Individual Actions Against Insolvent Debtors: CJEU Clarifies Rationale of Insolvency Exception
This post is authored by Antonio Leandro, Professor of Public and Private International Law at the University of Bari.
On 14 November 2024, the Court of Justice delivered its judgment in the Oilchart case (C-394/22 Oilchart International NV v O.W. Bunker (Netherlands) BV, ING Bank NV), which deals with the ‘insolvency exception’ provided in Article 1(2)(b) of the Brussels Ibis Regulation. The CJEU was asked by the Antwerp Court of Appeal to interpret that exception on the occasion of an action for the payment of a contractual claim that a creditor had brought in Belgium after filing for verification of the same claim within an insolvency proceeding opened in The Netherlands.
Factual Background
The facts have been described in detail by Manuel Penades Fons in its comment on the AG Medina’s opinion. However, they are worthy of a brief reminder.
Oilchart claimed before the Belgian courts the payment of outstanding invoices against OW Bunker, which had previously been declared insolvent in The Netherlands. Oilchart acted so to invoke a bank guarantee that was enforceable upon a declaratory judgment or an arbitral award rendered in Belgium against OW Bunker in relation to the payment of the invoices. The bank guarantee had been issued upon order from third parties (shipowners and P&I Clubs) to obtain the release of certain ships that Oilchart had managed to attach earlier on a precautionary basis. Oilchart had already submitted the same claim for verification within the Dutch insolvency proceedings.
Once seized of the payment action, the Antwerp Court of Appeal doubted whether the Belgian court had jurisdiction under the Brussels Ibis Regulation as the opening of the Dutch proceedings might have triggered the ‘insolvency exception’. The Belgian court deemed it necessary to ask the CJEU for clarifications.
Legal Background
The Olichart case has developed under Regulation (EC) no 1346/2000 on insolvency proceedings, which was silent on the jurisdiction over the so-called ‘insolvency-related actions’. The CJEU filled in this gap by relying upon the ‘insolvency exception’ of the Brussels I regime (as early as under the 1968 Brussels Convention, then the Brussels I and finally the Brussels Ibis Regulation) and has built up a massive case-law since the well-known Gourdain judgment rendered in 1979. The Court has consistently held that, in order to fall under the ‘insolvency exception’, the action must be ‘directly derived from’ and ‘closely linked with’ the insolvency proceedings; otherwise, the Brussels Ibis Regulation applies. That is what is usually referred to as Gourdain two-fold criterion. Particularly regarding the ‘direct derivation’, the Court maintains that the legal basis of the underlying claim is more important than the procedural context when it comes to triggering the ‘insolvency exception’.
Article 6 of Regulation (EU) 2015/848 (‘EIR’) basically replicates the Court’s findings in order to set out the scope of the vis attractiva concursus (see recently Leandro, ‘Article 6’, in Cuniberti and Leandro (eds), The European Insolvency Regulation and Implementing Legislations).
The Gourdain criterion also helps avoid ‘regulatory loopholes’ between the Brussels Ibis Regulation and Regulation (EC) 1346/2000 (now the EIR). In this respect, the Court has also steadily warned interpreters to apply restrictively the ‘insolvency exception’, as the Brussels Ibis Regulation ‘is intended to apply to all civil and commercial matters apart from certain well-defined matters’ (see, among others, Case C-213/10 F-Tex SIA v Lietuvos-Anglijos UAB ‘Jadecloud-Vilma’ ECLI:EU:C:2012:215, para 29). Accordingly, Regulation (EC) 1346/2000 (and now the EIR) ‘should not be broadly interpreted’ (see, among others, Case C-157/13 Nickel & Goeldner Spedition GmbH v ‘Kintra’ UAB ECLI:EU:C:2014:2145, para 22).
The legal background of the admissibility and treatment of individual actions that creditors attempt to bring outside the insolvency proceedings after the opening is pretty simple: the lex concursus, i.e., the law of the State in which the insolvency proceedings have been opened, applies (Article 4(2)(f) of Regulation (EC) 1346/2000; now Article 7(2)(f) of the EIR).
The chance for Oilchart to bring parallel actions in relation to the same claim (one for the declaration before the Belgian courts in order to enforce the bank guarantee and the other for the verification before the Dutch insolvency courts) was allegedly based on Dutch law, which provides a distinction between verifiable and non-verifiable claims (Arts 25, 26 and 110 of the Dutch Faillissementswet).
The AG’s Opinion
In her opinion, AG Medina held that ‘when the debtor is declared insolvent and the action seeks the recovery of a claim which falls within the estate in the insolvency proceedings, the legal basis of that claim becomes a provision of the insolvency legislation of the lex concursus and that action must be characterized as an action which derives directly from insolvency proceedings’ (para 53). AG Medina regarded ‘the ‘legal basis’ test as a test by which the Court establishes whether the origin of the obligation falls within the insolvency estate’ (para 55).
She further came ‘to the conclusion that the Gourdain criteria should be interpreted in a way that takes into account the objective and raison d’être of the insolvency proceedings, namely the common pool problem and efficient asset-management. A narrow interpretation of those criteria leads to the possibility of circumvention by the creditor of the rules of insolvency proceedings, asset-grabbing and depletion of other creditors’ rights. That circumvention could take place due to the existence of multiple jurisdictions and the classification of the parallel action as a ‘civil and commercial’ action within the meaning of Article 1(1) of the Brussels Ibis Regulation’ (para 62).
AG Medina adopted a ‘result-oriented approach’ in reading the Gourdain test that might persuade in terms of purpose (to secure the exclusiveness of the jurisdiction that supervises the insolvency proceedings, the efficiency thereof, the integrity of the insolvency estate for the lodged creditors’ satisfaction and the collective nature of the proceedings), but is not consistent either with the CJEU’s case-law or, most importantly, the regime concerning the effects of the insolvency proceedings on individual actions.
The Court’s Ruling
Following the Gourdain criteria, the Court stresses that the action for payment for goods delivered brought before the Belgian courts against a company subject to insolvency proceedings abroad does not fall under the ‘insolvency exception’ of the Brussels Ibis Regulation, that is, it does not belong to the vis attractiva concursus. The action in question did not meet either the ‘direct derivation’ requirement – the creditor was seeking an order based on contract law that is independent of the special rules governing insolvency proceedings – or the ‘closeness with the insolvency proceedings’ – the fact that the claim underlying the action is the same as that lodged in the insolvency proceedings for verification purposes is not sufficient for that action to show closeness with the proceedings (para 49).
The Court further clarifies that, in any case, it is for the lex concursus to determine the effects of the insolvency proceedings on individual actions and the underlying contractual obligation, as well as to govern the lodging, verification and admission of claims (para 57; the English version speaks of ‘individual creditors’, but it is evidently a translation mistake as the other versions refer to ‘individual actions’ – poursuites individuelles, azioni giudiziarie individuali, Rechtsverfolgungsmaßnahmen einzelner Gläubiger auswirkt). In this respect, the Court recalls that ‘both the question of admissibility of an individual action against an insolvent company and that of the treatment of such an action where there is a declaration of claim made in the insolvency estate are covered not by rules allocating jurisdiction but by conflict of laws rules for determining the applicable law’ (para 51). The relevant conflict of law rule was Article 4 of Regulation (EC) 1346/2000 (now Article 7 of the EIR), which calls courts to apply the lex concursus even where the parallel civil actions are brought in Member States other than that of the insolvency proceedings.
Comment
The issue at the core of the Oilchart case was whether a claim could be brought simultaneously ‘from the estate’ or ‘outside of the estate’ before courts of different Member States. This scenario undoubtedly risks undermining the efficiency of the insolvency proceedings and the interest of the general body of creditors (to which the creditor suing before the Belgian courts belonged); see AG Medina’s Opinion, para 51 ff.
Even qualifying the case as an example of parallel actions, neither Regulation (EC) 1346/2000 (and the EIR) nor the Brussels Ibis Regulation is of help to determine which one is entitled to go on. The first does not provide rules on parallel related proceedings (apart from governing coordination between main and secondary insolvency proceedings), and the rules laid down by the Brussels Ibis Regulation cannot apply due to the insolvency exception that covers one action. By-analogy applications have been firmly excluded by the CJEU (Oilchart, para 59, with further references).
However, upon closer inspection, the Dutch rules could not have triggered in the Oilchart case such parallel proceedings as those might warrant the AG Medina’s concerns. They do envisage the case of legal actions concerning rights or obligations belonging to the insolvency estate that are brought against the insolvent debtor, adding, however, that they have no legal force against the estate (Art 25(2) Dutch Faillissementswet). The situation of parallel actions concerning the same claim is quite different and not covered by those provisions.
Furthermore, any actions seeking the performance of an obligation from the estate are to be brought through verification (Arts 26 and 110 Dutch Faillissementswet). Moreover, even assuming that the civil foreign judgment gave entire or partial satisfaction to the creditor, the return-and-imputation rule of Article 20 of Regulation (EC) 1346/2000 (Article 23 of the EIR) would prevent that creditor from affecting the pari passu and obtaining further dividend to the detriment of other lodged creditors (see also Manuel Penades Fons).
What is more, the actions in the Oilchart case aimed at different purposes. On the one hand, the creditor applied for verification in the Dutch insolvency proceedings; on the other hand, it demanded a declaratory judgment as a preliminary step to enforce a bank guarantee against third parties. While the underlying claim was the same, the civil action could not impact on the estate. Actually, the major impact would be on the bank and the third parties ordering the guarantee; not by chance, the bank demanded that the guarantee be enforced after the closure of the Dutch insolvency proceedings.
In light of the foregoing, the Court’s ruling is nothing more than the natural outcome of applying a well-established case-law (that setting out the ‘insolvency exception’/vis attractiva) and self-evident rules (those contained in Article 4 of Regulation (EC) 1346/2000, now Article 7 of the EIR) to the circumstances of the Oilchart case.
After recalling that the lex concursus establishes whether and to what extent an individual action may be brought after the opening of the insolvency proceedings, and that the ‘action’s legal basis’ is paramount to establish the scope of the ‘insolvency exception’ in the Brussels Ibis Regulation, the CJEU’s message is quite clear. Should the seized court have jurisdiction pursuant to the ‘action’s legal basis’, it will apply the lex concursus to establish the action’s admissibility before deciding on its merit, possibly under another law. In that regard, it does not matter whether such court has jurisdiction under the Brussels Ibis Regulation or the vis attractiva concursus.
Concluding Remarks
If one wished the Court to replace the Gourdain criteria with a result-oriented approach or even with a far-reaching principle that places any action concerning the insolvency estate under the vis attractiva concursus, the Oilchart case was not the right occasion. Actually, no occasion seems suitable as long as the legal framework stands as it does.
The EU legislator might consider inserting a uniform definition of ‘action which derives directly from the insolvency proceedings and is closely linked with them’, in order for the vis attractiva in the EIR and the ‘insolvency exception’ in the Brussels Ibis Regulation to work independently of the ‘action’s legal basis’. However, that is another story, to tell during the next EIR’s recast with a balanced look at insolvency and private international law policies.
On the other hand, the competence of the lex concursus to verify the admissibility of individual actions after the opening of an insolvency proceeding by no means risks being undermined, even in future recasts. The EIR is essentially a private international law instrument. Prohibitions or permissions to bring individual actions are or could be subject to shared rules depending on the extent and depth of the EU harmonisation process in the area of restructuring and insolvency law.
Finally, it is worth recalling that, except for enforcement procedures, the treatment of lawsuits and arbitrations commenced before the opening of the insolvency proceedings is different. In such cases, the effects of the insolvency proceedings are subject to the law of the Member State in which the lawsuit is pending or in which the arbitral tribunal has its seat insofar as the lawsuit or the arbitration concerns an asset or a right which forms part of a debtor’s insolvency estate (Article 18 of the EIR). However, that is another story, too.