ECJ rules on "centre of main interest" in insolvency proceedings

Background

The courts of the Member State where the debtor’s centre of main interest is situated have jurisdiction for insolvency proceedings and proceedings closely connected to insolvency proceedings. This departs from the general rule that a defendant must be sued before the courts of the member state where their registered office is situated.

However, it was unclear what constituted as “closely related” to insolvency proceedings. A recent ruling gives clarification.

Case summary

• In Slovakian insolvency proceedings a committee of creditors rejected the restructuring plan of a debtor. The debtor's shareholders and suppliers claimed to have suffered damage and sued the members of the committee of creditors before an Austrian court, as one of the committee members was an Austrian entity.
• The claims were based on alleged infringements against the obligations the committee had as creditors, however the legal basis of the claim was the Slovakian civil code. The matter was therefore only tangentially connected to insolvency proceedings.
• The ECJ ruled that the extent of that committee’s obligations in the insolvency proceedings and the compatibility of the rejection with those obligations should be analysed. In this case the issue was "closely related" and therefore the courts of Slovakia, the debtor's centre of main interest, had jurisdiction.

Comment

It is welcomed that the ECJ has now essentially stated that all claims against those involved in insolvency proceedings (i.e. insolvency practitioners, committees of creditors) belong before the courts of the country that has jurisdiction for the insolvency proceedings themselves.

Valach and Others (C-649/16)