16 January 2014
Case C-328/12
Court of Justice of the European Union (Judges Tizzano, Lenaerts, Borg Barthet, Levits, Berger (Rapporteur))

The Court of Justice extended the reach of the EU Insolvency Regulation to allow proceedings to set aside transactions to be brought against defendants resident in non-member states, confirming that it has universal effect.

The German Federal Court of Justice referred the question of whether, under Article 3(1) of the Insolvency Regulation (the ‘Regulation’), the Courts of the member state in which insolvency proceedings are opened have jurisdiction to decide an action to set aside a transaction brought against a person resident in a non-member state.  The Court of Justice of the EU answered in the affirmative, extending their finding in case C-339/07 Seagon [2009] ECR  I-767 that the Courts of the member state in which insolvency proceedings have been opened have jurisdiction when the defendant was resident in another member state.

In reaching their decision the Court of Justice examined both the provisions and objectives of the Regulation.

It found no requirement in the Regulation that limited its application to intra-EU matters.  Although some provisions require connecting factors to member states others did not. Further, Article 44(3)(a) would be superfluous if the Regulation could not apply between a member state and a third country.  Moreover, the requirement that the debtor’s COMI is identified at the application to open proceedings (when cross-border elements may be unknown) suggests a cross-border element is not necessary for the Regulation to apply.

The Court of Justice also reasoned that the Regulation’s objectives of fostering certainty were furthered by its application when the debtor’s COMI is in a member state, irrespective of the location of the defendant’s residence.  This was deemed more important than the principle that the defendant should be sued in his country of residence.

The Court rejected the argument that non-member states would be under no obligation to enforce a judgment under the Regulation.  It noted that judgments may regularly be enforced in non-member states through bilateral conventions.  Further, article 25 of the Regulation can be effective if the defendant has assets in a member state.

Those transacting with a debtor whose COMI is in a member state may, on a debtor’s insolvency, be subjected to proceedings under the laws of the debtor’s COMI, even if they are located outside the EU. The decision also implies that the Regulation is capable of applying to insolvency proceedings which are of a purely domestic nature.