European Court of Justice 16 July 2015 in Case C-681/13

Member States must recognise a decision by the courts of another Member State even if it is obviously contrary to EU law, unless the decision constitutes a manifest breach of a rule of law regarded as essential in the EU legal order. This is perhaps the unsatisfactory consequence of the decision of the European Court of Justice dated 16 July 2015 in the conflict between Diageo Brands and Simiramida.

Diageo Brands, which has its registered office in the Netherlands, is the proprietor of inter alia the trade mark Johnny Walker. It places the Johnny Walker brand of whisky on the market in Bulgaria through Simiramida, a local importer trading alcoholic beverages established in Bulgaria.

On 31 December 2007 a shipment of bottles of Johnny Walker whisky arrived at a port in Bulgaria from Georgia. Diageo requested and obtained permission on 12 March 2008 from the Sofia City Court in Bulgaria to have the whiskey seized. On 9 May 2008 in a ruling on appeal lodged by Simiramida, the Sofia Court of Appeal annulled the decision of the Sofia City Court. Attempts by Diageo Brands to have the Bulgarian Supreme Court overturn the Sofia Court of Appeal’s decision have failed on formal grounds.

In the substantive proceedings that followed, the Sofia City Court ruled – without examining the case – that it followed from an interpretative decision from the Bulgarian Supreme Court that the import of goods to Bulgaria which, with the permission of the proprietor of the trade mark, have been placed on the market outside the European Economic Area, did not infringe the rights conferred by the trademark. The Sofia City Court considered itself bound by that decision which (already at the time it was taken) was obviously incorrect and contrary to EU law. Diageo Brands did not bring an appeal against the Sofia City Court’s decision. According to Diageo Brands, making use of the legal remedies before the Bulgarian courts would have been pointless, for it would not have resulted in those courts coming to a different decision.

Simiramida subsequently started legal proceedings against Diageo Brands in the Netherlands in order to obtain compensation for damages. In these proceedings, Simiramida argued that the Dutch courts must recognise the Sofia City Court’s decision in the substantive proceedings, even though the interpretative decision by the Bulgarian Supreme Court and the Sofia City Court was based upon is contrary to EU law.

According to Article 33 (1) of Regulation (EC) No. 44/2001 (after the recast Article 36 (1)) a decision rendered in one Member State must be recognised in the other Member States without trial. According to Diageo Brands though, the Sofia City Court’s decision should not be recognised because it infringes public policy in the Netherlands.

Article 34 (1) of Regulation (EC) No. 44/2001 (after the recast Article 45 (1)) provides for an exception: decisions that manifestly contradict the public order of the Member State in which recognition of the decision is sought, do not have to be recognised. Member States are free to establish if and when the public order in their State is being violated, and follow their national views in that respect. However, these national rules are curtailed by the definition of the notion of public order as referred to in Article 34 (1) by the European Court of Justice. This is reason for the Dutch Supreme Court to stay the proceedings and ask the European Court of Justice for a preliminary ruling on – in short – how to deal with the Sofia City Court’s decision. In reply, the European Court of Justice ruled that:

  • “the fact that […] a judgement given in a Member State is contrary to EU law does not justify that judgment’s not being recognised in another Member State on the grounds that it infringes public policy in that State where the error of law relied on does not constitute a manifest breach of a rule of law regarded as essential in the EU legal order and therefore in the legal order of the Member State in which recognition is sought or of a right recognised as being fundamental in those legal orders”;
  • “when determining whether there is a manifest breach of public policy in the State in which recognition is sought, the court of that State must take account of the fact that, save where specific circumstances make it too difficult, or impossible, to make use of the legal remedies in the Member State of origin, the individuals concerned must avail themselves of all the legal remedies available in that Member State with a view to preventing such a breach before it occurs.”

The European Court of Justice’ preliminary ruling implies that even if a party has serious doubts that it will have a due process in the sense that the competent courts are unlikely to apply EU law correctly, it still has to go through all steps of the legal proceedings available in that Member State if it wants to ensure that erroneous court decisions will not be recognised in another Member State.

This is in line with the observation of the Commission that Regulation (EC) No. 44/2001 is based on the fundamental idea that the measures adopted in the context of substantive proceedings, including the correction of substantive errors, must be concentrated in the Member State of origin. This observation was endorsed by Advocate General Szpunar in his Opinion (paragraph 63 and 64) as well.

Even then the chances that such a party can successfully claim that the erroneous decision should not be recognised in another Member States on the ground that infringes public policy are small. Only where a manifest breach of a rule of law regarded as essential in the EU legal order is involved, there is a possibility that the courts of another Member State will withhold recognition after all.