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Can a moratorium under Icelandic law bind French creditors? Does Icelandic or French law govern the situation? Can an Icelandic bank lift the attachment orders served by the French creditor?
LBI hf v Kepler Capital Markets SA C-85/12  All ER (D) 301 (Oct)
A French creditor served attachment orders on a third party to guarantee payment of claim against Icelandic credit institution, LBI hf (formerly Landsbanki Islands hf) (LBI). The European Court of Justice (ECJ) made a preliminary ruling on the interpretation of Directive 2001/24/EC on the reorganisation and winding up of credit institutions (the Credit Institutions Directive). The proceedings were between an LBI, Kepler Capital Markets SA (Kepler) and Mr Giraux (the French creditor) and concerned two attachment orders instituted in France by Mr Giraux against LBI and LBI’s moratorium.
What are the key points of this case?
The ECJ confirmed that:
• a moratorium is a reorganisation or winding up measure under the Credit Institutions Directive
• the Credit Institutions Directive doesn’t preclude retrospective national provisions (here, the retrospective Icelandic moratorium provisions)—they could be effective against actions commenced in another member state (the French attachment orders) before the declaration of the moratorium
• the exception relating to lawsuits pending covers only proceedings on the substance, not individual enforcement actions arising from those lawsuits (eg attachment orders, as here)—individual enforcement actions are therefore governed by the lex concursus (law of the country where a court has opened insolvency proceedings, here, Icelandic law)
How did the issues arise?
The dispute arose after a LBI sought to lift attachment proceedings served in France by a creditor in light of the moratorium in Iceland.
The key dates are:
• 10 November 2008: French creditor serves attachment orders in France to guarantee payment of his claim against LBI
• 13 November 2008: Icelandic law amended (Law No 129/2008) to permit financial institutions in difficulty to be granted a moratorium suspending pending legal proceedings throughout the period of the moratorium
• 5 December 2008: Iceland court grants moratorium in favour of LBI
• 9 January 2009: Official Journal contains notice of the moratorium as a reorganisation measure (under Directive 2001/24/EC, art 6) plus details of the effect of the moratorium
• 15 April 2009: Icelandic law amended (Law No 44/2009) so for moratoriums, the law shall apply as if the institution had been placed into winding-up proceedings by a judicial decision, and the proceedings shall be known as an ‘authorised debt moratorium’—the law was amended specifically with LBI (as well as Kaupthing and Glitnir) in mind and was conditional on an individual decision granting or extending the moratorium (ie a reorganisation measure granted by a judicial authority for a specific credit institution—here the orders on 5 December 2008 granting the moratorium and 22 November 2010 opening winding up proceedings)
• 22 November 2010: winding-up proceedings opened against LBI
The questions on interpretation of the Credit Institutions Directive were referred to the ECJ by the French Cour de Cassation.
How did the ECJ reach its decision?
The ECJ considered the following points when reaching its conclusion:
• the aim of the Credit Institutions Directive is mutual recognition by Member States of measures taken to restore viability to credit institutions (Directive 2001/24, recital 6)
• the Icelandic court granted the moratorium in order to enable LBI to reorganise its financial situation
• changes to Icelandic law (Law No 44/2009) meant financial institutions subject to a moratorium were also deemed to be subject to a specific winding-up scheme, without requiring them to actually be wound up before the end of the moratorium
• only the administrative and judicial authorities of the home member state are empowered to commence reorganisation measures for a financial institution (Directive 2001/24/EC, arts 3(1),9(1))
• the effects of reorganisation and winding-up measures in other Member States are those that the home member state (here, Iceland) confers on them
• it follows that it is the reorganisation measures decided by the administrative and judicial authorities in the home member state (here, Iceland) that are the subject of recognition
• the lex concursus generally governs the effects of reorganisation measures (here, Icelandic law)
• lawsuits pending are an exception to this rule and are governed by the law of the member state where the lawsuit is pending (here, French law)
• attachment proceedings are individual enforcement actions (and are not classed as lawsuits pending), so are governed by the lex concursus (here, Icelandic law)
What are the practical consequences?
This is a boost for universalism and a pragmatic decision to allow breathing space for credit institutions from actions by creditors, which may otherwise derail the restructuring process.
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