.

The provisions of Regulation No 44/2001 must be interpreted independently, by reference to its scheme and purpose.

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 constitutes the general rule and it is to be derogated only by the rules of special and exclusive jurisdiction which must accordingly be interpreted strictly. Furthermore, 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.

As regards the objectives and the purpose of Regulation No 44/2001, it should be recalled that it seeks to unify the rules on conflict of jurisdiction in civil and commercial matters by way of rules of jurisdiction which are highly predictable.

As regards Article 22, in order for it to apply, it is not sufficient that a legal action involve some link with a decision adopted by an organ of a company, 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.

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.

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.

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

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.

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.

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.

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.

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Updated: March 12, 2018 — 12:05 pm

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