The CJEU on Payments to an Insolvent Debtor under the European Insolvency Regulation
The author of this post is Antonio Leandro, Professor of Public and Private International Law at the University of Bari (Italy).
On 27 March 2025, the Court of Justice delivered its judgment in the Auto1 European Cars case (C-186/24 Matthäus Metzler, acting as insolvency practitioner in insolvency proceedings, v Auto1 European Cars BV), which deals with Article 31 of the European Insolvency Regulation (Recast) (EIR).
Legal Background
Article 31 of the EIR addresses the case of third parties that fulfil an obligation in favour of the insolvent debtor in a Member State after the opening of the insolvency proceedings in another Member State, when they should have done so for the benefit of the insolvency practitioner (on the topic, see Hrycaj, Article 31, in Cuniberti, Leandro (eds), The European Insolvency Regulation and Implementing Legislations – A Commentary, Edward Elgar, 2024). The payment yields the debt-discharging effect if the third parties are unaware of the opening of the insolvency proceedings. The unawareness is presumptively tied to fulfilling the obligation before the publications outlined in Article 28.
Facts
The facts underlying Auto1 European Cars have already been described on this blog by Marta Requejo Isidro and are quite simple. In the framework of insolvency proceedings opened in Austria in May 2022, a dispute arose between the insolvency practitioner and Auto 1 – a company based in the Netherlands with a branch in Austria – about the payment that the latter made in June 2022 to the insolvent debtor under a sale contract signed in Austria. The deed of sale had been concluded in Austria after the opening of the insolvency proceedings. The good (a car) was handed over in Austria as well. Auto1 paid the price from a German bank account.
The Austrian insolvency practitioner sued Auto1 for the payment of the car’s price, claiming that the car had been sold after the opening of the insolvency proceeding, that is, when the Austrian lex concursus qualifies any acts concluded by the insolvent debtor as unenforceable against the insolvency estate. Auto 1 contested this claim, arguing that the car was outside the insolvency estate. Since Auto1 made the payment from a German bank account, it further contended any connections of its obligation with the State of the proceeding. Moreover, it asserted not to be aware of the opening. Accordingly, Auto 1 invoked Article 31 of the EIR to be discharged from its obligation or other compensation corresponding to the selling price of the car.
The Preliminary Questions
In order to rule on the insolvency practitioner’s contentions against the Auto1’s allegations, the Austrian Supreme Court deemed it necessary to ask the CJEU a) whether Article 31 includes ‘obligations arising from a legal transaction which the debtor did not conclude until after the opening of the insolvency proceedings and the transfer of powers to the insolvency practitioner’, and, if so, 2) whether Article 31 applies if the payor, the insolvent debtor, and obligation to be honoured have only connections with the Member State of the insolvency proceedings, while the payment is made through a bank account located in another Member State.
The Court’s Ruling
The CJEU focused on the first question and stated that Article 31 also applies to legal acts that the insolvent debtor has concluded after the opening of the insolvency proceedings, provided that the acts are enforceable against the lodged creditors.
The Court held that Article 7 and, hence, the law of the State in which the insolvency proceedings have been opened (lex concursus) apply to assess such requirement. Accordingly, should the lex concursus permit a post-opening act to be enforced against the lodged creditors, Article 31 covers the obligation arising out of such an act and protects the honouring party.
The Courts added that, if Article 31 were meant to include unenforceable acts, the insolvency practitioner would be prevented either from recovering assets that the debtor has unduly distracted from the insolvency estate after the opening – in blatant contrast with EIR’s aim to impede cross-border asset removals to the detriment of the lodged creditors – or from suing third parties for unjust enrichment.
Comment
In Grontimmo, the CJEU had clarified that Article 31 refers to third parties rather than creditors. In Auto1 European Cars, the Court adds, on the one hand, that the provision applies to acts that the insolvent debtor concludes after the opening of the insolvency proceeding, but, on the other hand, that creditors regain protection because Article 31 works as long as such acts are enforceable against them under the lex concursus.
The Court relies on the lex concursus to outline the exact scope of Article 31. In its words, ‘that provision cannot be understood independently of Article 7 …, which determines the law applicable to insolvency proceedings and their effects’ (Auto1 European Cars, para 22). The lex concursus does not govern the debt-discharge effect, which is uniformly established by Article 31. Instead, it applies to determine specific prerequisites of Article 31, regardless of whether the obligation originates from acts that the debtor has concluded before or after the opening of the insolvency proceedings.
More in detail, the lex concursus applies, under Article 7(2)(b), to determines ‘the assets which form part of the insolvency estate and the treatment of assets acquired by or devolving on the debtor after the opening of the insolvency proceeding’, and, under Article 7(2)(m), to govern ‘the voidness, voidability or unenforceability of legal acts detrimental to the general body of creditors’.
Therefore, Article 31 encompasses any act entailing the removal of assets, as long as the payor is unaware of the opening when fulfilling its obligation and the lex concursus permits the legal act to be enforced against the lodged creditors.
As the issue of enforceability primarily concerns acts detrimental to creditors, the interaction between Articles 7, 16, and 31 warrants a final remark, albeit it was not to the Court’s attention.
It is well known that, under specific conditions, Article 16 renders detrimental acts immune from the lex concursus (see Wautelet, in the commentary edited by Cuniberti and Leandro, mentioned above). It is also well known that Article 16 applies, in principle, to legal acts concluded before the opening of the proceedings (Lutz, paras 35-36). Accordingly, for the purposes of Article 31, the lex concursus would apply without exceptions to determine the act’s enforceability only in relation to post-opening acts.