#5031 - Powell Duffryn - Conflict of Laws BCL

Powell Duffryn

Facts

Proceedings between W. Petereit, acting as liquidator of the company IBH-Holding AG, in liquidation, and Powell Duffryn plc (hereinafter referred to as "Powell Duffryn"). It appears from the papers in the case that Powell Duffryn, a company under English law, had subscribed for registered shares in IBH-Holding AG (hereinafter referred to as "IBH-Holding"), a company limited by shares under German law, when the latter's capital was increased in September 1979. On 28 July 1980 Powell Duffryn participated in the proceedings of a general meeting of IBH-Holding during which, by a show of hands, the shareholders adopted resolutions amending the statutes of IBH, in particular by inserting into them the following clause:

“By subscribing for or acquiring shares or interim certificates the shareholder submits, with regard to all disputes between himself and the company or its organs, to the jurisdiction of the courts ordinarily competent to entertain suits concerning the company.”

Powell Duffryn subscribed for further shares on successive increases in the capital of IBH-Holding and also received dividends. In 1983 IBH-Holding was put into liquidation and Mr Petereit, acting as liquidator, brought an action before the Landgericht Mainz claiming that Powell Duffryn had not fulfilled its obligations to IBH-Holding to make the cash payments due in respect of the increases in capital.

Questions

Does the rule contained in the statutes of a company limited by shares on the basis of which the shareholder by subscribing for or acquiring shares submits, with regard to all disputes with the company or its organs, to the jurisdiction of the courts ordinarily competent to entertain suits concerning the company constitute an agreement conferring jurisdiction within the meaning of Article 17 of the Brussels Convention which is concluded between the shareholder and the company?

Does subscription for and acceptance of shares, by means of a written declaration of subscription, on the occasion of an increase in the capital of a company limited by shares comply with the requirement for writing laid down in the first paragraph of Article 17 of the Brussels Convention as regards a jurisdiction clause contained in the statutes of the company?

Holding

Statutes of a company constitute an agreement for the purposes of Art. 23

In that connection, it must be recalled that, when it was requested to interpret the concept of "matters relating to a contract", referred to in Article 5 of the Convention, the Court held that the obligations imposed on a person in his capacity as member of an association were to be considered to be contractual obligations, on the ground that membership of an association created between the members close links of the same kind as those which are created between the parties to a contract (see the judgment in Case 34/82 Peters v ZNAV, referred to above, paragraph 13).

Similarly, the links between the shareholders of a company are comparable to those between the parties to a contract. The setting up of a company is the expression of the existence of a community of interests between the shareholders in the pursuit of a common objective. In order to achieve that objective each shareholder is assigned, as regards other shareholders and the organs of the company, rights and obligations set out in the company' s statutes. It follows that, for the purposes of the application of the Brussels Convention, the company's statutes must be regarded as a contract covering both the relations between the shareholders and also the relations between them and the company they set up.

It follows that a clause conferring jurisdiction in the statutes of a company limited by shares is an agreement, within the meaning of Article 17 of the Brussels Convention, which is binding on all the shareholders. It is immaterial that the shareholder against whom the clause conferring jurisdiction is invoked opposed the adoption of the clause or that he became a shareholder after the clause was adopted.

By becoming and by remaining a shareholder in a company, the shareholder agrees to be subject to all the provisions appearing in the statutes of the company and to the decisions adopted by the organs of the company, in accordance with the provisions of the applicable national law and the statutes, even if he does not agree with some of those provisions or decisions.

Consequently, the reply to the national court' s first question must be that a clause contained in the statutes of a company limited by shares and adopted in accordance with the provisions of the applicable national law and those statutes themselves conferring jurisdiction on a court of a Contracting State to settle disputes...