In a recent ruling, the Unified Sections of the Court of Cassation confirmed the longstanding precedents concerning the binding nature of a final judgement on jurisdiction (a judgement that cannot be challenged further). The Court of Cassation, in accordance with the decision issued by the Court of Justice of the European Union (hereinafter the “CJEU”), confirmed that a final judgement on jurisdiction can only bind lower courts to the extent that it disagrees with EU law. Although this ruling is nothing out-of-the-ordinary, it reaffirms the supremacy of EU law and the CJEU over internal procedural laws, to the point that even the binding nature of a final judgement on jurisdiction has to yield to EU law and a ruling from the CJEU.
Factual Background
The judgement of the Court of Cassation originates from insolvency proceedings started approximately ten years ago before the Court of Bari concerning a company that had recently changed its registered office from Italy to Sofia, Bulgaria (the “Company”). The Court of Bari declared the Company insolvent in June 2013, and this decision was promptly challenged before the Court of Appeals of Bari, while parallel proceedings that the Company brought before the Unified Sections of the Court of Cassation seeking to ascertain the jurisdiction of Italian courts were still underway.[1]
In May 2014, the Court of Cassation ascertained the jurisdiction of Italian courts; in particular, the Court of Cassation issued the judgement based on interpretation of Section 3(1) of Regulation EC 1346/2000 on insolvency proceedings (the “Regulation”), finding that the presumption that a company’s registered office is the center of its main interests was superseded in this case by the fact that the Company never actually moved the center of its main interests to Bulgaria, but remained anchored in Italy.
The Court of Appeals of Bari resumed the proceedings and disagreed with the Court of Cassation’s findings. It made a referral to the CJEU for a preliminary ruling, asking for correct interpretation of Section 3(1) of the Regulation.
On May 24, 2016, the CJEU (case C-353/15) confirmed its case-law affirming that the presumption that a company’s registered office is also the center of a company’s main interests can be overruled if there are elements—recognizable by third parties—that prove that the center of its main interests has not changed following a change in registered office. Therefore, the CJEU contended that if insolvency proceedings are brought before a court of the member state of origin, that court retains jurisdiction if it rules that the presumption does not apply.
After the CJEU issued its decision—which essentially confirmed the reasoning followed by the Court of Cassation in its judgement on jurisdiction—the Court of Appeals of Bari reasoned that there were no elements that could overrule the presumption of Section 3(1) of the Regulation and thus, in 2017, revoked the insolvency of the Company and ascertained the lack of jurisdiction of Italian courts since the Company’s registered office was located in Bulgaria.
The (second) proceedings before the Court of Cassation and the ruling
The insolvency administrator, along with a creditor of the Company, challenged the judgement before the Court of Cassation for numerous reasons, including a complaint that the Court of Appeals of Bari erroneously disregarded both the ruling of the Court of Cassation and the decision issued by the CJEU, addressing questions that had already been addressed by higher Courts in ascertaining the lack of jurisdiction. The Company and its former representative filed counter-appeals to the appeals filed by the liquidator and the creditor, which in turn filed further counter-appeals.
The Court of Cassation found that the grounds for appeal concerning jurisdiction were founded.
At the outset, the court noted that according to longstanding case law of the CJEU—the Interedil case, which was upheld by the Court of Cassation in 2015—a judgement on jurisdiction issued by a higher court does not per se prevent a lower court from raising questions before the CJEU if it deems that the judgement could result in a violation of EU Law. Applying these principles, and considering the nature and position of the CJEU, the Court of Cassation clarified that the binding nature of a final judgement on jurisdiction will not be effective for lower courts if the CJEU rules in contradiction to the findings of the judgement on jurisdiction.
However, the real question that the Unified Sections considered themselves to be concerned with was whether a lower court could disregard a prior judgement on jurisdiction even if the latter appears to be compliant with EU law (which is what happened in this dispute). The Court of Cassation answered no, finding that the binding nature of a definitive judgement on jurisdiction is not nullified by the mere fact that the lower court raised preliminary questions before the CJEU, but only in the event that the CJEU actually finds that the judgement is in contradiction to EU law. If the CJEU deems the final judgement compliant with EU law, then the binding nature of the judgement on jurisdiction will constrain lower courts.
In order to ascertain whether the disagreement between the judgement on jurisdiction and EU law existed in this specific case, the court examined the findings of the judgement on jurisdiction and the ruling issued by the CJEU. The court found that the CJEU’s ruling, in essentially confirming the reasoning previously employed by the Court of Cassation, had not nullified the binding nature of the judgement on jurisdiction. In particular, the court noted that, based on the CJEU’s ruling, it was up to national courts to ascertain whether there were indicia and elements that would constitute sufficient basis to overrule the presumption set forth in Section 3(1) of the Regulation. And since such an assessment had previously been carried out by the Unified Sections of the Court of Cassation, the Court of Appeals should not have autonomously carried out a different assessment.
Thus, the court annulled the judgement issued by the Court of Appeals of Bari and remanded the case to the Court of Appeals (which will decide the case with different judges), so that it can properly address the merits of the dispute.
Concluding remarks
In intervening, the Unified Sections of the Court of Cassation clarified yet again that the national procedural rules governing the binding nature of precedents yield to the supremacy of the CJEU and EU law. Yet such supremacy does not extend to the point that referring for a preliminary ruling will per se void the binding nature of a judgement: the binding nature of the judgement will only cease to exist when—and if—it is definitely ascertained that the judgement on jurisdiction does not violate EU law. Otherwise, there can be no doubt that its binding nature will affect lower courts pursuant to national procedural rules.
[1] To provide more context, when there are doubts on the jurisdiction of Italian courts, the parties can bring the case directly before the Unified Sections of the Court of Cassation pursuant to Section 41 of the Italian Code of Civil Procedure. The Unified Sections then issue a definitive judgement ascertaining whether Italian courts have or lack jurisdiction to hear those specific claims, without addressing the merits of the dispute. The judgement on a procedural requirement—jurisdiction—cannot be appealed further and thus its binding nature is intended to be final (although there is a long-running debate among Italian legal scholars as to whether a judgement on a procedural requirement can be considered fully res iudicata).
