Extraterritorial jurisdiction, sovereignty, and the German perspective

Claimants from all over the world have brought various lawsuits before US courts against non-US companies because of human rights being violated outside of the United States. Currently, the future of those cases seems to be depending on whether the US Supreme Court holds that the Alien Tort Claims Act can and should be applied extraterritorially without violating international law. In particular, there are concerns whether extraterritorial jurisdiction of civil courts violates the international law principle of sovereignty, or non-intervention. However, while the ATCA is often praised as being unique in its way, I would like to point out in this post that the ATCA is not the only provision of “exorbitant” or “extraterritorial” jurisdiction, i.e. jurisdiction in cases which have no or hardly any connection to the forum state.

Among the member states of the European Union, the legal systems of Belgium, Greece, Ireland, Italy, Luxemburg, the Netherlands, Austria, Portugal, Finland and Sweden provide for extraterritorial jurisdiction. One of the provisions granting jurisdiction whenever the defendant has some assets located in the forum state can be found in Germany. As to be explained below, Section 23 of the German code of civil procedure (ZPO) could provide German courts with jurisdiction in lawsuits brought by foreign victims of human rights violations involving companies based outside of the European Union. In particular, if the US Supreme Court was to apply Section 23 ZPO as if it had been passed by the US Congress, it would likely confirm the US courts’ jurisdiction to hear and decide cases like Kiobel v. Royal Dutch Petroleum.

Wording and purpose of Section 23 ZPO

Section 23 of the German Code of Civil Procedure (ZPO) provides for a legal venue on mere grounds of location of assets. According to Section 23(1), for complaints regarding monetary claims “brought against a person who has no place of residence in Germany, that court shall be competent in the jurisdiction of which assets belonging to that person are located.”

The German parliament introduced this so-called “exorbitant legal venue” (exorbitanter Gerichtsstand) in the year 1877 in order to facilitate claimants with the prosecution of claims against defendants that are not domiciled in Germany, or have neither a statutory or administrative seat nor branch offices in Germany. Section 23 applies to complaints under property law, including monetary claims for damages under tort law. The nationalities of the claimant and the defendant are not relevant, and a domicile of the claimant in Germany is also not explicitly required. It should be noted, however, that, Section 23 ZPO does not apply any more against European companies since the EU’s Brussels Regulation on civil jurisdiction has entered into force.

Concerns as to the extent of Section 23 ZPO

The wording of Section 23 has raised some concerns as to its extraterritorial implications, especially because it appears to provide a legal venue even if a defendant has by mere chance, knowingly or involuntarily, gained or placed any bit of property on German territory, for instance by losing a handkerchief or an umbrella. However, Section 23 ZPO has remained a part of German civil procedure, unaltered since its creation in the year 1877.

The 1991 ruling of the Federal Court of Justice

The Federal Court of Justice ruled on the extraterritorial implications of Section 23 ZPO on July 2, 1991. Its decision is important for two reasons.

Firstly, the Court held that if a defendant has some kind of asset in a state, international law does not obstruct the courts of that state in exercising jurisdiction regarding any unrelated civil matter: “An understanding of Section 23 ZPO as broadly as its wording suggests would not run contrary to constitutional or international law.” The German civil courts had indeed accepted jurisdiction in entirely extraterritorial cases simply because the defendant had once left a book or, in another case, a fruit basket on German soil.

Secondly, while the Court did somewhat restrict the application of Section 23 ZPO, that restriction is not particularly strong and not due to international law. It was only while the court elaborated the 1877 legislator’s intention when it held that Section 23 ZPO applies to „legal disputes which are related to Germany by a connection beyond the mere location of some asset“. The Court did not clearly state what it would regard as a sufficient connection, but it strongly hinted at the reasoning of the 19th century legislature. That legislature referred to the protection of “Inländer”, claimants who have a domicile or habitual residence within Germany at the time of the proceeding but do not necessarily have the German citizenship. (This would be particularly relevant if a case like Kiobel v. Royal Dutch Petroleum was brought before court in Germany. Some of the Kiobel claimants are said to have established domicile in the USA, where the proceeding is pending.) The Court also pointed out that – where no connection sufficient for the Section-23 venue can be found – German courts might yet have jurisdiction based on the principle of forum necessitatis (Notzuständigkeit).

Implications for international human rights litigation against foreign corporations in Germany

Section 23 ZPO may provide German courts with jurisdiction to rule on lawsuits brought by non-Germans against non-European companies for damages that were sustained outside of Germany. This may for instance be the case if a suit is directed against a foreign company which continuously supplies a German buyer company with goods. That supplier’s claims for payment under the law of sales against the buyer company are, by means of Section 23(2) ZPO, located at the debtor’s seat, i.e. in Germany. Hence, German courts are competent to hear any case for damages against the supplier, if that case has a connection to Germany. Such connection might be a claimant’s residence or domicile, or simply the fact that goods were produced in the course of injuring the claimant and then shipped to the German buyer.

Similarly, Section 23 ZPO may establish a jurisdiction of German courts in cases against foreign subsidiaries of German parent companies. In many constellations, subsidiaries continuously provide their parent companies with goods or services and in turn possess claims for compensation under company law, compensation which the subsidiary company needs in order to operate its business sustainably.

Opinions of German experts on extraterritorial jurisdiction

German scholars have been eager to point out that there are no principles under international law that prohibit extraterritorial jurisdiction of courts. As Haimo Schack points out, “[t]here is no rule under international law, according to which the manifold rules of extraterritorial jurisdiction, all of which require merely a relatively subtle link to the forum state, are prohibited. The civil courts’ exercise of jurisdiction has an effect only within the territory of their country and does not interfere with a foreign state’s affairs.” Reinhold Geimer and Axel Halfmeier agree with this view. Halfmeier explains that the talk about international-law limits is – as regards civil jurisdiction – misleading: “A civil court proceeding taking place in one state and the resulting judgment have no effect whatsoever abroad and can hence not be regarded as a matter of meddling into foreign affairs. It is entirely unimportant whether and which aspects of the case have any connection to the forum state. Effects of the proceeding and judgment are entirely subject to the foreign state’s willingness to acknowledge such effects. […] Inasfar as the judgment is executed within the forum state against property within that state, this, too, is a territorial effect and hence no meddling into foreign affairs.”

This view of German scholars coincides with the results of an international expert workshop that was convened in Brussels in 2006 on behalf of the United Nations’ Special Representative John Ruggie. The participants agreed that States are free to exercise extraterritorial jurisdiction as long as the principle of non-intervention is respected. As regards human rights purposes, the workshop could not identify any rule prohibiting the exercise of extraterritorial jurisdiction.

It should be noted that, in international law, states owe to each other the protection of human rights. And it is increasingly acknowledged that this state duty to protect extends to aliens abroad. To provide a civil forum may be one way of protecting human rights. By doing so, states can fulfill their international-law duty to protect. Fulfilling an own duty is not a merely foreign affair.

Conclusion

Extraterritorial jurisdiction is well known and accepted in Germany’s own rules of civil procedure. Proceedings under the ATCA before US courts would not infringe on principles of international law. In particular, the sovereignty of the defendant company’s home state would not be concerned. Based on the German understanding of the principle of sovereignty, a civil proceeding and judgment do not interfere in the affairs of another state exclusively. This goes in particular – but not only – for cases in which the exercise of jurisdiction is a means of protecting international human rights.