## Facts

- A Swiss-incorporated stock corporation (Aktiengesellschaft) with three shareholders moved its real seat (principal place of business/administrative seat) to Germany without transferring its incorporation to Germany.
- The Swiss company was involved in leasing real property in Germany connected with a trotting track (Trabrennbahn) and sought to enforce rights as landlord/lessor against a German lessee.
- The German lessee allegedly defaulted on the lease, prompting the Swiss company to sue in German courts for past-due rent, return/surrender of the property, and reimbursement of legal expenses.
- The German lessee challenged the Swiss company’s legal and party capacity to sue in Germany, arguing that a Swiss corporation with its administrative seat in Germany should not be recognized as a corporation under German conflict-of-laws rules.
- Switzerland is not a member of the EU or the EEA, and the Swiss company relied on arguments that recognition principles developed for EU/EEA companies should nonetheless apply.
- In the background to the asserted landlord position, a municipality in North Rhine-Westphalia was involved with the underlying real-estate arrangements; municipal declarations relevant to the transaction were made by a representative acting under a broadly worded power of attorney for “all real estate matters” (“in allen Grundstücksangelegenheiten”).
- The appellate court treated the Swiss company as capable of suing in Germany, reasoning in substance that Swiss company law should be treated comparably to EU/EEA situations; both parties pursued further review before the Bundesgerichtshof (BGH).

## Issues

1. Whether a Swiss-incorporated Aktiengesellschaft with its administrative seat in Germany is recognized in Germany as a corporation with legal and party capacity, or instead is assessed under German “seat theory” and reclassified under German law.
2. Whether EU/EEA freedom-of-establishment case law requiring recognition of EU/EEA-incorporated entities obliges Germany to recognize companies incorporated in non-EU/EEA states such as Switzerland.
3. If the Swiss corporate form is not recognized, whether the entity can nonetheless be treated in Germany as another legally capable organization (such as a partnership), allowing it to sue and be sued.
4. Whether a municipal power of attorney authorizing declarations “in all real estate matters” is effective, and what consequences follow for transactions requiring valid municipal authorization.

## Decision

- The BGH held that, because Switzerland is a third state (non-EU/non-EEA), German conflict-of-laws “seat theory” applies to a Swiss corporation whose administrative seat is in Germany.
- The BGH rejected the view that EU/EEA recognition rules extend to Swiss corporations merely because Swiss law may resemble EU standards; Germany was not required on that basis to treat the Swiss corporation like an EU/EEA company.
- The BGH held that a Swiss Aktiengesellschaft with its administrative seat in Germany is to be treated in Germany as a legally capable partnership (rechtsfähige Personengesellschaft), rather than as a corporation; the entity therefore can be a party to litigation, but not with the attributes of the foreign corporate form.
- The BGH held that a power of attorney issued for a North Rhine-Westphalian city authorizing declarations “in all real estate matters” is invalid.
- The defendant’s revision succeeded; the appellate judgment was set aside to the extent adverse to the defendant, and the action was dismissed. The plaintiff’s revision was rejected.

## Legal Principles

- Under German private international law for companies from non-EU/non-EEA states, the law of the company’s real seat (administrative seat) governs questions of legal status and capacity (seat theory).
- EU/EEA freedom of establishment requires recognition of companies formed under EU/EEA law, but this obligation does not extend to companies incorporated in third states absent a binding arrangement imposing such recognition.
- Where a third-state corporation seated in Germany is not recognized as a corporation, German law may treat the organization as a legally capable partnership (rechtsfähige Personengesellschaft), especially where there is more than one shareholder, preserving the ability to sue and be sued while denying corporate limited-liability effects tied to the unrecognized form.
- A municipal power of attorney that is framed as authorization to act “in all real estate matters” is too general and is invalid for a North Rhine-Westphalian municipality; declarations made on that basis cannot supply the municipal authorization required for significant property-related acts.

## Conclusion

Trabrennbahn holds that Germany continues to apply seat theory to third-state companies: a Swiss Aktiengesellschaft whose administrative seat is in Germany is not recognized as a corporation but is treated as a legally capable partnership, and EU/EEA recognition principles do not compel a different result for Switzerland; the BGH also invalidated a municipality’s blanket “all real estate matters” power of attorney, which affected the effectiveness of municipal participation in related property transactions and contributed to dismissal of the plaintiff’s claims.


Trabrennbahn, 27 October 2008, II ZR 158/06, BGHZ 178, 192 (2008)