This post was originally published on EU Law Live. We are grateful to the editors for the authorisation to repost it here.
Since the 1980’s, EU law has granted a jurisdictional privilege to certain weaker parties: parties who typically are socially and economically weaker, such as employees and consumers, benefit from more advantageous rules of jurisdiction in cross-border disputes. These rules are currently laid down in Brussels Ia Regulation 1215/2012. The idea underlying weaker parties’ jurisdictional privilege is to facilitate access to justice. Despite this clear rationale, determining whether the jurisdictional privilege is applicable sometimes causes issues, as the judgment in FD v ROI Land Investments Ltd (Case C-604/20) illustrates.
FD was domiciled in Germany where he worked for ROI Land Investments Ltd, a company established in Canada. In 2015, FD and ROI ended the employment contract. FD then worked for R Swiss AG, which was a subsidiary of ROI. ROI agreed to be the guarantor for the obligations incumbent on R Swiss under the new contract. In 2016, R Swiss dismissed FD. FD then contested the dismissal before the Labour Court of Stuttgart in Germany. The Court assumed jurisdiction since it was located in the place of habitual employment. Although R Swiss was eventually held liable to pay a signing bonus and salary, FD was unable to enforce the decision because R Swiss had declared bankruptcy shortly after the decision was given. FD then instituted proceedings against ROI based on the latter’s guarantee, claiming payment of the amounts due by R Swiss as well as additional outstanding salary. Once again, proceedings were brought before the Labour Court of Stuttgart in Germany. This time, however, the Labour Court dismissed the action due to a lack of international jurisdiction over ROI. The Higher Labour Court of Baden-Wurttemberg however overturned the Labour Court’s judgment, holding that the German courts did have jurisdiction. ROI subsequently instituted an appeal before the Federal Labour Court. The Federal Labour Court referred a series of preliminary questions to the Court of Justice.
The first question was whether FD could benefit from jurisdictional privilege under the employment section of the Brussels Ia Regulation (Articles 20-23) against ROI. The key issue facing the Court was whether the rules of jurisdiction ‘in matters relating to individual contracts of employment’ also covered disputes between parties, such as FD and ROI, who are not directly bound by an employment contract. The obvious difficulty in FD v ROI was that even though ROI was not FD’s nominal employer, it had a clear interest in the performance of FD’s duties towards its subsidiary R Swiss. What is more, it is not entirely unlikely that ROI directly instructed FD. Such situations in which an employee receives instructions from one company while formally being employed by another is highly usual in groups of companies. The Court confirmed that the mere fact that FD was not directly employed by ROI did not prevent the dispute from being covered by the protective rules of jurisdiction over disputes relating to employment contracts. What mattered was the actual relationship between parties: the rules apply whenever parties are in an employment relationship. Employment contracts are therefore defined functionally by the Court as a relationship in which, for a certain period, a person performs services for and under the direction of another person, in return for which he receives remuneration. While the Court held that it is up to the referring court to apply this test to the relationship between ROI and FD, it did provide some indications. In applying said test, the existence of an employment contract between ROI and FD prior to the conclusion of the new contract might be indicative that ROI is in fact FD’s employer. Moreover, the court can take into account the causal link between ROI’s guarantee and the employment contract between FD and R Swiss. A final element that is relevant for the referring court’s assessment is that FD performed similar duties under the employment contract that he had with ROI to those under the new contract it concluded with R Swiss.
The second question concerned the relationship between EU and national rules of international jurisdiction. Per Article 6(1) Brussels Ia, some of the employment rules apply to proceedings brought against employers who are established in non-EU countries. This rule is an exception to the general principle that the Brussels Ia Regulation only applies to proceedings against defendants who are domiciled in the EU, since those proceedings are generally deemed to have a sufficient connection to the internal market. The Federal Labour Court asked the Court of Justice whether Article 6(1) Brussels Ia bars the application of national rules that are more favourable for employees than those laid down in Brussels Ia. The Court rightly answered this question in the negative. Brussels Ia aims at achieving maximum harmonisation in the subject area it covers. This entails that there is no room for the application of national rules if Brussels Ia is applicable. Any other outcome would put a gloss on the clear and unequivocal language of Article 6(1) Brussels Ia.
The third question referred by the Federal Labour Court was whether FD, as an employee of R Swiss, could benefit from the protective rules for consumers to bring its claim against ROI. In the affirmative, FD would be entitled to sue in the place of his domicile, being Germany, per Article 18(1) Brussels Ia. The answer to this question would only be relevant if the referring court concluded that ROI and FD are not in an employment relationship. The key issue to be clarified was whether FD was a consumer at all, because contracts entered into for reasons other than private consumption are not covered by the consumer rules. The Court held that FD was not a consumer, since the guarantee by ROI related to FD’s professional activities as an employee of R Swiss.
Two elements in the decision in FD v ROI Land Investment deserve further attention. First, the Court defined employment contracts broadly. They encompass remunerated work in a relationship of subordination, even in the absence of a formally concluded contract. As a result, employees within a group of companies may rely on the protective rules of jurisdiction against group entities with which they do not have a formal agreement, to the extent that they receive directions from those group entities. While this broad interpretation benefits employees, its drawback is that it blurs the clear legal line between parties to a contract and third parties. Be that as it may, the Court’s decision settled a conflict of interpretation that had existed for some time. While the Court of Appeals of England and Wales was already applying the approach of the Court of Justice, the German Federal Labour Court, for instance, previously refused to apply the employment rules of jurisdiction whenever claimant and defendant were not party to a formally concluded employment contract. For further consideration see AG Saugmandsgaard Øe’s Opinion in Bosworth (Case C-603/17).
The second element of interest is more general. FD v ROI Land Investments illustrates that the protective rules of jurisdiction for employees protect employees regardless of their economic and social status. These rules were applied even though the claimant might not even have been in a position of economic or social weakness. While this outcome might seem overly generous, it is indicative of the tendency in the EU law of international jurisdiction not to pay too much attention to the specifics of a case but to deploy general rules instead.
Dr Michiel Poesen is lecturer in private international law at the University of Aberdeen, where he is a member of the Centre for Private International Law. His research interest is among other things in the harmonisation of the law of international jurisdiction and the intersection between private international and fundamental rights and values.