Posts Tagged Regulation 2015/848
Salzburg-based Alpine Bau had been carrying out a considerable amount of roadwork engineering for the Polish State. The courts at Vienna started insolvency proceedings in 2013, appointing Mr Riel as what is now called the ‘insolvency practitioner’. Austria is the centre of main interests, the Austrian procedure the main proceedings. A little later a secondary proceeding is opened in Poland. Skarb Państwa, the Polish finance ministry or treasury, seeks in those proceedings the payment of debt it claims is outstanding vis-a-vis the Polish State. It also seizes the Austrian courts in a separate proceeding, asking it to confirm the existence of debt owed to it (the amount almost exactly the amount it specified in the Polish secondary proceedings) and at the same time a stay in its pronouncement until the Polish courts have ruled on the fate of the claim in Poland. Essentially therefore the Austrian action is a conservatory action, a hedging of the treasury’s bets.
An interesting angle is that in the Austrian proceedings the Treasury claims application of the Brussels Ia Regulation, particularly its Article 29 lis alibi pendens rule. The Austrian courts reject the existence of the debt and they do not entertain the lis alibi pendens request (the request for a stay).
The first question in C-47/18 (judgment 18 September) was whether Brussels Ia or the Insolvency Regulation are engaged. The CJEU (at 33) emphasises the need for both avoidance of overlap and of non-cover by either (‘doivent être interprétés de façon à éviter tout chevauchement entre les règles de droit que ces textes énoncent et tout vide juridique’), in the relation between the two Regulations: the infamous dovetail which as I have flagged in earlier posts, the Court in my view does not get entirely right. References are to Valach, Wiemer & Trachte, Feniks, Nickel & Goeldner). Here, the Treasury bases its action on Article 110 of the Austrian insolvency act (allowing, and urging first-tier creditors (such as, inevitably, Inland Revenue) to have their claims properly registered so as to ensure the priority in the picking order against the other creditors). The claim therefore is subject to the Insolvency Regulation 1346/2000.
The Court subsequently and unsurprisingly holds that Brussels Ia’s lis alibi pendens rule cannot somehow apply deus ex machina. At 43: insolvency is excluded from the Regulation; this exclusion is all or nothing: if the Regulation does not apply, none of it applies, including its procedural rules. These have, in BIa context, the clear purpose of ruling out as much as possible procedures pending in more than one Member State on the same issue. The Insolvency Regulation, by contrast, allows for concurrent proceedings, albeit primary and secondary ones, and (in Article 31 of the old Regulation; tightened in the current version 2015/848) encourages co-operation and exchange of information to avoid irreconcilable judgments.
(The further question asked refers to debt documentation requirements).
Handbook of) EU private international law, 2nd ed. 2016, Chapter 5 Heading 5.4.1. Chapter 2 Heading 22.214.171.124.1
CeDe Group v KAN. Bobek AG on the intricate applicable law provisions of the Insolvency Regulation (here: concerning set-off for assigned claims).
Update 22 November 2019 the CJEU yesterday confirmed the AG’s Opinion.
Bobek AG opined end of May in C-198/18 CeDe Group v KAN. I am posting a touch late for well, readers will know I have not been fiddling my thumbs. The Opinion concerns the lex causae for set-off in accordance with the (2000) Insolvency Regulation – provisions for which have not materially changed in the current version of the EIR (Regulation 2015/848). At stake are Articles 4 cq 6 and 7 cq 9 in the two versions of the Insolvency Regulation.
The liquidator of PPUB Janson sp.j. (‘PPUB’), a Polish company the subject of insolvency proceedings in Poland, lodged before the Swedish courts an application against CeDe Group AB (‘CeDe’), a Swedish company, claiming payment for goods delivered under a pre-existing contract between PPUB and CeDe, which is governed by Swedish law. In the course of those proceedings, CeDe claimed a set-off in respect of a larger debt owed to it by PPUB. The liquidator had previously refused that set-off within the framework of the Polish insolvency proceedings. During the course of the procedure before the Swedish courts, PPUB’s liquidator assigned the claim against CeDe to another company, KAN sp. z o.o. (‘KAN’), which subsequently became insolvent. However, KAN’s liquidator refused to take over the claim at issue, with the result that KAN (in insolvency) is now party to the litigation
The Supreme Court, Sweden doubts the law applicable to such a set-off claim. Before the referring court, KAN claimed that the set-off claim should be heard under Polish law, whereas CeDe submitted that that issue should be examined under Swedish law. Both of course reverse-engineered their arguments to support opposing views.
The Advocate General in trademark lucid style navigates the facts and issues (not helped by the little detail seemingly given by the referring court). Complication is of course that the general Gleichlauf rule of the EIR is repeatedly tempered by ad hoc regimes for specific claims or claimants.
The AG advises on the main question (should the CJEU follow then his reply to the other questions becomes redundant), at 36, that ‘that Article 4(2) of the Insolvency Regulation makes reference to the conditions for invoking set-offs and to the effects of insolvency on current contracts cannot entail, in my view, that any claim relating to a contract where a party to that contract is subject to insolvency proceedings (and/or where a set‑off is invoked against that claimant) falls automatically within the concept of ‘insolvency proceedings and their effects’ for the purposes of determining which provision governs the applicable law. The mere fact that it is the liquidator who has lodged such an action does not, in my view, change that conclusion.. At 37 he adds powerful argument for same: ‘A case like the present one neatly demonstrates why any other conclusion would lead to unpredictable, or even bizarre, results. The law governing the contractual claim would not only differ from the one that the parties agreed on, but it would also change repeatedly, due to subsequent assignments and/or the assignees themselves eventually becoming subject to insolvency proceedings. All such changes to the applicable law would be based on events not only post-dating the conclusion of the contract and the choice of applicable law, but also largely unconnected to the contract. In addition, all this could be happening while proceedings are pending before the same court.’
Like the Commission, for the final, very interesting question [that question from the referring court boils down to the issue of whether the ‘non-permissibility’ of set-offs in the lex concursus under Article 4 EIR is to be addressed in concrete or abstract terms in order to trigger the exception laid down in Article 6(1)] Bobek AK focuses on the Regulation’s stated aim (recital 26 of the 2000 EIR; recital 70 in the 2015 EIR) of having the set-off regime fulfill its role as a guarantee for international commercial transactions: at 74: ‘adopting an approach focused on the concrete outcomes produced by the respective applicable laws in conflict in a given case, the test to be applied must zero in on the specific solution that would be arrived at by the law applicable to the main claim’.
An Opinion very much soaked in commercial reality.
(Handbook of) EU private international law, 2nd ed. 2016, Chapter 5, Heading 5.7.
Zetta Jet: COMI, time of filing, forum shopping, ordre public in insolvency. A comparative law Fest in Singapore.
An interesting comparison may be made between  SGHC 53 Re Zetta Jet Pte Ltd and  EWHC 2186 (Ch) Videology on which I reported here. Both concern recognition of foreign main (or not) proceeding under of the UNCITRAL Model Law on Cross-Border Insolvency (“the Model Law”). Zetta Jet came to me courtesy of my former student Filbert Lam, and has now also been analysed to great effect by Tan Meiyen and colleagues here.
The judgment is a master class on COMI determination, but also on comparative legal analysis re time of filing etc.: best read judgment and Tan’s note for oneself. Of particular note are
- the expression of sympathy by Aedit Abdullah J for forum shopping in insolvency law; compare also with Ocean Rig, and Kekhman; here this took the particular form of following the US approach to selecting the date on which the application for recognition is filed, as relevant to COMI determination (friendlier to forum shopping than the EU’s and England’s date of commencement of the foreign insolvency proceedings);
- the emphasis on the basket of criteria required to identify COMI;
- the narrow approach to ordre public despite Singaporean court order having been defied; yet also the relevance of the fact that these orders post defiance had been varied.
(Handbook of) EU private international law, 2nd ed. 2016, Chapter 5, Heading 5.6.1 et al.
Videology: Snowden J’s textbook consideration of COMI under UNCITRAL Model Law and EU Insolvency Regulations.
Looking at my back queue for blog postings,  EWHC 2186 (Ch) Videology is one I do wish to bring to the attention of my readers. Snowden J refused to recognise proceedings under Chapter 11 of the US Bankruptcy Code (“Chapter 11”) in relation to Videology Ltd as a foreign main proceeding under Article 17 of the UNCITRAL Model Law on Cross-Border Insolvency (“the Model Law”) as incorporated into English law in Schedule 1 to the Cross-Border Insolvency Regulations 2006 (the “CBIR”). He did so because he was not satisfied that the centre of main interests (“COMI”) of the Company was in the US where the Chapter 11 proceedings are taking place. He did, however, grant recognition of the Chapter 11 proceedings as a foreign non-main proceeding.
The Judgment is a master class on COMI determination. Of note are
- at 28 the rejection of, for so long as the UK remains a party to the Recast EIR, any different approach in relation to the concept of COMI under the CBIR/Model Law and the Recast EIR;
- the emphasis on a basket of criteria required to displace the presumption of COMI in place of the registered office;
- at 42 ff the rejection of a narrow focus on, or attachment of overriding importance to, the location in which the directors and senior management act;
- Snowden J’s rejection at 46 ff of the Head Office approach as being determinant under EU law (see also Handbook heading 126.96.36.199.4); and
- the factors referred to eventually to uphold the presumption: at 72: ‘In addition to being the place of its registered office, the UK is where the Company’s trading premises and staff are located, where its customer and creditor relationships are established, where it administers its relations with its trade creditors on a day-to-day basis using those premises and local staff, and where its main assets (the receivables and cash at bank) are located. All of those factors will be visible and immediately ascertainable by the customers, and in particular by the trade creditors, of the Company. The UK is also, importantly, where representations were made to the Company’s main finance creditor that its COMI was situated.’
(Handbook of) EU private international law, 2nd ed. 2016, Chapter 5, Heading 5.6.1 (specifically also 188.8.131.52.4 for the Head Office discussion).
Espírito Santo (in liquidation): CJEU on vis attractive concursus in the event of pending lawsuits (lex fori processus).
The title of this piece almost reads like an encyclical. C-250/17 Espirito Santo (in full: Virgílio Tarragó da Silveira Massa v Insolvente da Espírito Santo Financial GroupSA – readers will appreciate my suggestion of shortening), held last week, concerns the scope of Article 15 juncto 4(2)(f) of the EU’s Insolvency Regulation 1346/2000 (materially unchanged in Regulation 2015/848).
In many jurisdictions lawsuits pending are subject to vis attractiva concursus: all suits pending or not, relevant to the estate of the insolvent company are centralised within one and the same court. In the context of cross-border insolvency however this would deprive the courts and the law of the Member State other than the State of opening of proceedings, of hearing cq applying to, pending suits.
The Court has now held along the lines what is suggested in the Virgos-Schmit report: only enforcement actions are subject to Article 15. Lawsuits pending which merely aim to establish the merits of a claim without actually exercising it (in the judgment: ‘Substantive proceedings for the recognition of the existence of a debt’), remain subject to the ongoing proceedings in the other Member State.
The judgment evidently has more detail but this is the gist of it. Of note is that yet again, linguistic analysis assists the court in its reasoning.
(Handbook of) EU Private International, 2nd ed. 2016, Chapter 5.
I thought I had but seemingly had not, flagged Bob Wessels’ timely alert to  COMP 039 Colin King (Supreme Court of Gibraltar). The judgment first of all looks at the temporal scope of application of the Regulation, holding correctly that it is not the filing for bankruptcy which is relevant but rather the time of actual openings of those proceedings. Further, it makes correct application of the various presumptions and definitions vis-a-vis natural persons.
Not a shocking judgment but one which is a good read for a gentle introduction to COMI. And as Bob notes, it was not quite the first to apply the new EIR.
(Handbook of) EU Private International Law, 2nd edition 2016, Chapter 5.
Thank you Bob Wessels for again alerting us (with follow-up here [update 15 January 2018 and here ; looks like regular revisits of prof Wessels’ blog are in order) and also reporting by Lukas Schmidt here) timely to a decision this time by the German courts in Niki, applying the Insolvency Regulation 2015, on the determination of COMI – Centre of Main Interests. Bob’s review is excellent per usual hence I am happy to refer for complete background.
Of particular note is the discussion on the extent of a court’s duty to review jurisdiction ex officio; the court’s correct assumption that in the event of foggy circumstances, the EIR’s presumption of COMI at the place of incorporation must have priority; and finally in my view the insufficient weight the court places on ascertainability by third parties.
(Handbook of) EU Private International Law, 2nd ed. 2016, Chapter 5, Heading 5.6.1.