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European Business Law

The concept of “center of the debtor's main interests” determines not only the court which has jurisdiction to open proceedings but, as an extension, the law governing the proceedings. In effect, according to Article 7 of Regulation No 2015/848, the law applicable to insolvency proceedings and their effects is that of the Member State within the territory of which such proceedings are opened. Arti …

Principle of application of the law of the State opening insolvency proceedings

The concept of “center of the debtor's main interests” determines not only the court which has jurisdiction to open proceedings but, as an extension, the law governing the proceedings. In effect, according to Article 7 of Regulation No 2015/848, the law applicable to insolvency proceedings and their effects is that of the Member State within the territory of which such proceedings are opened. Article 7(2) includes a non-exhaustive list of the various factors which fall within the law of the opening State: “a)  the debtors against which insolvency proceedings may be brought on account of their capacity; b) the assets which form part of the insolvency estate and the treatment of assets acquired by or devolving on the debtor after the opening of the insolvency proceedings; c) the respective powers of the debtor and the insolvency practitioner; d) the conditions under which set-offs may be invoked; e) the effects of insolvency proceedings on current contracts to which the debtor is party; f) the effects of the insolvency proceedings on proceedings brought by individual creditors, with the exception of pending lawsuits; g) the claims which are to be lodged against the debtor's estate and the treatment of claims arising after the opening of insolvency proceedings; h) the rules governing the lodging, verification and admission of claims; i) the rules governing the distribution of proceeds from the realization of assets, the ranking of claims and the rights of creditors who have obtained partial satisfaction after the opening of insolvency proceedings by virtue of a right in rem or through a set-off; j) the conditions for and the effects of closure of insolvency proceedings ; k) creditors' rights after the closure of the insolvency proceedings; who is to bear the costs and expenses incurred in the insolvency proceedings; the rules relating to the voidness, voidability or unenforceability of legal acts detrimental to all the creditors” .

Articles 8 to 18 lay down exceptions to the principle of application of the law of the opening Member State which are strictly interpreted . The rules of conflict of law set forth in Articles 8 to 10 concern creditors or third parties to the proceedings who hold rights on the debtor's assets located in a State other than the opening State, and give them the possibility to assert their rights on those assets according to the law of the State concerned. These are, inter alia, the rights of creditors based on rights in rem  (Article 8) or a reservation of title (Article 10). According to the Court of Justice, the scope of application of Article 8 which allows the law of the Member State on whose territory the asset concerned is situated to be applied to the right in rem of a creditor or a third party in respect of assets belonging to the debtor, does not depend on the origin of the right in rem concerned or the nature, whether governed by public or private law, of the debt guaranteed by that right in rem . The other derogatory rules of conflict govern the effects of the insolvency proceedings on, inter alia: - contracts relating to immoveable property (Article 11); - payment systems and financial markets (Article 12); - contracts of employment (Article 13); - rights subject to registration (Article 14); - European patents and trade marks (Article 15); - lawsuits pending concerning not only a specific right or asset, but, more broadly, an asset or right that is part of the insolvency estate (Article 18) . 

With regard to the derogations to the general “lex fori concursus” conflict rule, Article 16, on detrimental acts lays down that Article 7(2)(m)), which makes subject to the law of the State of the opening of proceedings the determination of the rules relating to the voidness, voidability or unenforceability of legal acts detrimental to the general body of creditors, does not apply: “where the person who benefited from an act detrimental to all the creditors provides proof that: a) the act is subject to the law of a Member State other than that of the State of the opening of proceedings; and b)	 the law of that Member State does not allow any means of challenging that act” . According to the Court of Justice, Article 16 does not in principle apply to acts which took place after the opening of insolvency proceedings as its application would go beyond what is necessary to protect legitimate expectations and the certainty of transactions in Member States other than that in which proceedings are opened . Article 16 of Regulation No 2015/848 may be validly relied upon where the parties to a contract, who have their head offices in a single Member State on whose territory all the other elements relevant to the situation in question are located, have designated the law of another Member State as the law applicable to that contract, provided that those parties did not choose that law for abusive or fraudulent ends, that being a matter for the referring court to determine . However, those considerations cannot be applied to the situation in which a creditor exercises a right in rem falling within Article 8(1) of the regulation - and as such not subject to the lex concursus, which aims to allow the creditor to effectively assert a right in rem accrued before the opening of the insolvency proceedings even after they are opened . The system of exceptions under Article 16 also applies to limitation periods or other time-bars relating to actions to set aside transactions under the lex causae. Procedural requirements for the exercise of an action to set a transaction aside are also determined according to the lex causae .

Case C-116/11 Bank Handlowy w Warsszawie SA, Judgment of 22 November 2012, LawLex201400000206JBJ, ruling that it is for the national law of the Member State in which insolvency proceedings have been opened to determine at which moment the closure of those proceedings occurs, insofar as questions related to the conditions for and effects of the closure cannot be given an autonomous interpretation, but must be decided under the lex concursus designated as applicable; Case C-25/20 Judgment of 25 November 2021, LawLex202200002717JBJ: holding that the lodging, in secondary insolvency proceedings, of claims already submitted in the main insolvency  proceedings, by the liquidator in those latter proceedings, is subject to the provisions relating to the time-limits for lodging claims and to the consequences of lodging claims out of time, laid down by the law of  the Member State of the opening of the secondary proceedings.

Case C-594/14 Simona Kornhaas, Judgment of 10 December 2015, LawLex201500001699JBJ: holding that national provisions which have the effect of penalizing a failure to fulfill the obligation to apply for the opening of insolvency proceedings fall within the scope of Article 7(2)(m).

Case C-557/13 Hermann Lutz, Judgment of 16 April 2015, LawLex201500000502JBJ, on the application of Article 16, which is interpreted strictly.

Case C-557/13 Hermann Lutz, cited above: the right resulting from the attachment of the bank accounts is in fact capable of constituting a 'right in rem' within the meaning of Article 8(1) of Regulation No 2015/848, provided that, under the national law concerned, that right was exclusive in relation to the other creditors of the debtor company. For the question as to whether such a right automatically became legally invalid as a result of the opening of insolvency proceedings against the debtor company, reference should be made to the competent lex fori concursus for determining, in application of Article 4(2)(m) of that regulation the rules relative to voidness, voidability or unenforceability, even if the provisions of Article 8(4) refer only to the "actions" (not the"rules") for voidness, voidability or unenforceability.

Case C-195-15 SCI Senior Home, Judgment of 26 October 2016, LawLex201600001739JBJ.

Case C-250/17 Tarrago da Siveira, Judgment of 6 June 2018, LawLex201800000871JBJ, specifying that although Article 18 of Regulation No 2015/848 which, as an exception, provides that the effects of insolvency proceedings on a lawsuit pending concerning an asset or a right of which the debtor has been divested are governed solely by the law of the Member State in which that lawsuit is pending, does not apply to enforcement proceedings, finding that actions for a declaration of monetary obligations which merely determine the rights and obligations of the debtor, without involving their realization, and therefore, unlike individual enforcement proceedings, do not risk undermining the principle of equal treatment of creditors. 

Case C-310/14 Nike European Operations Netherlands BV, Judgment of 15 October 2015, LawLex201500001261JBJ.

Case C-54/16 Vinyls Italia SpA, Judgment of 8 June 2017, LawLex201700001002JBJ. the form and the time-limit in which a person benefiting from an act that is detrimental to all the creditors must raise an objection under Article 16 of Regulation No 2015/848, in order to challenge an action to have that act set aside in accordance with the lex fori concursus, and the question whether that article may also be applied by the competent court of its own motion, if necessary, after the time-limit allowed to the party concerned has expired, fall within the procedural law of the Member State on whose territory the dispute is pending, provided that the principle of equivalence and the principle of effectiveness are respected.

European Business Law

387. Principle of application of the law of the State opening insolvency proceedings

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387. Principle of application of the law of the State opening insolvency proceedings

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Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

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