The German Federal Court of Justice (Bundesgerichtshof) recently changed its interpretation of the law regarding clawback claims, Vorsatzanfechtung (case of actio pauliana). Here, we outline how the Court's position on clawback claims has changed and what this could mean for future claims.
What are the existing legal provisions?
According to section 133 (1) of the German Insolvency Act (Insolvenzordnung, InsO), a transaction entered into by a debtor during the 10 years prior to a request to open insolvency proceedings (or following this request) that is intended to disadvantage the debtor's creditors may be contested if the other party was aware of the debtor's intention on the date of this transaction.
How has the interpretation of the law changed?
In determining the debtor’s intention and the other party’s awareness of this in a recent case, the Bundesgerichtshof has decided that:
- Both the intention to disadvantage and the awareness of this intention can no longer be determined by recognised imminent illiquidity alone.
- Full proof of intention to disadvantage is also no longer assumed simply because the debtor is aware that it is currently illiquid. Instead, the key factor is whether the debtor knows or at least accepts that it will not be able to satisfy all its creditors in the future either, and this also applies to the other party's awareness.
What does this mean for future clawback claims?
Limiting the circumstantial evidence of the debtor's intention to disadvantage and the awareness of this intention, it gives opposing parties new hope of avoiding a successful insolvency recission (Anfechtung) by the insolvency administrator.
Find out more
To discuss the issues raised in this article in more detail, please reach out to a member of our Restructuring & Insolvency team.
