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Recognition of foreign proceedings

Under what circumstances will the courts in your jurisdiction recognise the validity of foreign insolvency proceedings?

According to the European Court of Justice, German insolvency courts must not review the jurisdiction assumed by the court of another EU member state with respect to insolvency proceedings. In the event that a court in another EU member state issues a so-called ‘opening decision’ (ie, any decision the consequence of which is a divestment), this opening decision will automatically be recognised in Germany.

Foreign insolvency proceedings (eg, opening, execution or conduct and termination) are acknowledged in Germany in principle. Such recognition may only be denied if the court of the state in which the insolvency proceedings are opened has no jurisdiction according to German law or if such recognition means that the essential principle of German law is not in compliance with the decision. A mere deviation from German law is insufficient.

Winding up foreign companies

What is the extent of the courts’ powers to order the winding up of foreign companies doing business in your jurisdiction?

The German insolvency courts may become active only if the debtor pursues an economic activity as a self-employed person in Germany. In this case, the foreign assets of the debtor are covered by the insolvency proceedings.

In the event of a cross-border case within the European Union, the court has jurisdiction in the territory of which the debtor has the centre of its main interest. With respect to companies, this is the place where they carry out their business activities.

Centre of main interests

How is the centre of main interests determined in your jurisdiction?

The jurisdiction of the German insolvency courts is determined by reference to the place where the debtor has its main centre of economic interest. With regard to companies and legal entities, it is assumed that the seat, as stipulated in the articles of association, forms the ‘main centre of interest’. As regards individuals, as a rule, their domicile is decisive. If the seat as stipulated in the articles of association and the administrative headquarters differ from each other, the administrative headquarters of the debtor's company is decisive (ie, where business decisions are passed and implemented into management actions). If the debtor's company has several branch offices, its headquarters form the legal basis for jurisdiction.

Cross-border cooperation

What is the general approach of the courts in your jurisdiction to cooperating with foreign courts in managing cross-border insolvencies?

In the event that the requirements for the recognition of foreign insolvency proceedings are met or it has been clarified that the requirements will be met, the German insolvency court can cooperate with foreign insolvency courts – in particular, it may provide information which is relevant to the foreign proceedings.

In this case, cooperation is left to the discretion of the respective court and only the efficient handling of cross-border insolvency proceedings will serve as a benchmark.