A, a Portuguese shipping company, brought proceedings against B, a French national domiciled in France. A owned a commercial yacht, which was registered in the International Register of Ships of Madeira. A hired B to perform the duties of captain on the yacht. B’s employment contract contained detailed requirements regarding his duties. A argued that B failed to fulfil part of his obligations, causing considerable damage to A. A claimed EUR 354,042.13 in damages from B.

B argued that the Portuguese courts lacked international jurisdiction to hear the action. B contended that an employer can only bring an action against one of its employees in the courts of the Member State in which the latter is domiciled (see art 22.1 of EU Regulation No 1215/2012). The action therefore had to be brought in the French courts. Furthermore, the French courts had judged themselves competent to hear another action brought by B against A arising from the aforementioned employment relationship, and had also held that the contractual relationship established between the parties was governed by French law.

A responded that no employment contract was in force at the time of filing of this action, so A was not B’s employer; nor had B been A's employee since June 2016.

The Court of first instance found in favour of B. A appealed to the Court of Appeal.

Held: Appeal dismissed.

The only issue that arises on appeal is whether the Portuguese courts are internationally competent to process and determine the present action. The obligations in the agreement between A and B are typical of an employment contract and not a service contract. Therefore, the Court below incorrectly found that the contract invoked in the initial petition must be characterised as being for the provision of services. This is also not a case of non-contractual civil liability. In short, the disputed material relationship is that of an employment contract governed by the Labour Code.

The place of performance of the employment activities for which the defendant was engaged was on board the yacht. This yacht meets the definition of a ship.

Regulation (EC) No 593/2008 of the European Parliament and of the Council, of 17 June 2008, governs the law applicable to contractual obligations (Rome I Regulation). Article 8 of that Regulation sets out the applicable law of employment contracts. If the law applicable to the employment contract has not been chosen by the parties, the contract is governed by the law of the country in which the worker habitually performs their work in performance of the contract or, failing that, the country from which the worker habitually performs their work in performance of the contract (para 2). If it is not possible to determine the applicable law under para 2, the contract is governed by the law of the country where the establishment that hired the worker is located (para 3). However, the rules in paras 2 and 3 appear to be mere interpretative guidelines on the law of the country which has the closest connection with the contract. In fact, para 4 determines that if it appears from all the circumstances that the contract has a closer connection with a country other than that indicated in paras 2 and 3, the law of that other country shall apply. Neither the Rome Convention on the Law Applicable to Contractual Obligations nor the Rome I Regulation contains a special rule on employment contracts on board ships.

The main solutions to this issue are the application of the law of the ship's flag, as the place of work (art 8.2); and the law of the country where the establishment that hired the worker is located (art 8.3).

Article 91 of UNCLOS provides:

Nationality of Ships

1. Every State shall fix the conditions for the grant of its nationality to ships, for the registration of ships in its territory, and for the right to fly its flag. Ships have the nationality of the State whose flag they are entitled to fly. There must exist a genuine link between the State and the ship.

2. Every State shall issue to ships to which it has granted the right to fly its flag documents to that effect.

Continuity, legal certainty, non-discrimination between crew members, and co-ordination with public law regimes in administrative, technical and social matters justify a preference in principle for the law of the ship's flag. In this case, A’s yacht is registered in the International Ship Registry of Madeira. Therefore, it seems that the law applicable to the resolution of the disputed material issue discussed in the present case will be Portuguese law.

A different issue, however, concerns the determination of the court internationally competent for the processing and judgment of the case. In this regard, EU Regulation No 1215/2012 of the European Parliament and of the Council of 12 December 2012 regulates international jurisdiction in civil and commercial matters, including matters relating to individual employment contracts. In that Regulation, special care is taken in cases where weaker contractual parties are involved, such as workers. If the employer is the claimant, art 22.1 provides exclusively for the jurisdiction of the court of the worker's domicile. Underlying this provision is the protection of the worker, who will be sued in the State where, from the outset, they will be on relatively permanent terms. No derogation is permitted by art 23 of the Brussels I Regulation.

The Court below, therefore, correctly held that the Portuguese courts were absolutely incompetent, on account of nationality, to process and judge the present action for damages brought by A against B, for compensation for the damages that A claims to have suffered as a result of the alleged culpable breach by B of the employment contract that bound them. Consequently, the Court below correctly dismissed the proceedings.