The High Court recently clarified the meaning of 'central administration' in relation to establishing a company's domicile under the EU Brussels I Regulation, and therefore the jurisdiction in which a claim may be brought against a company.
This case(1) involved two jurisdictional applications, heard together, arising from different actions against Anglo American South Africa Ltd (AASA), a South African registered company. Both actions involved personal injury claims against AASA arising from activities carried out in South Africa or Botswana for which the claimants in each action alleged AASA was responsible.
In Vava v Anglo American South Africa Ltd the claimants alleged that they had contracted silicosis during their employment in gold mines in South Africa operated by companies controlled and advised by AASA.
Young v Anglo American South Africa Ltd concerned a claim for damages for clinical negligence against AASA's company doctors. The claimant alleged that the mine hospital's doctors in Botswana had failed to diagnose a metabolic disorder, and that this failure had led to significant brain damage which could have been avoided if diagnosis had been made promptly at birth.
The claimants in both actions were seeking to sue AASA in England on the basis that AASA's central administration was in England, and that it was therefore domiciled in England for the purposes of the Brussels I Regulation. AASA sought declarations from the English High Court that the court had no jurisdiction to hear either claim.
Article 2 of the Brussels I Regulation provides that "persons domiciled in a Member State shall whatever their nationality, be sued in the courts of that Member State". Article 60 provides that a company is domiciled where it has its:
- statutory seat;
- central administration; or
- principal place of business.
At an earlier hearing, the judge had indicated that the claimants would not have a good arguable case that AASA's principal place of business was in England. The only issue which therefore fell to be determined in this application was whether AASA's central administration was in England.
There was a divergence of views between the parties in relation to the applicable test to establish whether the claimants had demonstrated that the defendant was domiciled in England. The judge preferred the defendants' submissions that the standard was whether the claimants had shown "a good arguable case".
The claimants' principal argument was that the meaning of 'central administration' under Article 60 of the Brussels I Regulation was uncertain, and that the court should request a ruling from the European Court of Justice (ECJ). Their secondary submission was that in light of European jurisprudence on a proper interpretation of Article 60, the location of a company's central administration is the place where its major decisions are taken or where the "main entrepreneurial decisions are taken which determine the activity of the company". They submitted that the place of central administration is therefore not simply the location of a company's board and general meetings, but where the "people who devise the company's strategy and who take the big picture decisions are located".
The claimants alleged that while the defendant was a South African company, its central administration was in England. They relied solely on the fact that AASA was a wholly owned subsidiary of an English company, Anglo American plc. The claimants suggested that Anglo American made the strategic and policy decisions which AASA implemented. They argued that this indicated that Anglo American had usurped the governance functions of AASA, or that AASA had delegated these functions to Anglo American. AASA had no employees and conducted no business of its own. However, it had control, through share ownership, over companies incorporated and operating in South Africa. The claimants also suggested that the board of AASA met infrequently and irregularly, which they said was a further indication that the central administration was in England by virtue of Anglo American.
The judge summarised the claimants' central argument as being that the principal function of AASA was to "hold shares in the group's South African companies and be the vehicle through which the group implemented its strategy in South Africa". The judge noted that it was not argued by the claimants, nor could it be cogently argued, that the central administration of a wholly owned subsidiary would always be located with its shareholder, but the claimants contended that in this case, they had sufficient argument that it was.
In deciding the case, the judge reviewed a number of European and English authorities in relation to the meaning of 'central administration'. The judge noted that in R v HM Treasury(2) the ECJ treated the concept of 'central administration' as equivalent to "central management and control". He also referred to text from a book by Ulrich Everling,(3) which was cited in R v HM Treasury: "The central administration is located where the company organs take the decisions that are essential for the company operations."
The judge noted that while the frequency and regularity of a company's board meetings may in some circumstances be an indication that the parent company has usurped control, in certain situations, such as this one, the limited number of board meetings were in fact sufficient for the limited business carried out by the company.
The claimants also suggested that Anglo American would be concerned to ensure that the correct decisions are taken in relation to the assets of its subsidiary, AASA. The judge noted that to some degree, this would be true of any relationship between a parent and a subsidiary.
In addition, the claimants suggested that Anglo American influenced or determined the decisions of AASA. The judge drew a distinction between a parent company 'influencing' and 'determining' decisions, finding that here there was no evidence to suggest that Anglo American did any more than influence the decisions of AASA. The claimants further pointed to the fact that Anglo American, through other entities, was responsible for the overall management of the group and its long-term strategies and objectives. However, the judge noted that this was unsurprising and not indicative that Anglo American had usurped control of AASA, or that AASA had delegated its functions to Anglo American.
The judge concluded that while the English courts have recognised that there are circumstances where a parent company has usurped the function of control over the subsidiary, the courts do not readily conclude that. Furthermore, he noted that he was unable to accept the claimants' argument that a company's central administration is where the "main entrepreneurial decisions" are taken. He clarified the test for central administration as being:
"where the company itself carries out its functions… and unless the company can properly be said to be acting through another person or entity because of agency or delegation, then the actions of others do not determine the question."
The judge summarised his findings on the proper interpretation of Article 60 of the Brussels I Regulation as follows: "Article 60(1)(b) is about where it [a company] carries out functions, not about where others carry out functions that affect it."
The judge did not deem it necessary to make a reference to the ECJ for clarification of the meaning of 'central administration' under Article 60. While he accepted the claimants' argument that some English first instance decisions did not take into account European jurisprudence, he did not consider that there was real uncertainty as to the meaning of Article 60.
This judgment serves as a useful clarification of the meaning of 'central administration' in the context of a company's domicile for the purposes of the Brussels I Regulation, and specifically in relation to the court's approach where a company is registered abroad, but where there is influence by a parent company in England.
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(1)  EWHC 2131.
(2)  Case 81/87  ECR 5483.
(3) The Right of Establishment in the Common Market.