Court of Justice considers German in rem claim

Court of Justice considers German in rem claim

We look at whether a charge against immovable property in Germany to ensure payment of real property tax constitutes an in rem claim exempt under article 5 of the EC Regulation on Insolvency in SCI Senior Home v Gemeinde Wedemark.

Original news

C-195/15: SCI Senior Home v Gemeinde Wedemark

The Court of Justice of the European Union considered a request for a preliminary ruling on the interpretation of Article 5 of Council Regulation (EC) 1346/2000 of 29 May 2000 on insolvency proceedings (the EC Regulation on Insolvency). The request was made in proceedings between SCI Senior Home, in administration, represented by Mr Pierre Mulhaupt, acting as court appointed administrator, and Gemeinde Wedemark (Wedemark local authority, Germany) and Hannoversche Volksbank eG, concerning the compulsory sale of a property owned by Senior Home.

What are the key take-aways?

The key points to note from this case are:

  • a German charging order to secure a tax debt can constitute an in rem right
  • here, the German local authority was permitted to sell property belonging to a French company to recover tax debts, despite the ongoing French administration proceedings

How did the issue arise?

Senior Home (the Company) was a real estate company incorporated under French law which owned real property in Germany. A German local authority (Wedemark) applied for the compulsory sale of the property by public auction to recover property tax and argued that it was a public charge on real property and so constituted an in rem right, meaning that the opening of French main proceedings did not affect this right. The charge over the property meant the German tax authorities had the status of a preferential creditor in the insolvency. A simplified chronology follows:

  • 6 May 2013: Company placed into court supervised administration in France
  • 15 May 2013: German local authority (Wedemark) applies for the compulsory sale of the property by public auction to recover property tax
  • 21 May 2013: German court orders the compulsory sale of the property—the French administrator appealed this decision all the way up to the German Federal Court (Amtsgericht Burgwedel) seeking an order that the order for compulsory sale be set aside and the entry relating to the sale be removed from the land register

What question was referred by the German court to the Court of Justice?

The German Federal Court referred the following question to the Court of Justice:

  • 'Does the term “right in rem” in Article 5(1) of Regulation No 1346/2000 include a national rule such as that contained in Paragraph 12 of the [Grundsteuergesetz

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About the author:
Kathy specialises in restructuring and cross-border insolvency. She qualified as a solicitor in 1995 and has since worked for Weil Gotshal & Manges and Freshfields. Kathy has worked on some of the largest restructuring cases in the last decade, including Worldcom, Parmalat, Enron and Eurotunnel.