However, the IfM study yields promising results as well. In insolvency proceedings terminated by confirmation of an insolvency plan, creditors received on average a dividend of above 60% from corporate debtors and a dividend of above 13% from individual enterprise debtors. Both values exceed significantly the chances for recovery in regular insolvency proceedings. Moreover, creditors benefit from an insolvency plan because it speeds up the proceeding and leads to earlier settlement of claims.

Nevertheless, only very few insolvency plans were implemented. According to the IfM study for the years between 2002 and 2007, 63,990 insolvency petitions were filed and 44,115 proceedings were opened, but only 211 proceedings were terminated by the confirmation of an insolvency plan. The study adds that the proportion of proceedings with insolvency plans is thus relatively small.

The evident benefits of the insolvency plan as a restructuring tool – as shown in the IfM study – make it probable that more debtors and creditors will prefer to restructure through insolvency plan in future. The prospects under regular insolvency proceeding are simply too meagre. Besides, practitioners specializing in insolvency plans now have more experience in drafting and implementing insolvency plans than in 2002.

The insolvency plan unit of Schultze & Braun expects an increasing demand for insolvency plans as the current global economic downturn continues to affect German companies and struggling companies tend to react and seek professional help earlier than in the recent past.

Dr Annerose Tashiro
Attorney at Law in Germany
Head of Cross-Border Insolvency & Restructuring

The French law provides no statutory provisions in the matter of international private law concerning insolvency proceedings. Nevertheless, it is commonly admitted that a foreign insolvency administrator can obtain the recognition of the appointment order on the basis of case law (the conditions are specified in the famous decision of the Cour de Cassation in the matter Munzer, Civ 1ère, 7 jan. 1964, N° 62-12.438, Bull civ. I N° 15).

Contrary to the EC Regulation nº 1346/2000 of the Council of May 29th, 2000 dealing with insolvency proceedings that provides legal basis for publication of the essential content of the opening order in other member state according to the modalities of publication of this member state, the issue of the publication of exequatur order has been treated at arm’s length by case law.

No clear answer to the question of the legal basis and the jurisdiction to order the publication of the decision of exequatur existed. Thus, the eminent Professor LeCorre writes in his well recognized Law and Practice of Insolvency Proceedings “the exequatur judgement (…) must be submitted to the same rules of publicity as a French opening judgement even if there are no explicit provisions provided." (translation by the author)

The Court of Appeal of Colmar managed to fill the gap in a case on the basis of the following facts:
In order to sue French debtors in France, the insolvency administrator of the German law company Phoenix Kapitaldienst GmbH - the insolvency proceeding has been opened by the Court of First Instance of Frankfurt on the Main on July 1st, 2005 - has introduced a request for exequatur before the Higher Court of First Instance of Strasbourg.

The court of Strasbourg granted the exequatur but − after omitting to decide on this demand at first − refused to grant the publication on the ground of lack of jurisdiction. According to the iudex a quo to order the publication would alter the foreign judgement.

The Court of Appeal of Colmar ordered in its ruling of June 16th, 2009 the publication of the exequatur decision “as if it were a French order opening a domestic insolvency proceeding”. The obligation to proceed to the publication was ordered to the court office of the commercial chamber of the Court of First Instance of Strasbourg by a supplemental ruling of the Court of Appeal dating from July 7th.

It appears from the decisions of the Court of Appeal of Colmar, first, that the court giving the decision to the exequatur request has jurisdiction to order the publication of its decision and, second, that this publication must be done on the basis of the Article R-621-8 of the French commercial code applicable by analogy.

It has to be noted that the Court of Appeal invalidates the decision of the Court of First Instance of Strasbourg for the reason that the publication constitutes only an accessory measure and by no means a modification of the foreign decision. According to the Court of Appeal, only the “finality of the exequatur” must be ensured by the publication.

Moreover, the court applies the Article R-641-7 of the commercial code dealing with domestic insolvency proceedings. As a result, it proceeds to a complete assimilation of the foreign decision that was submitted to exequatur to a French adjudication order despite the fact that the proceeding submitted to the appreciation of the court remains subject submitted the German law.

The decision of the Court of Appeal of Colmar is welcomed insofar as it clarifies the modalities of recognition of the foreign insolvency orders in France and it assimilates the foreign decision to a French decision concerning the modalities of publication.

Nevertheless, it is desirable that the case law goes on evolving. First, not only the decision of exequatur but the original opening order should be the subject of publication. Furthermore, the French procedural insolvency law, especially the deadline for the third-party appeal, should be applicable, at the end of the day, to a decision of exequatur duly published according to the French rules of legal publicity.

Court of Appeal of Colmar (France), RG N° 2 A 09/00692 & 2 A 09/03097, 18 June / 7 July 2009, F Schmitt in his capacity as insolvency administrator over the assets of Phoenix Kapitaldienst GmbH / Public Prosecutor of the TGI of Strasbourg

Patrick Ehret
Attorney at Law in Germany and France
DEA (Droit des Communautés Européennes)

In a decision of May 19th, 2009, the German Federal Court of Justice had the opportunity to specify the issue of the internal competence concerning the avoidance actions within the framework of a German insolvency proceeding with cross-border implications (German Federal Court of Justice (BGH), decision of May 19th, 2009, N° RG IX ZR 39/06 (Article 3 Section 1 of the 1346/2000 regulation of the Council of May 29th, 2000 relating to insolvency proceedings, Article 19a of the German Code of Civil Procedure (ZPO), Article 102 of the introductive Law of the Code of Insolvency (EGInsO)).

According to the highest German court, jurisdiction in the province of the tribunal having opened the insolvency proceeding is called to rule on avoidance actions filed by the insolvency administrator against defendants without jurisdictional venue within Germany.

This decision takes place after a preliminary ruling of the European Court of Justice (ECJ) of February 12th 2009, affirming the exclusive international competence of the courts of the member state where the insolvency proceeding has been opened for such cross-border avoidance actions.

According to the ECJ Article 3 of section 1 of the n°1346/2000 EC Regulation dealing with insolvency proceeding must be construed in the sense that the courts of the member state where the insolvency proceeding has been opened are competent to state on the issue of an revoking action ground on insolvency against a defendant having its statutory headquarters in another member state.

However, the ECJ only gave a decision on the issue of the international competence leaving to the member states the responsibility for determining the territorial and subject-matter jurisdiction. According to the ECJ, the court having jurisdiction should not necessarily be the one that opened the insolvency proceeding.

In this particular case, the insolvency administrator of a German corporation had sued before the Landgericht (the Court of First Instance dealing claims above 10,000 €) within the jurisdiction of the Court of First Instance of his appointment in order to recover from a Belgian corporation the payment of 50,000 Euros. Indeed, this amount had been transferred to this corporation the day before the filing of the insolvency proceeding. Both the judge of First Instance and the judge of appeal declared themselves incompetent, the latter permitting an appeal to the German Federal Court of Justice.

The German Federal Court of Justice having confirmed the international competence of the German courts in this particular case had to face the issue of defining the internal competence. The application of the Article 19 a) of the German Code of Civil Procedure defining the jurisdiction for the actions against the estate was limited to the actions filed against the insolvency administrator. Moreover this article being an exception to the regular rule of competence had to be interpreted in a restrictive way.

On this basis, some authors considered that without the intervention of the legislator the German courts – while internationally competent – had to declare themselves territorially incompetent and declare the avoidance claims inadmissible.

Yet, the German Federal Court of Justice has considered that the member states could not be deprive of all substance of the European law of direct application by omitting to declare a German court competent to deal with the avoidance claims of the insolvency administrator.

Therefore, by analogy Article 19 a) of the German Code of Civil Procedure and to Article 102 of the Introductive Law of the Code of Insolvency, the Landgericht seized at First Instance has been declared exclusively competent.

Although this case law is able to make the task of insolvency administrators in Germany easier and to enable a more effective and efficient treatment of cross-border avoidance claims, an intervention of the legislator remains desirable in order to obtain a complete concentration of the avoidance actions in the province of the Court having opened the insolvency proceeding. Indeed, the avoidance actions against defendants domiciled in Germany still have to be launched before the court of their place of residence.

Patrick Ehret
Attorney at Law in Germany and France
DEA (Droit des Communautés Européennes)