The ECJ has outlined how the protection afforded to a counterparty by Article 13 of the European Insolvency regulation works where an insolvency officeholder challenges a transaction governed by a law different from the one which applies to the insolvency of the estate generally.
A German liquidator challenged a payment after German insolvency proceedings had been commenced. The payment was made out of the insolvent German company's bank account in Austria to Mr L. The payment was in connection with certain Austrian proceedings. Mr L defended the liquidators claim on the basis of certain elements of Austrian law which he claimed gave him a limitation type defence.
The ECJ held that Article 13 of the regulation meant that the procedural defence under Austrian law was available to Mr L to refute the insolvency claim even though the law applicable to the main insolvency proceedings was German law.
It has always been understood that Article 13 allowed substantive defences available under the governing law of the relevant transaction to be deployed to defeat an insolvency claw back claim made in foreign insolvency proceedings. It had been unclear whether procedural defences such as time bars for bringing claims were within the scope of Article 13. This case has resolved that issue.