Service of the statement of claim against foreign defendants in proceedings before the UPC

In a series of decisions, the Court of Appeal of the Unified Patent Court (UPC) has dealt with the question of the requirements for service of process on defendants domiciled outside the UPC and EU member states.

• Order dated 29.07.2024, CoA_69/2024 – APL_8972/2024
• Order dated 29.07.2024, CoA_70/2024 – APL_8977/2024
• Order dated 06.08.2024, CoA_205/2024 – APL_24585/2024
• Order dated 05.08.2024, CoA_183/2024 – APL_21602/2024
• Order dated 05.08.2024, CoA_86/2024 – APL_10370/2024

I. Facts

The defendants sued were both defendants domiciled in the UPC member states (in particular the Federal Republic of Germany; hereinafter referred to simply as “European defendants”) and defendants domiciled neither in the UPC member states nor in the EU member states (Asia; hereinafter referred to simply as “Asian defendants”). All defendants are independent companies within the overall group structure. In most cases, the Asian defendant was located higher up in the group structure (parent company).

II Question

The plaintiffs were of the opinion that the action could be served at the registered office of the European defendant with effect vis-à-vis the Asian defendant, as they are interwoven within the group structure.

In this respect, they first referred to R. 271.5 lit a) UPC Regulation, according to which service within the UPC contracting member states is to be effected at the following place (emphasis added):

“where the defendant is a company or other legal person, at its registered office, central administration or principal place of business within the Contracting Member States or at any other place within the Contracting Member States where the company or other legal person has a permanent or temporary place of business”

The differentiation within the first variant is not relevant in the present case, so that in the following only the “head office” and “registered office” of a defendant are mentioned.

Furthermore, the defendants referred to R. 275 EPG VerfO. This regulates in para. 1:

“Where service could not be effected under section 1 or 2, the court may, on application by the plaintiff, by order authorize service by an alternative method or at another place if it finds that good cause exists for authorizing service by a method or at a place not otherwise provided for under this chapter.”

Paragraph 2 states:

“On a reasoned application by the plaintiff, the court may order that steps already taken to bring the application to the defendant’s attention by an alternative method or at another place shall constitute valid service.”

III Local chambers refused effective service

The local divisions stated in their orders that the application of R. 275 EPG VerfO requires a prior attempt at service in any case. This attempt at service could not be made on another legal entity, as there would otherwise be a risk that higher-ranking service regulations would be undermined (see, for example, order of the Local Chamber of Mannheim dated 09.02.2024 – UPC_CFI_223/2023).

IV. Relevant ECJ case law:

The local chambers referred primarily to the case law of the ECJ.

The Court has already clarified in its judgment of 19.12.2012 – C-325/11, EuZW 2013, 187 – Alder that the national legislator may not override higher-ranking rules on service, such as the EC Regulation (EC) No. 2020/1784 (then still (EC) No. 1393/2007). National service regulations must therefore be interpreted in such a way that they do not deliberately limit the scope of application of higher-ranking service regulations, for example by stipulating that in certain cases a document is not to be physically transmitted abroad. If the national provision cannot be interpreted in accordance with European law, it is contrary to European law.

Furthermore, the ECJ recently ruled that Art. 47 of the Charter of Fundamental Rights of the European Union and Art. 101 TFEU in conjunction with the EU TFEU (still Regulation (EC) No. 1393/2007 […]) must be interpreted as meaning that

“a parent company against which an action for damages for harm caused by an infringement of competition law has been brought has not been validly summoned if the document instituting the proceedings was served at the address of its subsidiary established in the Member State in which the action was brought, even if the parent company forms an economic unit with that subsidiary.”

ECJ, judgment of 11.07.2024 – C-632/22, NZKart 2024, 446 – Volvo

The ECJ thus reinforces the independence of companies, even if they belong to the same group.

The decision is also transferable to areas of law other than antitrust law due to its legal connection to Art. 47 of the Charter of Fundamental Rights and the EU Regulation, see para. 54 of the decision. Art. 47 of the Charter of Fundamental Rights also grants its rights to defendants from non-EU states, as Art. 47 is not based on where someone is domiciled, but on whether their rights are affected within the EU, i.e. also within a European court case.

V. UPC Court of Appeal confirms that service was not effective

Taking into account the cited case law of the ECJ, the UPC Court of Appeal ruled that an attempt at service must first be made in accordance with procedural law before service by alternative means or at an alternative place (R. 275 UPC CPR) is permissible. Like R. 275.1 EPG VerfO, R. 275.2 EPG VerfO presupposes an attempt at service provided for by procedural law. The wording leaves this open. However, in the opinion of the UPC Court of Appeal, the system and the risk that international rules on service of process are undermined (see above) speak in favor of this.

The UPC Court of Appeal then examines the question of whether there is a valid attempt at service at the European defendant’s registered office with effect vis-à-vis the Asian defendant pursuant to R. 271.5 (a) UPC Regulation. Strictly speaking, if this question had been answered in the affirmative, service would already have been effected ipso iure. The plaintiffs therefore took the view in some cases that R. 275 para. 2 UPC Regulation also gives the court the (declaratory) power in this case to order that service has been validly effected.

The UPC Court of Appeal ruled that it was clear from the wording of R.271.5(a) UPC CPR that (emphasis added)

“it applies only to service on companies or other legal persons having their registered office, central administration or principal place of business in the Contracting Member States. This is made clear by the choice of wording in the second part of the sentence, which refers to “the company”. The reference to “the company” refers to the first part of the sentence in which such a company is defined, i.e. a company with its registered office, central administration or principal place of business in the Contracting Member States.

The wording of the second part of R.271.5 (a) of the CPR thus provides for places where service can be effected in the UPC territory as an alternative to service on a company having its registered office, central administration or principal place of business in the Contracting Member States. This provision therefore provides for alternative places of service for a defendant domiciled in the UPC territory. Service may then be effected at any other place within the Contracting Member States where the company or other legal person has a permanent or temporary place of business.”

271. According to the UPC Court of Appeal, Sec. 271.5 lit a) UPC Regulation is therefore in any case only applicable to defendants that have their principal place of business within the Contracting Member States. European defendants can therefore not be a permanent or temporary place of business of an Asian defendant.

In this respect, the UPC Court of Appeal basically concludes an interpretation of 271.5 lit a) second alternative UPC Regulation, according to which an Asian defendant (head office outside the UPC contracting member states) can ever be served with an action within the contracting member states, even if it claims to have established a temporary or permanent place of business there.

VI Evaluation and practical implications

Due to the separation of the defendants under company law, it is still legally comprehensible that no service can be made on the parent company in the case of subsidiaries (see ECJ Volvo above).

However, in the author’s opinion, the further interpretation of the UPC Court of Appeal appears too narrow, particularly in view of the relevant ECJ case law (Aldar). The ECJ makes it clear that it is merely a matter of preventing a document, such as an action, from actually reaching the defendant physically (so-called fictitious domestic service). However, if a defendant has a temporary or permanent place of business within the contracting member states, he must adhere to this and accept service against him. Of course, it must be examined in each individual case whether a place of business exists within the meaning of the provision.

Accordingly, the German ZPO permits service at any place where a person is found, cf. section 177 ZPO. In trade fair matters, Section 178 (1) ZPO can also be applied. A trade fair stand is usually considered a business premises in this sense.

According to the case law of the UPC Court of Appeal, however, it would be impossible, for example, to quickly serve a preliminary injunction in proceedings on interim measures, for example at the trade fair stand of an Asian defendant, see R. 276 EGP VerfO, which refers to the previous rules on service, i.e. also R. 271.5 lit a) EGP VerfO. This is particularly necessary if the defendant is not yet represented by a lawyer.

It is therefore to be hoped that the UPG Court of Appeal will take another look at this case law in the future.

Robert Knaps