As a judgment of the month of September (Case No. 27 Cdo 3032/2023) we present a landmark decision that sheds light on the international jurisdiction of courts in disputes involving the liability of an elected body member for a company’s debts. These disputes often arise when a member—frequently a foreign national—fails to fulfil his or her duties while in office, causing damage, and the company’s unsuccessful creditors then seek to enforce their claims against him or her as the company’s guarantor.
The crux of the matter lay in the interpretation of the articles of the Brussels I bis Regulation, which determines the international jurisdiction of courts in civil and commercial matters. It also addressed whether it is possible to sue the managing director of a Czech company, residing in Austria, for damage caused to creditors by failing to fulfil his or her duties while in office.
In a dispute against the Austrian managing director, the Czech Supreme Court drew inspiration from the approach of the EU Court of Justice in the ÖFAB case, which dealt with the issue of statutory liability of an executive body member under Swedish law. Based on this, the Supreme Court specified the situations where creditors may file a lawsuit based on liability under Section 159(3) of the Civil Code, concluding that this falls under the category of “matters relating to delict or quasi-delict liability.”
In line with the Supreme Court’s decision, under the mentioned Regulation creditors have the option to assert their claims against an elected body member as a guarantor (subject to Section 159(3)):
- in the courts of the EU Member State where the defendant elected body member resides or is based, regardless of his or her nationality;
- in the court having the jurisdiction of the location where the creditor’s claim was supposed to be fulfilled (and wasn’t, thus causing damage to the creditor); or
- in the court having the jurisdiction of the location most closely connected to the company’s activities and the financial situation related to those activities.
Although this decision might seem like a theoretical list of options, it represents a significant ruling for creditors. It provides them with the assurance that they can effectively enforce their claims despite the international challenges associated with the composition of company executive bodies.
