Many domain owners think that their Internet domain is protected against access by third parties. However, a domain seizure is permissible in many situations. This view was endorsed by the Münster Finance Court on 16.09.2015. Tax offices can garnishee taxes in arrears by seizing the claims from the domain contract. In the present case, a cooperative society responsible for the registration of Internet domains had filed a lawsuit against a tax office that wanted to seize the claims of a customer. The ruling once again makes it clear that the Internet is not a lawless area and that "virtual" claims can be seized in real terms - no matter how absurd this may seem at first.
Domain seizure by the tax office possible
Delinquent taxpayers should hurry up with their tax arrears: According to a ruling of the Münster Fiscal Court of 16.09.2015 (7K 781/14 AO), tax offices are permitted to seize claims arising from a domain contract. Although this possibility was only rarely used in the past, a progressive application in practice is to be expected after publication of the judgment - it is certain that the possibility exists and is legally enforceable. In the concrete case, a cooperative, which is responsible for the administration of internet domains as a registry, sued. The cooperative had a Contract about the registration of an internet domain. The contractual partner was an online shop for consumer electronics. The contents of the contract stipulated that the internet domain would be provided and maintained by the cooperative. As the company had tax arrears, the competent tax office decided to seize the claims arising from the contract, i.e. the company's claim to maintain the registration of the domain for the online shop. The cooperative filed a lawsuit against this action and attempted to have the garnishment lifted.
The ruling on the domain attachment
The Seventh Senate of the Münster Finance Court considered the facts of the case and decided to dismiss the cooperative's action. A domain seizure is therefore basically permissible, since the domain contract or the rights arising from it are considered to be attachable property rights. This procedure is in accordance with the attachment regulations under tax law. In the case of a domain seizure, various rights, obligations and circumstances must be considered. In the case of a domain garnishment, the Internet domain itself is not garnished because it is only a technical Internet address. Only claims under the law of obligations which the domain holder has towards his registry are attachable. These claims originate from the registration contract. Tax offices can carry out a domain seizure, since this is to be treated like a conventional seizure. In the case of a seizure, all claims to assets can generally be claimed. It is completely irrelevant whether these claims are claims, money or material possessions. The tenor of the judgement stated that cooperatives and domain registries can certainly be considered debtors if they are obliged to provide services to the "tax evader" under a contract. In this context, it was not important whether there were a large number of such distraints and, as a result, an increased work and administrative burden for the cooperative.
Future prospects
The ruling on domain attachment by the Münster Fiscal Court has left an interested hoster landscape. Due to the general importance of the legal question, the senate allowed an appeal to the Federal Fiscal Court. Webhosters will be watching further rulings and appeals with interest. No wonder: After all, webhosters will have to reckon with some disadvantages due to the scope of the ruling. On the one hand, customers will no longer feel completely secure. On the other hand, the administration and workload will increase considerably with a large number of such cases. The resulting Costs are not reimbursed or only reimbursed under certain circumstances, so that negative consequences arise for - the actually uninvolved - web host. Although the judgement of the Finance Court of Münster has a certain significance, the ruling can be decided quite differently at the highest level. Appeals are often successful, so that completely different views may arise after further proceedings. Internationally operating web hosters do not need to be upset about the verdict. German tax offices are not qualified to seize top level domains such as .com or .net if the registry is located outside Europe. Attachments are only ever permitted if the registry is located within Germany or within the EU.
How does a domain seizure work?
The Federal Court of Justice (file number VIIZB 5/05) is of the opinion that claims arising from the ownership of a domain can be seized under § 857 I ZPO. Attachable claims are the following:
- Entitlement to registration of the domain in the Primary Name Server and in DENIC's register
- Entitlement to permanent maintenance of the registration in the primary name server
- Entitlement to adjustments for personally deposited Data
- Entitlement to change the IP number and the associated assignment to another computer
In general, all claims for the registration and use of a domain name can be seized. In the case of domains ending in ".de", the registry DENIC is to be regarded as the debtor, i.e. it must surrender the seized claims. The attachment is already effective once the attachment order has been served on DENIC. Under certain circumstances, an attachment is not permitted. According to § 811 No. 5 ZPO, attachments are prohibited if the domain holder's entire gainful employment is attached to the domain name. As soon as web hosters refuse to cooperate in the seizure of their customers, claims for damages against the web host may arise from the tax office. For example, a conviction was issued on 09.05.2011 (file number 2-01S309/10). The Regional Court of Frankfurt sentenced DENIC to pay damages because it prevented a compulsory execution and because it violated the obligations of third-party debtors. As soon as a web host has received an attachment order, it must act accordingly. In doing so, he is prohibited from providing further services to his customers. All claims are transferred to the tax office so that the original customer no longer has any claims.
Immunity from seizure of name domains
Many domains have imaginative names or names that are related to products and activities. Most of these can be seized. However, seizure is not permitted if the domain reflects a company or family name. The same may also apply under certain circumstances to domain names that contain an artist's or nickname. An inadmissible garnishment exists if the name of the domain and the family name of the debtor are identical. Furthermore, the name must be unique. In the past, the Munich Regional Court had to decide a case in which the debtor's family name existed only 72 times in the whole of Germany. Due to the decision of the Federal Court of Justice (Shell.de ruling), the name is not to be considered unique. Whether a garnishment is permissible must always be decided on a case-by-case basis. With the previous rulings, a good estimate or prognosis can be made as to whether the domain name is attachable or not.
Why has the seizure of domains become popular?
The seizure of domains has become increasingly popular in recent years. No wonder: In the meantime, tax offices and courts have recognised the economic value domains can have. In the past, the sale of attractive domains has been able to generate considerable sums of money. The prices for popular domains have risen sharply in recent years. A memorable and catchy domain is a basic requirement for a successful internet presence, which is why domains have developed into a valuable economic asset. Domains are now sold and purchased and sometimes rented for horrendous sums of money. Due to these facts, the foreclosure of domains has become more and more popular. In the future it can be assumed that tax offices and courts will venture further and further into the virtual world in order to locate and seize assets.
