When is something right even when it’s wrong? It sounds like a question from a Christmas cracker, but it’s actually a question with which the CJEU has had to grapple in dealing with the issue of whether a court in an EU member state must recognise and enforce a civil or commercial judgment given in another member state even if it believes that the first member state court has misapplied EU law in reaching its judgment. Ultimately, the Court concluded1 that just because a judgment is (or is likely to be) wrong is not necessarily a sufficient basis for refusing to recognise it.
The grounds for refusing to enforce a civil or commercial judgment from another member state are narrow, including where enforcement would be manifestly contrary to public policy in the member state of enforcement (Article 45 of EU Regulation No 1215/2012, known as “Brussels I recast”).2
The dispute here arose from the importation by a Bulgarian company, Simiramida-04 EOOD (“Simiramida”), of a consignment of “Johnny Walker” whiskey from Georgia. A Dutch company, Diageo Brands BV (“Diageo”), was the trade mark owner of the “Johnny Walker” brand.
Diageo considered that the importation of the goods without its consent as trade mark owner was prohibited, and relied on its right under the then-applicable First Trade Mark Directive (89/104/EEC) to have the consignment seized by order of the Sofia City Court. That order was annulled on appeal, and a further appeal was rejected by the Bulgarian Supreme Court.
In Diageo’s substantive proceedings for trade mark infringement, the Sofia City Court held that it was obliged to dismiss the claim, because it was bound by a prior decision of the Bulgarian Supreme Court that the import into Bulgaria of goods that had been placed on the market outside the European Economic Area (EEA) with the permission of the trade mark proprietor did not infringe the rights conferred by the trade mark. Having previously visited the Bulgarian Supreme Court unsuccessfully in relation to the matter, Diageo did not appeal that ruling.
Simiramida then brought a claim in the Netherlands seeking damages for the injury caused to it by the seizure of the consignment, relying on the decision of the Sofia City Court. Diageo contended that the Bulgarian decision could not be recognised in the Netherlands as it was manifestly contrary to public policy there, since the Sofia City Court had misapplied EU law by relying on a judgment of the Bulgarian Supreme Court on the interpretation of the First Trade Mark Directive, which it contended was vitiated by substantive and procedural error.
It was plain that the Dutch courts considered that the Bulgarian judgment was wrong in law. This was based on prior EU jurisprudence3 that the import into the EEA of goods that had been placed on the market outside the EEA with the permission of the trade mark proprietor required the express or implied consent of the trade mark proprietor so as not to infringe the rights conferred by the trade mark. The Amsterdam District Court refused to recognise the Bulgarian judgment on the basis that it would be manifestly contrary to Dutch public policy to do so. However, the Amsterdam Court of Appeal held that the Bulgarian judgment had to be recognised. On further appeal, the Dutch Supreme Court referred issues of recognition to the CJEU.
The Court held that it did not make a difference if the error claimed in the judgment of the court of origin was an error of EU law or of national law. What was relevant was whether the error was of such a fundamental nature that the judgment could not be enforced. The Court did not accept that the fact that there were dissenting opinions in the Bulgarian Supreme Court’s interpretative ruling could be held to demonstrate that the Bulgarian court knew the ruling was wrong; indeed it noted that the European Commission had opened but terminated infringement proceedings against Bulgaria arising from the controversial Bulgarian Supreme Court interpretative ruling and had concluded that the decision was consistent with EU law.
The Court placed considerable reliance on the fact that Diageo had not appealed the decision of the Sofia City Court in the substantive proceedings. It held that Diageo should have done so, because if it had taken the issue back to the Bulgarian Supreme Court, that court would have been obliged, as a domestic court of final instance, to refer the issue to the CJEU (and hinted that if it had not done so, then recognition of the judgment could be refused, as a breach of the principle of co-operation between national courts and the European Courts). The aggrieved party must avail itself, the Court concluded, of all remedies available in the member state of origin.
The Court then concluded that just because a judgment sought to be recognised may be contrary to EU law does not automatically mean that it would be contrary to public policy to recognise or enforce it, where the error is not a manifest breach of a rule of law regarded as essential in the EU legal order and the member state or of a right recognised as being fundamental in those legal orders. This was not such a case.
The ruling in this case is a warning to those involved in litigation in the EU to pursue any error of law to finality in the courts of the state where that error occurred, as there is very little scope to resist enforcement of a flawed judgment in the courts of one’s home member state, even where those courts are very sympathetic.