The Italian Supreme Court applies the rule of the jurisdiction of the court of the State in which the defendant is domiciled in case of breach of the shareholders’ agreement by the Italian shareholder of a Polish LLC
By Enzo Bacciardi – International Litigation and Arbitration Area
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The Supreme Court, with judgment no. 26984 dated 26 November 2020, established that, in case of breach of the shareholders’ agreement by the Italian shareholder Sole Director of a limited liability company with its registered office in Poland, the court having jurisdiction is the Italian one.
The Supreme Court applied the general rule of the jurisdiction of the Member State in which the defendant is domiciled, as provided for by article 2 of EC Regulation 44/2001 (replaced by article 4 of EU Regulation 1215/2012).
In the case in question, the Polish shareholder of a limited liability company with registered office in Poland filed a claim for reimbursement of damages with the Court of Rome against the Italian shareholder Sole Director, who, according to the claimant, would have been responsible for having managed the company without ever giving account to the claimant himself, in breach of the shareholders’ agreement executed between the parties, causing damages to the claimant.
The Court of Rome and, in second instance, the Court of Appeal accepted the defendant’s objection of lack of jurisdiction of the Italian court, by stating that the court having jurisdiction was the Polish one, namely the court of the State where the company has its registered office, by virtue of a close connection rule.
The Supreme Court, on the other hand, overturned the decisions of both judges, by applying the rule of the domicile of the defendant (art. 2 of EC Regulation 44/2001, replaced by art. 4 of EU Regulation 1215/2012). Such rule is mandatory with the exception of certain specific cases – such as, for example, the exclusive jurisdictions under article 22 of EC Regulation 44/2001 (replaced by article 24 of EU Regulation 1215/2012) – which cannot be interpreted extensively.
The Supreme Court has grounded its judgement on the following reasons:
- When the dispute concerns the validity of the decisions of the corporate bodies, adopted in breach of the Articles Of Association or of the Bylaws and producing effects against the company itself, the rule of the exclusive jurisdiction of the State in which the company has its registered office applies, according to Article 22(2) of Regulation 44/2001 (replaced by Article 24(2) of EU Regulation 1215/2012), since the courts of that State are in the best position to know and settle the dispute.
- When, on the other hand, the dispute concerns the breach of a shareholders’ agreement, i.e. a contract executed between the shareholders which, as such, only produces mandatory effects between the parties, but is not capable of producing effects vis-à-vis the company, the rule of the defendant’s domicile provided for by art. 2 of EC Regulation 44/2001 2001 (replaced by art. 4 of EU Regulation 1215/2012) applies.
- In the present case, the fact that the Italian shareholder who has breached the shareholders’ agreement is also the Sole Director is not relevant for the applicability of the exclusive jurisdiction of the State in which the company has its registered office, provided for by art. 22 no. 2 of Regulation 44/2001 (replaced by art. 24 no. 2 of EU Regulation 1215/2012), since the dispute is not brought against the company, but only concerns the relationships between the two shareholders and is aimed at enforcing the personal liability of the defendant shareholder towards the claimant, “even if linked to conduct allegedly involving abuse of the position of shareholder or director”.
Therefore, the Supreme Court has stated that it is not admissible an extensive interpretation of the rules governing the exclusive jurisdictions and has confirmed that the criteria to allocate the jurisdiction between the domicile of the defendant and exclusive jurisdictions are aimed at guaranteeing the legal certainty, as they must allow the parties of a contract to identify, already at the time of the execution of the same, with a high degree of clarity and predictability, which court will have jurisdiction to decide future disputes that may arise from the same contract.