International labour contract, counterclaim and credit assignment: European Court of Justice ruling case C-1/17 concerning “Brussels I” Regulation n. 44/2001

MB.O law firm has been the protagonist of a complex judicial case, sponsored by Mr Umberto Oliva, which, due to a particular aspect of the case concerning international jurisdiction, has come before the European Court of Justice. The case was decided with  judgment  C1 / 17 of 21 June 2018.

The decision has aroused the interest of the academic world of private international law, with the publication of detailed comments by Prof. Ángel Espiniella Menéndez of the University of Oviedo (The counter-claim in litigation about international contracts of employment) and by the German jurist M. Brinkmann (Counter claims under the Brussels I Regulation).

The case concerned an Italian manager of a large multinational company, detached in another EU country under an international labour contract (in the form of a “double contract”: the original one with the Italian parent company and a second one with the foreign subsidiary). He was dismissed for disciplinary reasons during the period of work abroad.

When the dismissal was challenged before the Turin Labour Court by the manager as unjustifiable and unfair, the employer defended his position stating the full legitimacy of the discharge and presenting a counterclaim based on a credit transfer in his favour from the foreign subsidiary, relating to certain payables of the Manager due to the latter.

The first instance sentence, while acknowledging the legitimacy of the withdrawal, liquidated the Manager a significant compensation for the damage from insulting dismissal. The Italian judge declined his jurisdiction on the counterclaim instead, adhering to the thesis for which the art. 20.2 of the Regulation n. 44/2201 is applicable only if the employer intends to exercise credits arising within its own legal sphere, but not those that are received by assignment.

Both parties appealed the sentence. The Turin Court of Appeal – Labour Section submitted the European Court of Justice a preliminary ruling regarding the competent judge to the counterclaim, investigating “whether art. 20.2 of Regulation No. 44/2001 involves the jurisdiction of the judge with the principal claim even in the case the counterclaim brought by the employer does not have, as its object, a credit originally belonging to the employer, but a credit originally belonging to a different subject (who is at the same time an employer to the same worker by virtue of a parallel employment contract), and the counterclaim is based on a credit assignment concluded between the employer and the subject originally owning the credit, after the proposition of the main claim of the worker ”.

With the sentence in re, the Court of Justice, referring to the previous Northartov (C-306/17) and Kostanjevec (C 185-15), stated the Italian jurisdiction to the counterclaim, interpreting the art. 20 of Regulation n. 44/2001 in light of the pre-eminent demands of procedural economy and giving emphasis to the “common origin” of the two claims, although inherent to two different contractual relationships.

According to Prof. Menèndez, partly critical of the sentence, “in its Judgment of 21 June 2018, the EUCJ affirms the viability of a counterclaim by the employer. The Judgment has positive aspects, two to it consolidates the jurisdiction of the initial court for counterclaim for procedural economy, even when it is a legal and economic party, such as an employer. This is the reason why it has to do with the co-decision. Among the negative aspects, the Court, when applying the general doctrine to the specific case, legitimizes an abusive situation. The counterclaiming is using the network of group companies in order to design the counterclaim by an assignment of credits that affects the procedural position of the counterclaim defendant. That occurs when this counterclaimer does not participate in this assignment (it is an external act) and cannot even calculate its effects, since it is subsequent to the filing of the initial claim”.

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