Federal Supreme Court: Jurisdiction Based on Virtual Branch Office in Germany

If international contracts are concluded online, they sometimes lack an unambiguous nexus to a specific jurisdiction. Sometimes, this makes it difficult to determinate the competent court. In a recent case involving a German customer, Air France and flights from the United States to France and then on to the UK, the lower German courts found that they had no jurisdiction. It was for the Federal Supreme Court (Bundesgerichtshof) to provide clarity: It found that the Frankfurt District Court (Landgericht) had jurisdiction after all.

Facts

The claimant sought damages from Air France before the Frankfurt District Court due to the cancellation of a flight booking. In December 2017, he had booked a ticket for the summer of 2018 via the website “airfrance.de”, where he had found a first class flight from San Francisco to Paris in and an onward flight from Paris to London in business class for a total of just under EUR 600. After payment of the amount, Air France confirmed the booking and the claimant received an electronic ticket with a reservation code. The ticket indicated “DIR – WEB Allemagne, Frankfurt am Main” as the place of issue. A telephone number with the Frankfurt area code “069” was given in the contact details. The imprint of the homepage read: “Air France in Germany: Air France Direktion für Deutschland, Zeil 5, 60613 Frankfurt am Main”.

One day after the booking, Air France cancelled the ticket, informing the claimant that this was due to a system error, and refunded the amount he had paid. In January 2018, a comparable flight would have cost EUR 10,578.86. The claimant argued that Air France was not entitled to cancel the ticket. He claimed damages in the amount of the then current price of such a ticket, that is, EUR 10,578.86.

Decisions of the Frankfurt Courts

The Frankfurt District Court dismissed the action as inadmissible because it did not have jurisdiction (judgment of 24 October 2018, 2-24 O 22/18). The claimant’s appeal was unsuccessful. The Frankfurt Court of Appeals (Oberlandesgericht) agreed with the district court (judgment of 16 January 2020 – 16 U 208/18).

It held that the district court had rightly denied its international jurisdiction; in particular, it did not follow from Article 7 (5) Brussels I Regulation. According to this provision, “a person domiciled in a Member State may be sued in another Member State (…) as regards a dispute arising out of the operations of a branch, agency or other establishment, in the courts for the place where the branch, agency or other establishment is situated.”

On the one hand, Air France’s marketing department and the registered office of the managing director for Germany were located in Frankfurt. On the other hand, the confirmation and the ticket had not been issued by employees based in Frankfurt. The court also gave weight to the fact that the website was operated entirely from France.In the opinion of the Frankfurt courts, the information in the defendant’s imprint may have created the prima facie impression (Rechtsschein) that the Frankfurt branch office was involved in the transaction. That was, however, was not sufficient for the courts to find they had jurisdiction according to Article 7 (5) Brussels Ia Regulation.

Decision of the Federal Supreme Court

The Federal Supreme Court took a different view and affirmed the jurisdiction of the German courts. In its assessment, the facts of the case supported the finding that Air France maintained a branch in Frankfurt within the meaning of Article 7 (5) Brussels Ia Regulation:

“According to the settled case-law of the European Court of Justice, a branch in this sense presupposes a centre of commercial activity which appears permanently as an extension of the parent company, has its own management and is materially equipped in such a way that third parties do not need to approach the parent company directly in order to conduct business.”

The Federal Supreme Court held that Air France’s presence in Germany fulfilled these requirements. The extent to which the employees in Frankfurt needed the internal approval of employees at the head office to conclude the contract could be left open. It was not Air France’s internal procedures that were decisive, but the way in which the branch office acted in business dealings with third parties. The Federal Supreme Court placed particular emphasis on the imprint.

“In the case in dispute, the branch of the defendant acted vis-à-vis customers who made bookings via the website “a[irfrance].de” as the establishment offering the bookings, receiving the offer of a contract, i.e. the booking, and, if applicable, declaring its acceptance. This follows from the fact that the branch office is referred to in the imprint of the website as “A[ir France]. in Germany”.

Information in the imprint of a website serves to fulfil the information obligations under Section 5 Telemedia Act (Telemediengesetz, TMG). (…) It [serves] the purpose of ensuring a minimum of transparency and information for the user about the person or group of persons offering a teleservice; in this way, in particular in the event of a conflict, it should also be a starting point for legal action (…).

In view of this purpose, the establishment indicated in the imprint is in principle to be regarded in business dealings as the establishment that offers the advertised service and makes or receives the relevant contractual declarations.”

The Federal Supreme Court states that the information on the provider only fulfils its purpose if the user can rely on the fact that this establishment is the provider and the contractual partner. In the case in dispute, the Air France branch had acted as the provider in this sense:

“Using the top-level domain “.de” and the German language indicates from the customer’s point of view that the offer on the website is directed at interested parties in Germany. Against this background, if an existing establishment is referred to as “A[ir France] in Germany”, a customer is entitled to understand this to mean that this establishment is the place offering the bookings.”

The Federal Supreme Court did not see a need to refer the case to the European Court of Justice. The questions on the interpretation of Article 7 (5) Brussels Ia Regulation that were relevant for the decision had already been clarified by the cited case law of the Court of Justice.

Comment

This decision clarifies the law with respect to “virtual branches”. It is consistent with the consumer-friendly case law of the Federal Supreme Court and with that of the European Court of Justice. International businesses doing business in Germany (and indeed in the European Union) should take care in designing their web sites and the imprint. Depending on the design of the web shops, the German courts may have jurisdiction for disputes arising from contracts that otherwise have no connection to Germany.

Outside the scope of the Brussels Ia Regulation, the outcome should be identical: The autonomous German rules also provide for the jurisdiction of the courts at the seat of an branch office (Section 21 German Code of Civil Procedure, ZPO).

Federal Supreme Court (Bundesgerichtshof), judgment (Urteil) dated 16 March 2021, file no. X ZR 9/20

Photo: Steven He, Air France F-HTYF A350-900CC BY-SA 4.0

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