Disappearing Defendant

In a judgment published today, the European Court of Justice held that the fact that it is not possible to identify the current domicile of the defendant must not deprive the applicant of his right to bring proceedings.

Hypoteční banka, a Czech bank wanted to sue Mr Lindner, a German national whom the bank has granted a loan. The bank brought proceedings in Cheb, Czech Republic, at the place of Mr Lindner’s last known domicile, since the current domicile could not be established. The bank argued that in doing so, it brought the proceedings before the “court with general jurisdiction over the defendant.” The guardian ad litem to Mr Lindner appointed by the court  raised objections to the claim. The Okresní soud v Chebu (Cheb District Court) decided to stay the proceedings and to refer the following questions to the European Court of Justice for a preliminary ruling:

  1. If one of the parties to court proceedings is a national of a State other than the one in which those proceedings are taking place, does that fact provide a basis for the cross-border element within the meaning of Article 81 (formerly Article 65) of the Treaty, which is one of the conditions for the applicability of Council Regulation [No 44/2001]?
  2. Does Regulation [No 44/2001] preclude the use of provisions of national law which enable proceedings to be brought against persons of unknown address?

The Court’s First Chamber ruled, firstly, that the Council Regulation on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters did apply in the Lindner case, since an action is brought before a court of a Member State against a national of another Member State whose domicile is unknown to that court.

Secondly, it interpreted the Regulation to mean that

“in a situation such as that in the main proceedings, in which a consumer who is a party to a long-term mortgage loan contract, which includes the obligation to inform the other party to the contract of any change of address, renounces his domicile before proceedings against him for breach of his contractual obligations are brought, the courts of the Member State in which the consumer had his last known domicile have jurisdiction, pursuant to Article 16(2) of that regulation, to deal with proceedings in the case where they have been unable to determine, pursuant to Article 59 of that regulation, the defendant’s current domicile and also have no firm evidence allowing them to conclude that the defendant is in fact domiciled outside the European Union.”

To me, this is a very narrowly worded holding – de lege artis perhaps, since it does not step outside what is required to decide in the given case but not lending itself easily to generalization. The last section of the Court’s holding is, then, somewhat more general. The Court finds that

“that regulation does not preclude the application of a provision of national procedural law of a Member State which, with a view to avoiding situations of denial of justice, enables proceedings to be brought against, and in the absence of, a person whose domicile is unknown, if the court seised of the matter is satisfied, before giving a ruling in those proceedings, that all investigations required by the principles of diligence and good faith have been undertaken with a view to tracing the defendant.”

This gives some robust and sensible guidelines: Carry out “all investigations required by the principles of diligence and good faith” and then proceed with the litigation in the defenant’s absence at the court that had jurisdiction at his last known domicile. And since the principle applies in a case involving a consumer, it should be applicable in a commercial context as well. Mind you, the German courts would not appoint a guardian ad litem in such a situation.

 

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