Judgment of 14 November 2018, C 296/17, Wiemer&Trachte – has the CJEU done it right? [1]
Angel Ganev*, Simeon Simeonov* and Valentin Bojilov*
In the article ‘Judgment of 14 November 2018, C-296/17, Wiemer&Trachte – has the CJEU done it right?’ the authors analyze one of the most recent judgements of the Court of Justice of the European Union (hereinafter referred to as the “Court” or “CJEU”), delivered upon a referral for a preliminary ruling of the Bulgarian Supreme Court of Cassation and aimed at interpretation of Article 3(1) of Council Regulation (EC) No. 1346/2000 of 29 May 2000 on insolvency proceedings (hereinafter the “EIR 2000”) and more specifically – the jurisdiction of the courts of the Member States to hear cases which derive directly from insolvency proceedings and which are closely connected to them.
The request for referring the case to the CJEU has been made in proceedings between Wiemer & Trachte GmbH (“W&T”), a limited liability company, whose assets were made subject to insolvency proceedings in Germany, and a Bulgarian citizen, concerning the repayment by that person of a sum of money which was transferred to him from W&T’s bank account by the managing director of the Bulgarian branch of W&T, without the provisional liquidator’s consent. The request has been made by W&T to the Supreme Court of Cassation as part of the cassation appeal and consisted of 3 questions, concerning the interpretation of Articles 18(2), 21 and 24 of EIR 2000 in the light of the requirement for publication of the decision for opening of the main insolvency proceedings and the following consequences. The Bulgarian Supreme Court itself added to the referral one more question in regards to the meaning of Article 3(1) of EIR 2000, although it was indeed the same court that had already ruled very clearly on this issue in the sense that the Bulgarian courts of law have jurisdiction to hear the case.
With a judgment dated 14 Nov 2018 the CJEU came to the conclusion that Article 3(1) confers to the courts of the Member State which has jurisdiction to open insolvency proceedings exclusive jurisdiction to hear and determine actions which derive directly from those proceedings and which are closely connected with them. Assuming the answer given to the first question, the CJEU has found that there is no need to answer questions (2), (3) and (4). The Court referred, in support of this thesis, to its previous judgments under the Seagon[2] and F-Tex[3] cases.
The overall impression of the judgement is that it not only fails to fulfil the objectives of the preliminary ruling procedure due to the lack of answers to the questions (2), (3) and (4), but also suggests quite controversial answer to the first question, which contradicts the principles and the meaning of EIR 2000, as well as Regulation (EU) 2015/848 of the European Parliament and of the Council of 20 May 2015 on insolvency proceedings (the “recast EIR”).
The reasoning of the Court, presented with a view to justify the answer given, misses important points which are evident from the analysis of the applicable provisions of EIR 2000. The provision of Article 18 supports the view that the liquidator shall have the choice to exercise its powers whenever is needed in the territory of the Member States other than this one where the main proceedings have been opened, so as to effectively protect the creditors’ rights and the insolvency estate. The same approach may also be deduced from the second paragraph of Article 25(1) of EIR 2000. Strong arguments in support of the aforesaid position could also be derived from the provision of Article 6 of the recast EIR. According to the legal theory, the interpretation of Article 6, leading to the conclusion for exclusive jurisdiction, should be rejected as this would limit the options of the insolvency practitioner unduly. As stated in the article, the authors are of the opinion that EIR 2000 and recast EIR firmly recognizes the possibility that judgments arising from an action in the context of the insolvency to set a transaction aside may be adopted by the court seized of the insolvency proceedings or by another court which is situated either in the same Member State or in a different one. In line with the strategic decisions which the liquidator must take, he shall have the right to choose between different jurisdictions. This opinion is also pointed out by the AG Ruiz-Jarabo Colomer under the Seagon case.
The authors conclude that the CJEU judgement brings clarity with regard to the existing gap regarding the precise scope of international jurisdiction in both insolvency and civil/commercial matters and it also raises serious concerns in regards to such ‘bundling’ of jurisdiction. Concentrating different proceedings in one Member State may not always be in the interest of the creditors and the insolvency practitioner and does not necessarily facilitate the efficiency and acceleration of the insolvency proceedings, quite the contrary. This is why it is very important that the rule of jurisdiction should not be absolute, but should depend on the factual background of each particular case and on the choice of the liquidator.
It is to be seen how such controversial judgment will be applied by the national courts on cross-border insolvency matters in the future.
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[1] The authors from DGKV Attorneys and Counsellors at law represent Wiemer & Trachte GmbH both in the preliminary ruling procedure at hand and before the Bulgarian courts.
* Angel Ganev is a Partner at DGKV and heads the Bankruptcy & Insolvency and Litigation & Arbitration Practice Groups at DGKV. He is an experienced litigator with more than 15 years’ practice in complex commercial disputes with a strong cross-border focus, in international arbitration, and commercial litigation. Mr. Ganev acts on regular basis as an arbitrator with the VIAC, the Arbitration Court with the Bulgarian Industrial Association and the Chartered Institute of Arbitrators. He is also a Member of Sofia Bar, IBA, INSOL Europe and ICC FraudNet. He holds an LL.M degree from University of London and Sofia University and a Diploma in International Comparative Commercial Arbitration from School of International Arbitration, London and has various publications on arbitration, insolvency and competition law.
* Simeon Simeonov is a Senior Associate and a member of the Bankruptcy & Insolvency and Litigation & Arbitration Practice Groups at DGKV. Mr. Simeonov has extensive experience in civil and commercial litigation, arbitration and insolvency and represented major domestic and international clients in a large number of complex litigation and insolvency cases at both the trial and appellate levels. Mr. Simeonov holds an LL.M. degree from Sofia University, Faculty of Law and an LL.M. degree in International Business Law from Tilburg Law School, Tilburg University, The Netherlands. He is a member of the Sofia Bar and the International Bar Association.
* Valentin Bojilov is a Senior Associate at DGKV working on client matters coming within the remit of a number of DGKV’s practices, notably Litigation & Arbitration, EU Law, Commercial Contracts, M&A and Project Financing. He holds his first law degree from Sofia University and an LL.M. in EU Law and International Economic Law from the University of Lausanne.
[2] Judgment of 12 February 2009 under case C‑339/07 Christopher Seagon v Deko Marty Belgium NV EU:C:2009:83
[3] Judgment of 19 April 2012 under case C‑213/10 F‑Tex SIA v Lietuvos-Anglijos UAB „Jadecloud-Vilma“ EU:C:2012:215