Federal Supreme Court: Jurisdictional Issues in the “Lost Art” Database Case

The judgment of the Federal Supreme Court (Bundesgerichtshof) in the “Lost Art” database case so far has attracted attention primarily because of its significance for art and restitution law. However, it has something to offer not only in terms of substantive law (more on this will be forthcoming shortly), but also in terms of procedural law: In the judgment published yesterday, the court also considered the question of international jurisdiction based on the failure of a defendant domiciled outside a Member State of the European Union to object to the jurisdiction of the German courts.

Facts

The question at the heart of the case before the Federal Supreme Court was whether the entry of the painting “Calabrian Coast” by Andreas Achenbach in the “Lost Art” database constitutes an interference with ownership within the meaning of Section 1004 the German Civil Code (BGB) and gives rise to a claim by the current owner against the party who initiated the entry – which the Federal Supreme Court denies.

The “Lost Art” database is operated by the German Lost Art Foundation (Deutsches Zentrum Kulturgutverluste), a foundation established by the Federal Government, the Länder and various  local government associations. It is headquartered in Magdeburg. The database publishes “search requests” and “found object reports” on cultural property lost as a result of Nazi persecution.

The plaintiff bought the painting at an auction in London in 1999. From 1931 to 1937, it belonged to the gallery of the Jewish art dealer Max Stern in Düsseldorf. In 1935, Max Stern was prohibited from continuing to practice his profession. In March 1937, he sold the painting in a private sale and in September 1937 he had to finally give up his gallery and emigrated to Canada via England. His estate is administered by a Canadian trust. The defendants are its trustees, which raises the question of the international jurisdiction of the German courts for the action filed with the Magdeburg Regional Court:

The jurisdictional aspect of this case concerned the question whether Art. 26 (1) Brussels Regulation applied even though the defendants in question were domiciled in Canada, a non-member state. Under that provision, a court of a member state shall have jurisdiction where the defendant enters an appearance without contesting the jurisdiction and there is no other exclusive ground of jurisdiction

Decision

At the appeal stage, the Court of Appeals (Oberlandesgericht) Naumburg, had based its jurisdiction on Sec. 32 German Code of Civil Procedure (Zivilprozessordnung, ZPO), which deals with the jurisdiction for torts and other wrongful acts. However, it is unclear whether this provision would also cover purely negatory (preventive) actions such as the one brought by the plaintiff under Sec.1004 BGB. The Federal Supreme Court did not settle this debate.

It held that the international jurisdiction of German courts in this case was based on Art. 26 (1) Brussels Regulation, as the Canadian defendants failed to object to the jurisdiction of the German courts. Given the clear wording of the provision, this may not come as a surprise to many readers, and they might wonder why the Federal Supreme Court devotes almost 25% of the judgment on that issue and devotes a head note (Leitsatz) to its finding. It must be understood against the following background: In a 1996 ruling on Art.18 Brussels Convention, the almost identical predecessor of Art. 26 Brussels Regulation, the court held that it would not apply if only the plaintiff had its domicile in a contracting state and the defendant was domiciled in a non-contracting state, i.e. outside the European Union.

The Federal Supreme Court does not uphold that precedent for the successor provision that is Art. 26 Brussels Regulation and adopts a broad interpretation that does not give any weight to defendant’s domicile. In doing so, it considered the wording and the legislative intent behind Art. 26 Brussels Regulation, and held:

“It is also in line with the purpose of the Regulation to assume a wide scope of application of Art. 26 of the Regulation. The adoption of rules on jurisdiction is intended to facilitate the functioning of the single market for disputes related to it (…). This aims is met by removing the obstacles that may arise from the applicability of the lex fori and the differences in the respective national laws regarding the consequences of the defendant’s appearance without contesting jurisdiction; the legal certainty and foreseeability of the establishment of jurisdiction by appearance without contest are best ensured by a wide scope of application (…)”.

Once the Federal Supreme Court had established the applicability of Art. 26 Brussels Regulation, it had to apply it to the facts at hand: Had the Canadian defendants really failed to challenge the jurisdiction of the German courts?

It turns out that in the first instance court, in the District Court (Landgericht) Magdeburg, an objection to the local jurisdiction (örtliche Zuständigkeit) was raised by the defendants. Under the Federal Supreme Court’s case law, an objection to the local jurisdiction of a given court also includes, in case of doubt, an objection to its international jurisdiction (Federal Supreme Court, judgement of 1 June 2005 – VIII ZR 256/04). But raising the objection once is not good enough, it has to be repeated at the appeal stage:

“[T]he defendants have, in any event, entered appearance in the appeal stage without (re)challenging the international jurisdiction; their blanket reference to the submissions made at first instance is, in any event, insufficient for a repetition of the objection (…).”

Comment

The Federal Surpeme Court’s interpretation of Art. 26 Brussels Regulation is convincing and provides clarity. There is no reason to distinguish between foreign defendants from EU member states and those from third countries as regards their need for legal protection. Those who do not object to the jurisdiction of the German courts, or do not object to it in a timely manner, accept it and may be held to it.

As to the objection itself: It is the established case law of the Federal Supreme Court that the objection in the first instance must be repeated in time in the appeals court (see BGH, decision of 27 June 2007 – X ZR 15/05 on the Lugano Convention). Since a mere cross-reference to the first instance submission is not sufficient for the Federal Supreme Court, it is important from a counsel’s perspective to expressly repeat the objection to the German courts’ international jurisdiction in the second instance.

For an extended German-language version, see over at the zpoblog.de.

Update: Geert van Calster has picked up this post, and has reached a quite different conclusion: “X v Trustees of Max Stern estate. German Supreme Court unconvincingly extends Article 26 submission to non-EU defendants.” Geert has added: “De lege ferenda, I do not think BIa should so distinguish [between EU and non-EU defendants]. De lega lata however I do not see how one can ignore the clear language in A6(1)BIa.”

Photo: National Gallery of Canada, Library and Archives, Fonds Max Stern, Galerie Stern, Königsallee 23, Düsseldorf, vor 1937.

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