Reinier advises national and international companies
reinier.russell@russell.nl +31 20 301 55 55The dual relationship of the statutory director with the company makes it complicated to determine which court may hear a case against the director. It becomes even trickier if the director lives abroad. How can then be determined which court has jurisdiction?
A statutory director has a special position in the law. On the one hand, he is appointed by the shareholders or the supervisory board, the so-called corporate bond. On the other hand, he may also have an employment contract or a contract for services with the company. Both the type of contract and the basis of the claim against the director can make a difference to the rules applicable in a case against the director and to which court is competent to decide the case. This can be the ordinary court, the subdistrict court or the Enterprise Chamber of the Amsterdam Court of Appeal.
If the director lives abroad, the difference in the type of contract can even have greater consequences: it could be that a foreign court may have sole jurisdiction to rule on the case. How is determined which court is competent?
In a recent case, the Rotterdam District Court explains how it decided whether or not it is competent to rule on a case against a foreign director under the articles of association. And what role the difference between a contract for services and an employment contract plays in this context.
InterBurgo Europe B.V. is a company that mainly focuses on the import of Korean and Japanese food from Asia and trading it in Europe. In this case, InterBurgo claims almost EUR 10 million damages from its (former) statutory director on account of director’s liability. According to InterBurgo, the director performed his management duties improperly and breached his obligations under the management agreement existing between the parties. The director claims that the Rotterdam District Court has no jurisdiction. He does not live in the Netherlands, but in France. In Paris. So before the court can hear the case, it has to be assessed whether it may hear the case.
For this, the judge consults jurisdiction rules. Jurisdiction in cases of persons and companies domiciled in the European Union is governed by the Brussels I bis Regulation (hereinafter Brussels I bis), that of other countries by the Dutch common international jurisdiction law. As the director lives in France, the court must assess its jurisdiction by reference to the Brussels I bis rules on jurisdiction, which states that in principle the court of the defendant’s domicile is competent. InterBurgo failed to state and substantiate that the director lives in the Netherlands and not in Paris as argued by the director.
So the Rotterdam District Court probably is not competent, but the case should still be heard by a judge. So who will hear it? For that, the court consults some special jurisdiction provisions.
First are the jurisdiction provisions concerning an individual employment contract. If there is an individual employment contract, solely the court of the member state of residence of the employee will be competent. Based on the law and case law, the Rotterdam District Court establishes that it is possible to have an employment contract and to be a director under the articles of association at the same time. And that is the case in this matter.
Still, the District Court rules that there us no “individual employment contract” in accordance with Brussel I bis, because the director was not subordinate to InterBurgo: he in fact conducted the day-to-day management of the company and could pursue policies as he saw fit. As a result, the French court does not have exclusive jurisdiction even if the director lives in France. So there is reason to look further.
The court then checks whether the competent court can be found through the jurisdiction scheme for contractual obligations. This turns out to be the case. The director has agreed in a management agreement to provide services to InterBurgo. Then the competent court is the court of the place where the services are provided according to the contract. As InterBurgo has its registered office in Rotterdam, the obligation to act as a good director and the obligations under the management agreement must be performed there and the Dutch court will be competent.
Do you have a dispute with a foreign employee and would you like to know before which court you should bring the case? We will be happy to give you advice. We also have an extensive international network, so that we can help you find a good and reliable lawyer in the event the Dutch court has no jurisdiction. And, of course, you can also come to us with other issues and disputes on employment and corporate law. Please contact us:
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