Air Berlin Online Symposium: The Protection of Local Creditors
This is the first post in the online symposium on the recent judgment of the CJEU in Air Berlin (see also here). It is authored by Ilaria Queirolo and Stefano Dominelli (University of Genoa, Italy), who contributed to the recent Elgar Commentary on the European Insolvency Regulation and Implementing Legislations.
In Air Berlín Luftverkehrs KG, the Court of Justice of the European Union has dealt with a number of questions on the Insolvency Regulation Recast (cfr. para. 49 on matters of intertemporal law). As already noted by scholars (see Cuniberti here), the underlying issue is that of coordination between a main insolvency procedure (opened in 2017 Germany against the air carrier) and a subsequent secondary procedure (opened in 2020 in Spain). Following the opening of the main proceedings, creditors in Spain obtained Spanish courts relief orders for payments in their favour – without opening a secondary proceedings. The main practitioner obtained a Spanish authorisation to transfer assets (despite a Spanish freezing order) and after that, a secondary insolvency proceedings was opened in Spain as well.
The judgment makes use and applies one provision of the Insolvency Regulation Recast that finds no direct ‘predecessor’ in the previous Regulation 1346/2000 (albeit the term was already used), i.e. current article 2(11) on ‘local creditors’. The definition of ‘local creditors’ acquires relevance in as much such a category is granted given rights under the Regulation: for example, under article 3(4)(b), it is for ‘local creditors’ and public authorities to request the opening of a territorial procedure before a main insolvency proceedings has been opened.
There is little doubt that in the case dealt with by the Court of Justice, former employees litigating in Spain did fulfil the requirements to be considered as ‘local creditors’ as they had ‘claims [which] arose from or in connection with the operation of an establishment […]’. Rather, the judgment offers some food for thinking as per the balancing of different values and principles enshrined in the Regulation.
According to article 45 of the Insolvency Regulation Recast, ‘creditors’ have the possibility to lodge their own claims against the debtor in any insolvency proceedings opened in the Member States. This is a case of cross-filing the same credit in multiple parallel insolvency proceedings. In Air Berlín Luftverkehrs KG, former employees did file their claim in both the German main insolvency proceedings and the Spanish secondary insolvency proceedings.
It has been argued that (see ex multis Peter Mankowski, art. 45, para. 6; for further references, see Queirolo/Dominelli, in Cuniberti, Leandro, 2024, art. 45, para. 45.11) whereas creditors have an EU-derived substantive right to file claims under article 45(1) of the Regulation, the admission of the claim, as well as its ranking, is done according to the lex concursus where the claim is filed.
In its latest decision, the Court of Justice concludes that the lex concursus secondarii, under article 7 g) and h) of the Regulation, governs claims to be admitted only if said claims arose after the opening of the secondary proceedings. The relevant point before Spanish national courts being that the secondary proceedings in Spain was opened quite some time after the main German procedure. In between the opening of the two proceedings employees were recognised the right to payment in Spain. Such a right, under the law of the main procedure, was a non-privileged ‘claim against the insolvency procedure’, whilst under the local Spanish law, it would have been a privileged ‘insolvency claim’.
The referring court (para. 30) argued that ‘it would be inconsistent for Regulation No 2015/848 to provide that the priority of claims or the ranking of employees’ claims must be determined, in order to protect local interests, in accordance with the law on insolvency proceedings of the State of the opening of proceedings, only for the application of that law to lead to an outcome that is detrimental to the interests the protection of which is sought’.
What – with a margin of uncertainty (see Cuniberti, here) – the Court seems to argue is that claims in the case at hand should have been filed in the Spanish secondary proceedings under the German law of the main proceedings. The strongly adherence to the letter of the Regulation, leading in the practical case to a treatment of local creditors worst-off than the one under the local insolvency law, confirms the Court’s vision according to which the main insolvency procedure has a ‘predominant role’ (para. 70) in the European judicial space and seems to translate in one important practical consequence: local creditors should not wait more than necessary to open a secondary insolvency proceedings, as only from the moment of its opening the lex concursus secondarii will govern the claims, their rankings and lodgement.
Not only the nature of the main insolvency proceedings is ‘protected’ as per the law applicable to claims; the Court also argues that the removal of assets (even despite local court orders to the contrary) by the main insolvency practitioner that has been authorised by (another) local court is not against the Regulation if a secondary proceedings has not been opened yet (para. 73). In this case, however, the Court does make use of principle of the protection of local interests (para. 85) and concedes that, once opened, the practitioner appointed in the secondary proceedings may exercise a claw-back action not only against the debtor, but also against the administrator appointed in the main procedure (para. 84). It remains, nonetheless, that such actions can only be exercised to retrieve assets that fall within the scope of the local proceedings. Before the opening of such proceedings, the foreign main administrator may indeed transfer goods and assets which could potentially be under the competence of a possible subsequent secondary procedure.
What seems to emerge, thus, is that in specific contexts, the best way for local creditors to protect their interests appears to be that of an immediate opening of a local insolvency proceedings.