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Upd@te Germany
2 February 2016
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Schultze & Braun News

Recent publications

Dr Andreas J. Baumert
Zur „demnächst“ erfolgten Klagezustellung bei PKH-Antrag innerhalb von 14 Tagen nach Zugang der Gerichtskostenanforderung, Anmerkung zu BGH, Urteil vom 03.09.2015 – III ZR 66/14, Entscheidungen zum Wirtschaftsrecht (EWiR) 2016, 31 - 32

Stephan Ries
Co-editor of Karsten Schmidt (publ.), Kommentar zur Insolvenzordnung und EuInsVO, 19. Auflage, 2016, Kommentierung zu §§ 56-59 InsO

Dr Pascal Schütze
EU-Zahlungsverzugsrichtlinie /Forderungsmanagement: Wer sich anpasst, profitiert
Der CreditManager, 12/2015, 34 - 35

Dr Roland Fendel,
Dr Andreas J. Baumert
Co-editors of Sladek/Heffner/Graf Brockdorff (publ.), Insolvenzrecht - Aktuelle Schwerpunkte aus Gläubigersicht 2015/2016, S. 357 – 397, Deutscher Sparkassenverlag, Stuttgart, 2015.

Lectures

Qualifizierungslehrgänge für Aufsichts- und Beiräte
Deutsches Verwaltungs- & Aufsichtsrats-Institut (DVAI), 83684 Tegernsee, 19.02.16
Volker Böhm

13. Deutscher Insolvenzrechtstag 2016
Be- und Verwertung von (Kredit-)sicherheiten des Umlaufvermögens
Arbeitsgemeinschaft Insolvenzrecht und Sanierung im Deutschen Anwaltverein, 10785 Berlin, 09.03. - 11.03.16
Dr Rainer Riggert

SanierungsFORUM - Krise, Sanierung und Insolvenz
Insolvenzanfechtung: Leitlinien für den Geschäftsverkehr
FORUM Institut für Management, 50668 Cologne, 17.03. - 18.03.16
Dr Pascal Schütze

Risiko Insolvenzanfechtung
Verband der Vereine Creditreform e.V., Creditreform Akademie, 04103 Leipzig, 21.04.16
Rüdiger Bauch
Karsten Kiesel

Qualifizierungslehrgänge für Aufsichts- und Beiräte
Deutsches Verwaltungs- & Aufsichtsrats-Institut (DVAI), 83684 Tegernsee, 22.04.16
Volker Böhm

Handelsblatt Jahrestagung "Restrukturierung 2016"
Pre-Workshop: Die Liquiditätswirkung des Lieferantenpools
Handelsblatt in Kooperation mit EUROFORUM, 60313 Frankfurt, 27.04. - 29.04.16
Dr Rainer Riggert

Vorsatzanfechtung
Anfechtung erfolgreich vorbeugen - vermeiden - abwehren
FORUM Institut für Management GmbH, 80807 Munich, 27.04.16
Tobias Hirte
Karsten Kiesel

Verkauf & Verwertung in Krise und Insolvenz
AV-Service GmbH, 66117 Saarbrücken, 28.04.16
Tobias Hirte

 
German Supreme Court: recognition and enforcement of a debtor’s discharge from English bankruptcy proceedings not contrary to German public policy

Judgment of the German Supreme Court (Bundesgerichtshof) handed down on 10 September 2015.

The German Supreme Court has given a salutary reminder that a German court may only refuse to recognise and/or enforce a judgment from another EU member state in exceptional circumstances and where it was obvious that public policy dictated refusal. Where the factors relied upon by a party as being contrary to public policy were factors which could have been raised by way of objection in the original jurisdiction, or where a legal challenge could be mounted against a judgment in the original jurisdiction, then the original jurisdiction should be regarded as the best place for these arguments to be determined. 

Frank Tschentscher, LL.M. (Nottingham)
Attorney at Law (Germany)
Solicitor (England and Wales)

Frank Tschentscher

Facts
The Defendant was sole shareholder and director of a public limited company and had given a guarantee as primary debtor to the Claimant for the company’s borrowings. After the company fell into financial difficulties, the Claimant terminated the loan without notice and held the Defendant liable under the guarantee.

On 26 August 2011 bankruptcy proceedings in respect of the Defendant’s assets were opened in England. The company’s debt vis-à-vis the Claimant had been partially reduced through the realisation of other securities. By application dated 20 January 2012 the Claimant brought an action against the Defendant under the guarantee for payment of €165,696.44 plus interest.

The Defendant opposed the claim and referred to the English bankruptcy proceedings. The Regional Court in Cologne found in favour of the Claimant in line with the relief sought in its application. The Higher Regional Court in Cologne rejected the Defendant’s subsequent appeal. In its judgment, the court referred to the public policy exception contained in Article 26 of the European Council Regulation (EC) 1346/2000 on insolvency proceedings (the “European Insolvency Regulation”) and held that the Defendant had only moved the centre of his main interests (COMI, as defined by Article 3(1) of the European Insolvency Regulation) to England in order to evade his creditors’ claims and that that was an abuse of process.

In addition, the court held that it had not been shown that the English bankruptcy court had properly considered as to whether it had jurisdiction. However, the Higher Regional Court in Cologne allowed an appeal to the German Supreme Court, which ultimately set aside the decision and referred the matter back for further clarification of the facts.

Decision
The Supreme Court makes it plain, in concise but clear terms, that the decision of the Higher Regional Court in Cologne did not satisfy the requirements of the public policy exception contained in Article 26 of the European Insolvency Regulation. In particular, the Cologne court’s view that the Defendant’s transfer of residence to England was an abuse of rights and an inacceptable attempt to evade the justified claims of the Defendant’s creditors did not contribute towards satisfying the test for Article 26 of the European Insolvency Regulation. The same applied in respect of the (alleged) insufficient consideration of international jurisdiction by the English court.

The Supreme Court stated that the public policy exception contained in Article 26 of the European Insolvency Regulation can only be relevant in exceptional cases and where public policy dictated refusal. This was not the case here. For the purpose of recognition, it was irrelevant that the appellate court was not convinced that the English judge had considered his jurisdiction. Even an actual error in relation to the assumption of international jurisdiction could not constitute an infringement of German public policy, always provided, as in this case, the errors were not found to be arbitrary.

Moreover, German courts cannot refuse to recognise the discharge of residual debt granted in English bankruptcy proceedings on the grounds of claims that the debtor provided false or inaccurate information to the English court, leading that court to wrongly assume jurisdiction. Instead, and following on from the exceptional nature of Article 26 of the European Insolvency Regulation, it was necessary to refer the Claimant to the legal remedies, if any, available in the Member State of the original decision.

The same applied also in relation to the Claimant’s allegation of an infringement of its right to a fair hearing. The Claimant had submitted that it first became aware of the English insolvency proceedings during the course of the German proceedings and, consequently, that it had not had the chance to register its objections regarding jurisdiction in England. Here, the Federal Supreme Court noted that the Claimant did not appear to be left without a legal remedy and that it could submit an application to annul the bankruptcy order pursuant to Section 282 of the English Insolvency Act 1986. In view of all of the foregoing, the decision of the lower courts could not stand.

Practice note
Article 16 of the Insolvency Regulation provides that any judgment opening main insolvency proceedings must be recognised in all the other EU member states (other than Denmark) from the time that the judgment becomes effective in the state where proceedings are opened. Pursuant to Article 25 of the Insolvency Regulation, the same automatic recognition is afforded to subsequent judgments and orders made by the opening court and in the course of such main insolvency proceedings.

This, however, is subject to the proviso that a state may refuse to recognise insolvency proceedings where the effects of recognition would be manifestly contrary to that state's public policy (Article 26 of the Insolvency Regulation).

The decision of the German Supreme Court is a welcome reminder that the courts must take very seriously the concept of mutual trust in the legal systems of other EU-member states. The public policy ground pursuant to Article 26 of the Insolvency Regulation is only available in exceptional circumstances. It requires a manifest breach of a rule of law regarded as essential in Germany so that public policy dictated refusal. It is not enough to consider that the original court misapplied national (in this case: English) law.

Instead, the German courts must consider whether the system of legal remedies in the original jurisdiction affords sufficient protection for the party challenging the recognition and/or enforcement of the foreign judgment. It follows that, where registration and/or enforcement of a foreign judgment is challenged on the ground that the foreign court was fraudulently deceived, the German courts should first consider whether a remedy lies, in such a case, in the foreign jurisdiction in question.

Frank Tschentscher, LL.M. (Nottingham)
Attorney at Law (Germany)
Solicitor (England and Wales)

Impressum

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