Federal Court of Justice: German courts remain competent for cross-border consumer lawsuits despite Brexit

The Federal Court of Justice did not follow the reasoning of the Munich Higher Regional Court. It clarified that the Brexit Agreement does not preclude the applicability of the Brussels Ia Regulation after the end of the transition period. In the specific case, the Federal Court of Justice therefore derived the international jurisdiction of the German courts from the place of jurisdiction of the plaintiff consumer's place of residence in accordance with Article 18 (1) 2nd half-sentence of the Brussels Ia Regulation. 

[1] Agreement on the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union and the European Atomic Energy Community (OJ of 12 November 2019/C 384 I./01) 

The Federal Court of Justice first clarified that, in accordance with Article 6 (1) of the Brussels Ia Regulation, the jurisdiction of the courts of an EU member state in disputes with defendants who are not domiciled in the territory of an EU member state (“third state”) is governed by their own law. However, for consumer matters, Article 18 of the Brussels I Regulation provides for exceptions that take precedence and can also establish the international jurisdiction of the courts of EU member states in cases involving third states. 

The Federal Court of Justice did not share the Munich Higher Regional Court's view that the application of the Brussels Ia Regulation was excluded due to the Brexit Agreement. Although Article 216 (1) TEU states that the European Union may conclude agreements with third countries that are binding on the Member States, the Brexit Agreement only contains provisions on the application of EU law during the transition period. After that, EU law should have the same legal effects for the United Kingdom as it does within the EU and its member states. However, the Brexit Agreement only contains provisions on the application of EU law during the transition period. According to these provisions, EU law should have the same legal effects for the United Kingdom as it does within the EU and its member states and should be interpreted and applied in accordance with the same methods and general principles. 

Rather, the Brexit Agreement provides that, after its withdrawal, the United Kingdom will be considered a third country in relation to the European Union (as already stated by the Federal Court of Justice, decision of 15 June 2021, ref.: II ZB 35/20). The Brexit Agreement does not contain any specific provision that would limit the applicability of the Brussels Ia Regulation (in particular Article 18 of the Brussels Ia Regulation) in the member states in relation to the United Kingdom as a third state. Brexit therefore does not affect the applicability of the Brussels Ia Regulation in the member states of the European Union. 

As a result, the Brussels Ia Regulation must therefore be applied by the courts of EU member states even if they have to decide on a case relating to the United Kingdom.

In the case decided by the Federal Court of Justice, the consumer jurisdiction in Germany was established in accordance with Article 18 (1) of the Brussels Ia Regulation. 

According to the findings of the Munich I Regional Court, the plaintiff was to be classified as a consumer within the meaning of the Brussels Ia Regulation. Furthermore, the case concerned a consumer matter within the meaning of Article 17 of the Brussels Ia Regulation. The Federal Court of Justice emphasized that the acquisition of shares is also to be classified as a consumer transaction if the primary purpose of the transaction is not to become a shareholder but to invest private capital.

According to the Federal Court of Justice, the defendant's legal predecessor also acted commercially and directed its activities at consumers resident in Germany within the meaning of Article 17 of the Brussels Ia Regulation, by also offering its services and products in Germany. (see ECJ, judgment of 7 December 2010, ref. C 585/08, 144/09).

In the view of the Federal Court of Justice, the correct interpretation of the Brexit Agreement was obvious and left no room for serious doubt ("acte clair"). The Federal Court of Justice therefore refrained from referring the matter to the European Court of Justice and referred it back to the Munich Higher Regional Court for the further proceedings. 

The Federal Court of Justice clarifies that German consumers will, in principle, still be able to take legal action against British companies in German courts after Brexit. The Brexit Agreement and the expiry of the transition period agreed therein do not alter the applicability of the Brussels Ia Regulation within the EU – in particular, they do not alter the consumer jurisdiction under Article 18 (1) of the Brussels Ia Regulation. This means that German consumers will continue to have access to their domestic courts, even if the defendant is based in the United Kingdom. The Federal Court of Justice's ruling also makes it clear that the hurdles for accepting a consumer transaction aimed at EU citizens are extremely low. In practice, for example, an online offer in German may be sufficient.

Companies operating in the EU or targeting EU citizens must therefore examine particularly carefully whether and how jurisdiction agreements can be drafted in a legally secure manner. Jurisdiction agreements are only effective vis-à-vis consumers in very limited exceptional cases and cannot generally effectively exclude the jurisdiction of German courts. In the case of invalid jurisdiction agreements, there is even a risk of actions for injunction filed by consumer protection associations.