CJEU considers interplay between EC Regulation on Insolvency and Brussels I

What did the Court of Justice of the European Union (CJEU) decide in Nickel & Goeldner Spedition GmbH v "Kintra" UAB and how do you decide whether the EC Regulation on Insolvency 1346/2000 or Brussels I applies to jurisdictional disputes?

Original news

Nickel & Goeldner Spedition GmbH v "Kintra" UAB C-157/13, [2014] All ER (D) 129 (Sep)

The CJEU gave a preliminary ruling concerning the interpretation of Council Regulation (EC) 1346/2000, arts 3(1) and 44(3) (the EC Regulation on Insolvency) and of Council Regulation (EC) 44/2001, arts 1(2)(b) and 71 (Brussels I) dealing with jurisdictional issues. The request had been made in proceedings between Nickel & Goeldner Spedition GmbH (Nickel) and "Kintra" UAB (Kintra), a company that had been placed in liquidation, concerning payment in respect of services comprising the international carriage of goods.

How did the issue arise and what were the jurisdictional factors?

Kintra (a company incorporated under Lithuanian law that has been placed in liquidation in Lithuania) provided services comprising the international carriage of goods for Nickel (a company incorporated under German law) in France and in Germany.

Kintra's insolvency administrator applied to the Lithuanian Regional Court, Vilnius for an order that Nickel pay for these services.

Kintra's administrator argued that the Lithuanian court had jurisdiction based on Lithuanian insolvency law. Nickel disputed that jurisdiction claiming that the dispute fell within the scope of:

the Convention on the Contract for the International Carriage of Goods by Road, signed in Geneva on 19 May 1956, as amended by the Protocol signed in Geneva on 5 July 1978 (the CMR) (which applies to 'every contract for the carriage of goods by road...when the place of taking over of the goods and the place designated for delivery...are situated in two different countries, of which at least one is a contracting country,... irrespective of the place of residence and the nationality of the parties') and

Brussels I

The matter was appealed through the Lithuanian courts up to the Supreme Court of Lithuania, which decided to stay the proceedings and refer various questions to the CJEU.

Does the EC Regulation on Insolvency or Brussels I apply?

The CJEU reviewed the case law on the relationship between the EC Regulation on Insolvency and Brussels I, including:

      • F-Tex SIA v Lietuvos-Anglijos UAB 'Jadecloud-Vilma' C-213/10 —only actions which derive directly from insolvency proceedings and are closely connected with them are excluded from the scope of Brussels I. Consequently only those actions fall within the scope of the EC Regulation on Insolvency
      • Gourdain—an application to make good a deficiency in the assets (which under French law may be taken by the insolvency administrator against the managers of the company in order to have them declared liable) was an action which derives directly from insolvency proceedings and is closely connected with them. In order to reach that conclusion, the CJEU relied on the consideration that the action was based on provisions derogating from the general rules of civil law
      • Christopher Seagon v Deko Marty Belgium NV C-339/07 [2009] All ER (D) 112 (Feb) —the CJEU adopted a similar view regarding an action to set a transaction aside (which in German law may be taken by the insolvency administrator in order to challenge acts undertaken before the insolvency proceedings were opened which are detrimental to the creditors). Here, the action was based in the national rules relating to insolvency proceedings
      • German Graphics Graphische Maschinen GmbH v Schee [2009] All ER (D) 75 (Sep) —the CJEU held that an reservation of title clause against an insolvency administrator has only an insufficiently direct and insufficiently close link with insolvency proceedings as it is independent of the opening of insolvency proceedings. Similarly, an action brought on the basis of an assignment of claims granted by an insolvency

In Nickel & Goeldner Spedition GmbH v "Kintra" UAB, it was concluded that the CJEU has taken into account the fact that various types of actions were brought in connection with insolvency proceedings. However, it has mainly determined whether the action derived from insolvency law or from other rules. It follows that the decisive criterion is not the procedural context of the action, but its legal basis, ie whether the right or the obligation arises from:

      • common rules of civil and commercial law, or
      • the rules specific to insolvency proceedings

Here, the action (for the payment of a debt arising out of the provision of services in implementation of a contract for carriage) could have been brought by the creditor itself before the opening of insolvency proceedings and would have been governed by the rules concerning jurisdiction applicable in civil and commercial matters. The fact that, after the opening of insolvency proceedings, the action for payment is taken by the insolvency administrator who acts in the interest of the creditors does not substantially amend the nature of the debt relied on which continues to be subject to the rules of law which remain unchanged.

Therefore the action does not have a direct link with the insolvency proceedings and so:

is not covered by the EC Regulation on Insolvency, art 3(1) and

(by the same reasoning) does not concern bankruptcy or winding-up for the purposes of Brussels I, art 1(2)(b) (ie Brussels I does apply in this case)

 

Can a member state chose whether to apply the rules under Brussels I or CMR?

One of the questions referred to the CJEU was whether, in a situation where a dispute falls within the scope of both Brussels I and the CMR, a member state may apply the rules concerning jurisdiction provided for in the CMR, and not those set by Brussels I.

The CJEU decided that it is for the referring court (here, the Lithuanian Supreme Court) to determine whether the CMR applies (ie whether the carriage services meets the conditions for application of the CMR) and it may apply the jurisdiction rules of the CMR.

However, the CMR cannot compromise certain provisions of Brussels I—for matters governed by specialised conventions, the rules provided for by those conventions cannot compromise the principles which underlie judicial cooperation in civil and commercial matters in the EU such as the principles of the free movement of judgments in civil and commercial matters, predictability as to the courts having jurisdiction and therefore legal certainty for litigants, the sound administration of justice, minimisation of the risk of concurrent proceedings, and mutual trust in the administration of justice in the EU (recitals 6, 11, 12 and 15–17 in the preamble to Brussels I).

Here, the jurisdictional rules of the CMR (allowing the applicant to choose between (i) the courts of the country in which the defendant is ordinarily resident (ii) those of the country where the goods were taken over by the carrier and (iii) those of the country designated for delivery) correspond to those under Brussels I (under Brussels I, arts 2(1) and 5(1), the applicant may choose between (i) the courts of the member state in which the defendant is domiciled and (ii) those for the place of performance of the obligation in question, ie the place in a member state where the services were provided or should have been provided).

Although Brussels I offers the claimant less choice than the CMR (which allows him to choose between the place where the goods were taken over by the carrier and the place designated for delivery of the goods), that does not affect the compatibility of the CMR with principles which underlie judicial cooperation in civil and commercial matters in the EU.

 

What does this mean in practice for insolvency practitioners bringing claims with cross-border elements?

This case is a reminder and warning to insolvency practitioners that the EC Regulation on Insolvency will not apply unless the actions derive directly from insolvency proceedings and are closely connected with them. If the action could have been brought by other parties prior to the commencement of insolvency, it is unlikely to fall within the EC Regulation on Insolvency.

Kathy Stones, solicitor in the Lexis®PSL Restructuring & Insolvency team.

Further reading

If you are a LexisPSL Subscriber, click the links below for further information on this topic:

Practice Notes: Which law applies under the EC Regulation and Brussels I—application (Subscriber access only)

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First published on LexisPSL Restructuring and Insolvency

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